Effect of Gender Diversity on the Association between Corporate Sustainability Practices and Financial Performance of Firms

Abstract

Purpose: The objective of this research is to examine the effect of corporate sustainability practices (CSP) on financial performance (FP) as well as the moderating effect of gender diversity (GENDIV) in the board on the relationship between CSP and FP of firms in Malaysia.
 Methods: The sample of the study is 312 firm-year observations from 2015 to 2017 of 104 firms listed in Bursa Malaysia. The theoretical framework of the study is underpinned by the Stakeholder theory and the Agency theory. To test the hypotheses, with the help of STATA software, the panel corrected standard errors (PCSE) estimator model and the hierarchical moderated multiple regression model have been used.
 Results: The findings of the study reveal that CSP significantly and positively affects the FP of firms. The empirical results also show that gender diversity in boards significantly moderates the relationship between CSP and FP of Firms in Malaysia.
 Implications: Based on the empirical findings, the study recommends that the policymakers and regulatory bodies should follow up the mandatory corporate sustainability practices of the firms as well as revise the codes of corporate governance regarding gender diversity of the boards to ensure their long-term sustainability as well as to reduce the risk of financial distress, or bankruptcies in the future.

Board diversity on firm performance from resource-based view perspective: new evidence from Pakistan

“…Board diversity has become a consequential topic among CG mechanisms in recent years (Fei et al ., 2023; Hafsi and Turgut, 2013; Molla et al ., 2021; Curado et al ., 2021). According to Ayuso and Argandona (2009), board diversity is the heterogeneity of board members.…”

“…Extended literature on boards' roles suggests that board members' diversity can improve board members' effectiveness (Ali et al ., 2021) and firm performance (Molla et al ., 2021; Foster et al ., 2023). According to Spencer Stuart's research (2012), 75.1% of firms took initiatives to improve board diversity, 63% asked search firms to include board members from the divergent background, and 50% generally stated the importance of inclusion of diverse board members (Stuart, 2012).…”

“…Notwithstanding the relative importance of board diversity in firm performance, CG studies have not provided sufficient evidence of how board diversity dimensions affect firms' performance (Curado et al ., 2021). Complete understanding entails a more detailed investigation of the relationship between board diversity and firm performance (Johnson et al ., 2013; Molla et al ., 2021; Foster et al ., 2023). Several studies attempted to understand the proposed association, but none of the empirical studies investigated the impact of a comprehensive set of board diversity on firm performance.…”

“…Second, we applied the maximum attributes of the board diversity in terms of determining the firms' performance to overcome the overlooked area in existing studies which focused on limited board diversity attributes (see Huang and Hilary, 2018; Arnaboldi et al ., 2020; Vo and Phan, 2013; Amin et al ., 2021). Moreover, existing studies used one or other performance measure (Sajjad and Rashid, 2015; Ullah et al ., 2019; Fidanoski et al ., 2014; Putri and Danarsari, 2020; Molla et al ., 2021) while, we provide evidence using both accounting-based performance (return on assets (ROA) and return on equity (ROE)) and market-based performance (Tobin's Q and excess return (ER)) measures of firm performance. Third, we make an important contribution to the theoretical literature on corporate governance by analyzing board diversity and firms' performance from RBV theory in the context of Pakistan.…”

Does corporate social responsibility mediate the relationship between board diversity and financial distress: evidence from an emerging economy?

“…Similarly, Aksoy and Yilmaz (2023) stated that corporate governance and board characteristics have a significant influence on a company’s financial stability by assisting in decision-making processes and enacting appropriate policies. Diversity has been shown to boost board member effectiveness (Ali et al , 2021) and, thus, firm success (Molla et al , 2021; Foster et al , 2023). Several studies have shown that board features like board size, independence and ownership level have an impact on the FD (Farooq et al , 2020; Ali and Nasir, 2018; Manzaneque et al , 2016; Ali et al , 2021; Farooq and Noor, 2021).…”