The moderating role of female directors in improving ESG performance through intellectual capital: evidence from GCC countries

Purpose With the global emphasis on sustainability this study shows the significant contribution that Islamic banks (IBs) can make to advance sustainable development in the Gulf Corporation Council (GCC) region. This study aims to investigate the moderating role of board gender diversity (BGD) on environmental, social and governance (ESG) performance through intellectual capital (IC). Design/methodology/approach The study investigates a sample of 41 IBs over the period 2016–2022. To ensure a comprehensive and nuanced analysis, it uses a diverse set of empirical tests, starting with ordinary least squares regression and extending to more advanced techniques such as the panel-corrected standard errors model and the Heckman two-step selection model, which addresses potential sample selection bias. In addition, a robustness test was conducted using quantile regression to validate the consistency of the results. Findings The authors find that there is no significant and negative impact of IC on ESG performance. The BGD has a positive and significant effect on ESG performance. However, the combined effect of BGD and IC has negative and insignificant impacts on ESG performance. Research limitations/implications This study has some limitations; however, these limitations provide opportunities for further research. First, this research sample is limited by locally owned GCC banks and excludes foreign banks and non-banking and specialized financial institutions operating in the GCC region. Second, IC is limited to the measurement of the Global Competitiveness Sustainable Index. Future research can replace the IC measurement method with others measurement such as value-added intellectual capital coefficient and modified value-added intellectual capital, or using all three measurement methods to facilitate a comparative analysis of the results. Practical implications Evidence demonstrate that IC is not significantly related to ESG performance. This study enhances the comprehension of IC and its role in IBs in GCC countries and may serve as a reference to regulators and managers. Hence, this is can be realized by the revision of the mandatory quota for women in corporate boards and developing relevant strategies to generate, use and maintain IC for more resilient banking sector. Originality/value To the best of the author’s knowledge, this study is the first to explore the relationship between IC and ESG performance in the GCC region. It is also the first to examine the moderating role of BGD in the relationship between IC and ESG performance. This study contributes to the understanding of the impact of BGD in improving sustainable growth through IC on IBs in GCC region.