Women on boards and ESG performance: empirical evidence before and during the COVID-19 pandemic in Indonesia and Malaysia

Abstract

PurposeThis study aims to investigate whether the presence of women in the boardroom influences companies’ environmental, social and governance (ESG) performance. Furthermore, it examines whether the COVID-19 pandemic and family control affect the relationship.Design/methodology/approachThis study uses nonfinancial firms listed on the Indonesia and Malaysia Stock Exchange during 2018-2021. Thomson Reuters’ database is used to collect the ESG scores. Using 312 firm-year observations, the authors apply multiple regressions and sensitivity testing to ensure the robustness of the results.FindingsThis study provides empirical evidence that the presence of women in the boardroom improves companies’ ESG and family control weakens the relationship. Meanwhile, there is no support on the moderating effect of the COVID-19 pandemic. The authors also conducted additional tests using ESG pillars (i.e. environment, social and governance pillars) as the dependent variable. The findings are robust to alternative samplings.Research limitations/implicationsThis research is limited to Indonesia and Malaysia, thus affecting the generalizability of the results to all developing countries. The sample size is relatively small due to data limitations related to the availability of ESG scores.Practical implicationsThe findings of this study provide a basis for the government to establish mandatory regulations regarding sustainability performance. The positive relationship between women on boards and better ESG performance suggests that encouraging gender diversity in corporate leadership can improve sustainability practices. The government may consider implementing gender quota regulations to increase women's representation on corporate boards.Social implicationsShareholders can pursue investment portfolios in socially responsible companies, prioritizing ESG performance. In addition, investors should consider the presence of women in the company’s boardroom and whether family control exists when making investment decisions.Originality/valueOverall, the originality and significance of this research lie in its comprehensive examination of the moderating factors, the inclusion of different governance systems in the sample, and the exploration of psychological aspects, contributing to a deeper and more nuanced understanding of the relationship between women on boards and ESG performance in the context of developing countries.