Does Firm’s Board Affects ESG? Malaysian Evidence

Abstract

Non-financial information such as environmental, social, and governance (hereafter ESG) issues are becoming important as financial data. There has been a series of organizational failures and controversies about corporate governance, which have raised questions about the capabilities of management and ethical behaviour on the business's level of transparency. Even factors that influence or detract from an ESG score are becoming increasingly relevant to consider. Therefore, this study aims to investigate the relationship between board characteristics and ESG score in Malaysian listed firms. In particular, this study examines four important board charactristics; board size, board independence, tenure, and board diversity on ESG score. Using 165 firm-year observations from 2017 to 2019, the findings reveal that the board independence is significantly positively associated with ESG scores. Other board characteristics; board size, tenure and board diversity, however, is not associated with ESG score. Several control variables, namely firm size, profitability, and leverage have been considered in the study, and it found that all control variables have a significant impact on ESG scores. This study contributes to the governance and ESG literature in the developing countries byhighlighting the effect of board characteristics on firm's ESG scores.

Shari'ah compliance and environmental performance - Evidence from the USA

“…Like Manita, et al (2018), this study confirms that diversity does not have any significant impact on the environmental performance of Shari'ah-compliant firms. While Halid, et al (2022) do not find a significant relationship between board tenure and environmental performance, the current study confirms that Shari'ah-compliant firms with experienced boards have better environmental performance. The final sub-sample analysis supports the findings of Saygili, et al (2022) and confirms that low-profit Shari'ah-compliant firms have better environmental performance.…”

How do board characteristics influence the ESG disclosure in Indonesia?

“…Several studies have examined the relationship between board characteristics and ESG disclosure in various countries, providing valuable insights into the significance of board diversity, gender diversity, and corporate governance in influencing ESG practices (Bhatia and Marwaha, 2022;Halid et al, 2022;Kamaludin et al, 2022;Lee et al, 2023;Manita et al, 2018;Pramono and Nasih, 2022). While existing literature has explored the impact of board characteristics on ESG disclosure in various countries, there is a lack of comprehensive research focusing specifically on Indonesian companies and a noticeable research gap in understanding the specific influence of board characteristics on ESG disclosure (Harymawan et al, 2022;Lubis & Rokhim, 2021;Wahyuningtyas & Susesti, 2022).…”

“…Furthermore, (Arayssi et al (2020) focused on the impact of board composition on ESG disclosures in Gulf Cooperation Council (GCC) countries, highlighting the scarcity of studies in this context. Halid et al (2022) contribute to the literature by emphasizing the effect of board characteristics on ESG scores in Malaysian firms. Harjoto and Wang (2020) extend the existing literature by examining the relationship between board network centrality and ESG performance.…”