Board diversity impact on corporate profitability and environmental, social, and governance performance: A study of corporate governance

Abstract

With the growing interest in understanding how environmental, social, and governance (ESG) factors interact and influence one another, as evidenced by increased attention from decision-makers, policymakers, stakeholders, investors, and corporate managers, this research aims to advance the existing literature on the subject (Ahmad et al., 2021; Al-Jaifi et al., 2023). This research aims to address a gap in the literature by examining the influence of board diversity (BD) in terms of board independence (BI) and gender diversity (GD) (i.e., female directors) on corporate ESG performance (ESGP), specifically considering the moderating effect of these two variables on the relationship between corporate profitability (CP) and ESGP. The analysis is based on a dataset encompassing 126 firm-year observations from 30 Saudi non-financial public listed companies spanning the period from 2013 to 2022. The results of the direct models show that CP has an insignificant negative impact, while BD, particularly in terms of independent directors and female directors, enhances ESGP. Moreover, the results from the moderation models indicate that while BI does not show a statistically significant positive impact on the relationship, GD demonstrates an insignificant negative effect on ESGP.