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 study examines the impact of board gender diversity (BGD) on financial performance (FP) and environmental, social and governance (ESG) disclosures, as well as the impact of ESG disclosures on FP. Furthermore, this study investigates the moderating role of ESG disclosures in the relationship between BGD and FP. Design/methodology/approach The sample included data on 60 nonfinancial companies listed on the Abu Dhabi Securities Exchange and the Dubai Financial Market from 2012 to 2021. Data were collected from a Bloomberg Terminal. Dynamic panel data regression was used to study the impact of BGD and ESG on FP. Findings During the voluntary ESG reporting period, the impacts of ENV and GOV on FP were significant, whereas that of ESG was not. BGD improves the FP of listed nonfinancial companies when mandatory ESG disclosure is required. However, this relationship was negatively moderated by ESG during adherence to these requirements. Research limitations/implications It is recommended that nonfinancial companies listed in the United Arab Emirates (UAE) practice a more favorable mechanism to enhance BGD when their ESG scores become weaker. Improving BGD practices for nonfinance companies with strong or increasing ESG scores will not be effective as it may reduce the strength of the existing association between BGD and FP. Practical implications It is recommended that nonfinancial companies listed in the UAE practice a more favorable mechanism to enhance BGD when their ESG scores become weaker. Consequently, such companies can improve FP in terms of an increased market value of shares (Tobin’s Q) when their ESG scores decrease. However, improving BGD practices for nonfinance companies with strong or increasing ESG scores will not be effective because it may reduce the strength of the existing association between BGD and FP. Originality/value To the best of the authors’ knowledge, this is the first study to find a negative moderating role of ESG in the relationship between BGD and FP, particularly during mandatory ESG reporting requirements.