The impact of board gender diversity on financial performance of non-financial companies of the UAE: the moderating role of environmental, social, and governance (ESG) disclosure

Purpose This paper aims to study how corporate governance and country-related contextual factors affect the relationship between board gender diversity and environmental, social and governance (ESG) disclosure in its components: governance, social and environmental. Design/methodology/approach Using ordinary least-squares and two-stage least squares (2SLS) regressions, and retrieving ESG disclosure data from Bloomberg’s database, the paper analyses a sample of European nonfinancial listed firms (1,935 firm-year observations) over the period 2014–2022. The study adopts board independence and board cultural diversity as structural and demographic board attributes that characterize the corporate governance environment in which female directors operate; the enforcement of law and gender equality as country-related institutional and cultural factors. Findings Results suggest that female directors may substitute board independence in improving ESG and governance disclosure, whilst they co-occur with board cultural diversity in increasing ESG, governance and social disclosure. Findings indicate that the enforcement of law increases the positive effect of female directors on environmental disclosure and lowers the impact on governance disclosure. Conversely, a more gender-equal environment enhances female directors’ engagement in improving governance disclosure, reducing their beneficial effect on environmental information. Originality/value This study contributes to the literature suggesting that structural and other demographic board contextual aspects, as well as institutional and cultural country-related contextual factors, affect the relationship between board gender diversity and ESG disclosure differently and the effect may vary depending on ESG disclosure.

Purpose: To analyze the impact of the Covid-19 Pandemic on the relationship between ESG (Environmental, Social and Governance) scores and the financial performance of Brazilian publicly traded companies. Methodology: The sample of this study consists of 100 Brazilian non-financial companies listed on B3 (Brasil, Bolsa, Balcão) with information about ESG. The data collection spanned a time series from 2018 to 2021. ESG scores were collected from the Refinitiv Eikon® database, using ROA (Return on Assets) as a proxy for financial performance. Two research hypotheses were tested: the first regarding the association between ESG and financial performance, and the second examining the effect of Covid-19 on this relationship. The hypotheses were tested using the Ordinary Least Squares (OLS) regression model, with controls for time and sector. Results: The results show that the financial performance of firms with ESG Score, Combined, and Environmental classifications demonstrated a positive and significant relationship, meaning that firms with higher ESG scores offered better financial performance on average. However, the non-significant result for the relationship between financial performance and ESG during the Covid-19 period indicates that it cannot be said whether firms with higher ESG scores were more or less impacted by this pandemic period. Contributions of the Study: This study utilized three types of ESG scores (Score, Combined, and Controversies), as well as the ESG pillars: Social, Governance, and Environmental. This allowed for a more comprehensive examination of the ESG indicators available to investors in the selection of companies for resource allocation. This joint analysis also contributes to the advancement of recent literature by analyzing all available ESG indicators for publicly traded companies in Brazil.

Environmental, social and governance (ESG) criteria mean investment in economic choices which, without interference with the environment, are intended to promote long-term economic and social well-being. Due to high environmental and social awareness, customers expect companies to devote time and efforts to such sustainable practices. This attitude has led to an overall rise in ESG disclosures and reporting instruments globally with a focus on influence of ESG disclosures on financial performance of companies. Many European countries have already introduced mandatory disclosure of non-financial information. This transition from voluntary to mandatory motivated other countries to adopt mandatory ESG disclosure practices for sustainable development. The practice of reporting non-financial disclosures has been rising due to several reasons, such as increasing visibility, informing customers, avoiding the risk associated with firm performance and achieving sustainability. Countries in the early stages of ESG disclosure need to understand the benchmark practices used by countries with a well-developed ESG system. For preparing the ESG disclosure index and benchmarking based on disclosure score, this study considers a set of developed and developing countries with their ESG disclosures. On the basis of ESG disclosures, the countries have been classified into four different categories. We found Norway, Sweden, Denmark, Finland, United Kingdom, Belgium and France, to have high ESG scores and have been classified as Countries with Well-Developed ESG Framework. Germany, Italy, USA, Australia, Switzerland, Canada, Japan, Brazil and South Africa have medium to high ESG scores and fall under the category Rapidly improving ESG framework. While Singapore, India, China, Philippines, Malaysia and Argentina are categorized as countries with ESG framework at developing stage, Russia, Indonesia, Thailand, Nigeria and Vietnam are classified as Countries with early-stage framework due to low ESG scores.

Purpose: By linking verified non-compliance of financial outcomes disclosures with non-verified disclosures of information related to social and environmental outcomes, we can assess their relationship and gain insight into the potential incentives driving Environmental, Social and Governance (ESG) disclosures. The aim of this study is to assess the credibility of non-financial reporting by examining whether companies that demonstrate greater compliance with ESG disclosure requirements also place more emphasis on "true and fair" or "fair" financial reporting. Methodology/approach: The study analyzed a sample of listed companies for the peri-od from 2019 to 2022, using a logistic regression with a modified audit opinion as the outcome variable and the ESG score as the primary explanatory variable. Findings: The results show a negative relationship between ESG disclosure scores and modified audit opinions, suggesting that companies with lower ESG disclosure scores are more likely to receive a modified audit opinion. Companies with higher ESG scores are less likely to receive a modified audit opinion than other companies. In addition to ESG scores, a modified audit opinion is also significantly related to the Big Four, profitability and solvency. Research limitations/implications: Our research sample is limited to the Croatian capital market with a relatively small number of observations, and the ESG score measurement is based on the methodology of the Croatian Financial Services Supervisory Authority, which is applicable to the Croatian environment. The generalization of our results should, therefore, be taken with caution. Originality/value: Given the relatively high frequency of modified audit opinions in our institutional setting, we are able to estimate the association between ESG performance and modified audit opinion more accurately than in alternative settings where modified audit opinions related to non-compliance with accounting standards are ra-ther rare. In addition, this study contributes to the existing literature by examining how ESG disclosure compliance is related to the audit opinion in an environment where firms do not face potentially severe financial consequences of a modified audit opinion.

PurposeThe purpose of this paper is to investigate the relationship between corporate debt-like compensation and the value of excess cash holdings.Design/methodology/approachThe environmental, social and governance (ESG) disclosure score provided by Bloomberg is used as a proxy for the extent of corporate social responsibility (CSR). The empirical analysis is based on a sample of 379 firms that made up the Standard & Poor’s 500 Index over the period 2010-2015. In order to take into account the endogeneity problem between board gender diversity and ESG disclosure, a fixed effect model with lagged board variables is used.FindingsTwo main results arise from this study. First, no significant relationship is found between board gender diversity and ESG disclosure. Second, the evidence also partially confirms critical mass theory, as below three female directors the relationship between board gender diversity and ESG disclosure is not statistically significant. However, beyond that, no significant relationship was found.Research limitations/implicationsReasonable theoretical arguments drawn from stakeholder theory suggest that board gender diversity may have a positive effect on ESG disclosure. The empirical evidence presented neither supports, nor denies stakeholder theory. However, the results may be improved by enlarging the frontiers of this research in time and space, increasing the perimeter of qualitative data integrated in this investigation.Practical implicationsThis paper offers theoretical and empirical arguments for the feminization of corporate boards, not only in the name of equality between women and men and organizational justice, but also in the light of organizational performance (examined through the prism of governance). Transparency, analyzed using the proxy of ESG disclosure, is strongly and positively correlated with a feminization of boards, if the proportion of women is significant and sufficient to be able to prevent and surpass the “invisibilization” phenomenon, which is based on the marginalization of passive ultra-minorities, reduction to silence, marginalization (disqualification of women voice or exit strategy), assimilation or the endorsement of stigma.Originality/valueFirst, this makes a theoretical contribution to the diversity and governance literature by examining the effect of WOCB on ESG disclosure through the stakeholder theory (Freeman, 2010). Second, the authors contribute to the CSR literature (cf. Byron and Post, 2016) by documenting specifically the effect of board gender diversity on CSR disclosures through ESG. Indeed, ESG research mainly concentrates on firm financial performance (Galbreath, 2013). No study has examined the relationship between WOCB and ESG disclosure. Finally, from an empirical standpoint, an FE model with lagged board variables (Liu et al., 2014) is used to fully address the endogeneity problems in the relationship between WOCB and ESG disclosure that may occur because of differences in unobservable characteristics across firms or reverse causality (Boulouta, 2013).

PurposeThis study aims to examine the moderating impact of audit quality (AQ) on the relationship between environmental, social and governance (ESG) disclosure and financial performance (FP) in the Indian context.Design/methodology/approachThe study sample consists of 218 Indian firms, for which Credit Rating Information Services of India Limited has published the ESG scores. Panel data estimation technique is used to examine the direct and moderating impacts. Furthermore, the two-stage least square estimation technique is used for robustness checks.FindingsThe study finds a positive impact of ESG score and its components on FP. The findings support the positive “revisionist” hypothesis. The results demonstrate that AQ significantly moderates the relationship between ESG scores and FP. It implies that the impact of ESG disclosure on FP is considerably greater for the Big-4.Originality/valueThe study enriches the existing knowledge by providing empirical evidence on the moderating role of AQ on the ESG disclosure and FP relationship. The findings have several policy implications.

The awareness regarding Environmental, Social and Governance (ESG) has grown a lot in the recent past years. The paper mainly aims at investigating whether there is an existing relationship between the disclosure by the companies from the industry of Banking and Information Technology based upon Environmental, social and governance framework and the stock performance of the companies of the same industry. The study took variable as the ESG Score and annual share price of the top 5 companies each of Banking and Information Technology present in the NSE ESG INDEX between the FY2014 to FY 2023. The study has used correlation and ANNOVA to analyse the impact that ESG score has upon the share prices of the target companies. We have attained observation through our studies that the relationship that exists between the SDG score of 8 companies out of the 10 companies selected as a sample is significantly positive. This study mainly aims to determines the relationship amongst ESG disclosures and stock prices and if the relationship is positive, negative or neutral. Keyword - ESG disclosure, ESG index, ESG Score, Stock Price, Firm performances

PurposeAssessing the performance and stability of financial institutions is crucial for investors, regulators and stakeholders. The primary purpose of this study was to examine the economic resilience and sustainability performance of banks operating in Türkiye through their capital adequacy, asset quality, management quality, earnings, liquidity, and sensitivity to market risk (CAMELS) and environmental, social and governance (ESG) scores. The research examined whether there was a significant relationship between the CAMELS and ESG scores of the banks in the sample and how they affected each other.Design/methodology/approachThis study analyzed the relationship between the CAMELS and ESG scores of five public and private banks operating in Türkiye. The study used statistical techniques such as correlation, regression and descriptive statistics to analyze the relationship between the CAMELS and the ESG score clusters. The data in the research cover the period 2008–2022 and were obtained from open sources disclosed to the public by the banks.FindingsThe study found a statistically significant relationship between the financial institutions’ CAMELS and ESG scores. Banks with higher CAMELS scores had a better ESG performance; however, this relationship was not linear. Regression analysis allowed for the identification of factors that had a significant impact on ESG scores within the CAMELS framework. No effect was detected on earnings (E), one of the CAMELS elements in the “economic, environmental, and governance elements” section of the banks' ESG scores. Management quality (M) positively affected only governance (G). Additionally, it was determined that the banks’ environmental performance (ENV) positively affected their CAMELS score.Practical implicationsThe positive relationship between the CAMELS and ESG dimensions shows that financial sustainability is essential. The findings are expected to enrich the understanding of financial institutions’ resilience in the context of Türkiye, which constitutes the research sample. In addition, the inferences that can be made from this Turkish sample are essential for informing investment decisions, regulatory frameworks and broader stakeholder engagement in similar markets.Social implicationsAlthough a significant and positive relationship was established between ESG and CAMELS scores, a substantial and positive relationship only sometimes emerged when the sub-elements of the variables in question were examined. Investing in environmental initiatives helps companies build sustainable business models for the long term, paving the way for future profits and improved capital adequacy and liquidity. However, new regulations and practices related to environmental activities may introduce additional costs, necessitating changes to existing business processes.Originality/valueThis study provides important information regarding the interaction in financial institutions between financial stability assessed by CAMELS scores and sustainability performance measured by ESG scores. The findings show that institutions with robust economic fundamentals demonstrate better ESG performance. This indicates that there is a positive relationship between financial stability and responsible business practices. This information will help investors, regulators and stakeholders to make informed decisions about financial institutions, decisions that focus on sustainability. The results also suggest that it is necessary to use dynamic models and analytical tools to address the link between CAMELS and ESG.

PurposeThis article aims to analyse the relationship between the environmental, social and governance (ESG) score and the cost of capital of 600 large, mid and small capitalization companies across 17 countries that are component of the EURO STOXX 600 Index. By examining whether ESG has an impact on the cost of capital, this article contributes to the solutions to improve the impact of organizations and societies on sustainable development. The article further examines whether the effect is because of the environmental, social and/or governance components. In addition, the article analyses which WACC component (i.e. the cost of equity, the cost of debt, the beta or the leverage ratio) is affected. Furthermore, this article analyses whether a high ESG score can substitute for a weaker legal environment.Design/methodology/approachThe results were obtained by using ordinary least squares panel data modelling to analyse the relationship between the ESG score and the cost of capital. The sample consists of companies that are part of the STOXX Europe 600 Index over the period 2018–2021, which is composed of 600 companies, including large, mid and small capitalization firms listed across 17 countries. The sample finally includes 1,960 firm-year observations.FindingsCompanies with a higher ESG score tend to have a lower cost of capital, but this relationship holds only for firms domiciled in countries with a weaker legal environment. In addition, these firms should not only increase their ESG score to create a more sustainable environment but also to reduce their cost of debt. Environmental and social factors have a significantly negative impact on the cost of capital only in countries with a weaker legal environment, while the governance component positively impacts the cost of capital by allowing firms to borrow more.Research limitations/implicationsThere is not yet a standardized taxonomy to define ESG, making the study dependent on commercial data providers.Practical implicationsThe new insights can be used by companies domiciled in countries with weaker legal environments to reduce their cost of capital. The results also allow us to know on which components of the ESG score to focus. It can also help policymakers, specifically those in countries with a weaker legal environment, to provide incentives to further stimulate ESG investments and disclosure, thereby contributing to a more sustainable society.Social implicationsTo achieve the sustainable development goals put forward by the United Nations, it is important for firms to invest in ESG projects. It is nevertheless insightful to know whether these ESG investments, which are currently observed as a cost, also provide benefits to firms and in which countries. If firms clearly see the advantages of investing in ESG projects, they are likely to proactively engage in them.Originality/valueThis article is the first, to the best of the authors’ knowledge, to focus on 17 European countries, thereby capturing divergent legal environments. This setting allows us to answer the main novel research question, namely, whether the ESG score can act as a substitute for the legal environment in which the company is domiciled. The article also goes further than previous articles by examining whether the effect is because of the environmental, social and/or governance component and whether these impact the components of the weighted cost of capital, namely, the cost of equity, the cost of debt, the beta or the leverage ratio of the companies.

Purpose Environmental, social and governance disclosures are becoming increasingly important in the energy sector, which is considered a sensitive sector due to its high environmental and social impacts. This study aims to investigate the impact of these disclosures on the corporate financial performance of global enterprises in the energy sector. Design/methodology/approach This study examines the 100 most prominent energy companies listed globally by market capitalization in 2022. The independent variable is the LSEG disclosure score (ESG Score), which rates the extent of environmental, social and governance disclosures. Return on assets (ROA) and return on equity (ROE), which measure corporate financial performance, are the dependent variables. Regression analysis analyzes the impact of environmental, social and governance disclosures on corporate financial performance. Findings The results show that there is an insignificant relationship between environmental, social and governance disclosures and corporate financial performance in the energy sector. The insignificant relationship is associated with the low disclosure performance of enterprises in the sector regarding their sustainability strategies, impacts and performance. When the relationship between environmental, social and governance disclosures and corporate financial performance is evaluated on individual dimensions, mixed results (negative, positive or insignificant) are obtained. There is a negative relationship between environmental disclosures and corporate financial performance, a positive relationship between social disclosures and corporate financial performance (ROA only), and an insignificant relationship between governance disclosures and corporate financial performance. Originality/value The study provides new evidence for the ongoing debate between environmental, social and governance disclosures and corporate financial performance through a global sample of energy businesses operating in different parts of the world. These businesses are expected to play a leading role in the functioning of the global economy through their sustainability strategies and practices.

Companies and investors in emerging markets have started paying attention to ESG (Environmental, Social, and Governance) issues. There has been a growing demand for aligning ESG disclosure of companies to UN SDGs (United Nations Sustainable Development Goals), so understanding how the firm-level ESG affects the country-level SDG is very important for evaluating the advances in ESG and SDG implementation in emerging markets. This study examines the linkage between firm-level ESG disclosures and their relationship with country-level SDG scores over ten years for three emerging countries: India, China, and Brazil. The analysis of 1,500 top-listed firms in these countries reveals an increasing trend of firms going for ESG disclosures and increased ESG scores over the years in the three markets. Out of the total sample, almost 75% of firms make ESG disclosures in Brazil, followed by 54% in India and 32% in China. Additionally, companies in all these countries tend to emphasize governance-related disclosures more, with Brazil having higher ESG disclosures than India and China. The correlation and causality tests indicate a significant positive correlation between mean ESG scores and country-specific SDG scores. The Dumitrescu-Hurlin panel causality tests provide stronger linkages between firm-specific Environment scores and SDG scores, indicating that a firm’s environment disclosures translate into higher SDG scores. However, the same is not valid for Social and Governance factors. These findings have important implications given the global attention on the linkages between ESG disclosure and SDG score. AcknowledgmentsThe financial and infrastructure support provided by FORE School of Management, New Delhi in completing this paper is gratefully acknowledged.

Currently, businesses are very vulnerable and exposed to the uncertainty that may cause damage to the company. With the ongoing pandemic issue, companies are more concerned about their performance and survival. Companies like banks play a crucial role in the economy since its growth depends on its financial sector's stability regardless of the country. Thus, companies have many approaches and strategies to maintain their business and stay relevant in the corporate world; hence, ESG disclosure comes in handy. According to the Bursa Malaysia Sustainability Reporting Guide (2018), ESG which stands for "Environmental, Social, and Governance" is a term used extensively, specifically by the investment community, portraying the environmental, social, and governance matters considered by investors in the corporate behaviour context. Experts have actively discussed ESG disclosure to address such reporting to enhance the company's performance portfolio. Furthermore, the ESG factor becomes one of the primary considerations for the investors' decision. ESG factor influences and strengthens the investors' confidence towards the company's performance. Bukhari, Hashim and Amran (2020) suggested that companies providing ESG disclosure show improvement in their financial performance. Experts found a significant impact of sustainability practices on the Islamic banks' financial performance (Jan, Marimuthu & Isa, 2019). Companies' ESG disclosure performance has established a reputation for playing a significant role in financial transparency and how it varies by economic and stakeholder's perspective (Oncioiu, Popescu, Aviana, Serban, Rotaru, Petrescu & Pantelescu, 2020). Jan et al. (2019) found that there is still a low adoption level of sustainability practices and reporting in the Islamic banking industry. An empirical study conducted by Nobanee and Ellili (2016) also stated that sustainability disclosure has an insignificant effect on Islamic banks than the high degree of such disclosure on conventional banks. Moreover, from a study conducted in seven Muslim countries, the sustainability practices and reporting were not of serious concern to those countries' Islamic banks (Hassan and Syafri Harahap, 2010). Keywords: Environment, Social, Governance (ESG) Disclosure, Islamic Banks, and Financial Performance.

Purpose: This study examines the relationship between board gender diversity and environmental, social and governance (ESG) disclosure of companies listed on the Johannesburg Stock Exchange (JSE).Design/methodology/approach: Panel regressions were used to analyse an unbalanced sample of 92 companies (725 company years) listed on the JSE All Share Index during 2011 to 2021. Board gender diversity, measured as the percentage of women on a board, was regressed against aggregate and individual component Bloomberg ESG disclosure scores. ‘Critical mass theory’ was tested using a 30%+ female board representation dummy variable.Findings/results: Positive correlation is found between female board representation and both aggregate ESG and S-disclosure. This likely results from unexplained differences between company and overall economy level time effects, as no time series correlation remains between board gender diversity and ESG disclosure scores once these effects are controlled for. Little evidence is found in support of critical mass theory.Practical implications: The results, although not conclusive, provide support for the argument that greater female representation on South African corporate boards is desirable to attain higher ESG disclosure. However, both female board representation and ESG disclosure scores may be driven by the same non-modelled underlying process, likely controlled for by the fixed effects.Originality/value: This study adds to the growing ESG and board gender diversity research – specifically in South Africa, an interesting case of an emerging economy with well-developed governance and disclosure frameworks, where more equitable gender board representation and increasing ESG disclosure are topics of great practical and academic importance.

PurposeThe goal is to investigate the relationship between financial performance and environmental, social and governance (ESG) indicators and disclosures for a sample of Latin American firms.Design/methodology/approachDynamic panel data regressions are used to analyze a sample of 114 companies listed on the Latin American Integrated Market, MILA (Chile, Colombia, Mexico and Peru) for the period 2011–2020. The Altman Z-score and Piotroski F-score are used as indicators of the probability of default and comprehensive financial strength. Models are developed in which the relationship between economic value added (EVA) and Jensen’s alpha are evaluated against firms’ ESG practices.FindingsA direct relationship between ESG strategies and financial performance was found. Better practices and transparency in ESG are related to lower probability of bankruptcy, greater financial strength, greater EVA and superior risk-adjusted returns.Research limitations/implicationsESG data were obtained from the Bloomberg system based on a methodology that may differ from other sources. The sample covers four Latin American countries and large corporations. Independent variables were selected for their perceived validity, given their frequent use in previous studies.Practical implicationsEvidence for company management regarding the importance of strengthening ESG practices and reporting should be part of their balanced scorecards. For investors, the results support the importance of evaluating ESG practices in asset selection.Originality/valueThe present study is the first research to present empirical evidence on the relationship between ESG scores and disclosures for MILA countries, using a comprehensive set of financial performance indicators (Altman Z-scores, Piotroski F-scores, EVA and Jensen’s alpha).

PropósitoAnalizar la relación entre las calificaciones-ESG y los diferenciales de bonos corporativos en la industria del petróleo y gas (PyG). Dada la significativa huella ambiental del sector y la transición energética, es crucial comprender cómo la divulgación-ESG afecta el desempeño financiero en términos de dinámicas del mercado de deuda.Diseño/metodología/enfoqueSe emplea un enfoque cuantitativo utilizando datos secundarios de Refinitiv para 2018–2022. Para abordar problemas de endogeneidad, utilizamos regresiones en dos-etapas. El análisis se centra en los diferenciales de los bonos corporativos (variable dependiente) y las calificaciones ESG (variable independiente).ResultadosNuestros resultados indican una asociación negativa entre ESG y los diferenciales de de bonos corporativos en la industria PyG. Las empresas con mejores calificaciones ESG tienden a experimentar diferenciales de crédito más bajos, sugiriendo que las prácticas ESG pueden llevar a una reducción en los costos de endeudamiento. Además, los resultados muestran que las empresas no estatales se benefician más de la divulgación ESG en términos de desempeño financiero en comparación con sus contrapartes estatales.Originalidad/valorSe proporciona evidencia empírica sobre la relación entre las calificaciones-ESG y los diferenciales de bonos corporativos. El uso de regresiones en dos etapas para abordar los problemas de endogeneidad añade robustez a los hallazgos. Al resaltar el impacto diferencial de la divulgación-ESG en las empresas estatales versus no estatales, la investigación ofrece perspectivas únicas que pueden informar estrategias corporativas de sostenibilidad y desempeño financiero.