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The impact of female representation and ethnic diversity in committees on environmental, social and governance performance in Malaysia

Shy Lih Wong (Graduate Business School, UCSI University, Kuala Lumpur, Malaysia)

Society and Business Review

ISSN: 1746-5680

Article publication date: 19 July 2023

Issue publication date: 12 April 2024

704

Abstract

Purpose

This study aims to explore how females on committees (FOC) and committee ethnic diversity (CED) impact environmental, social and governance performance (ESGP).

Design/methodology/approach

This study examines 126 listed firms under the coverage of FTSE ESG Ratings in Bursa Malaysia between 2017 and 2019. This study applies partial least squares structural equation modeling (PLS-SEM) to examine the hypotheses. While the risk of common method variance is minimised using multiple data sources for the analysis, instrumental variable-free approach, i.e. Gaussian copula method which is implemented in SmartPLS 4.0 has been used to address the potential endogeneity of the model.

Findings

Empirical evidence demonstrates significant positive direct relationships between FOC and ESGP, as well as CED and ESGP. The argument of resource dependence theory and positive empirical results on the two direct relationships hold firm despite several committees being aggregated as one construct with the aim of providing different insights into the literature.

Practical implications

This study provides implications for firm leadership to consider reviewing the composition of committees by increasing female representation while striking a balance in the appointment of committee members of different ethnicities to enhance firm ESGP.

Originality/value

To the best of the author’s knowledge, this study adopts a holistic approach by capturing, for the first time, the female representation of audit, nomination, remuneration and risk management committees. These dimensions are further developed into a single quantifiable variable, presented as FOC. Similarly, the ethnic diversity of the respective committees is aggregated and developed into a single quantifiable construct: the CED. Unlike most existing studies that commonly use econometric software, the application of PLS-SEM in this study contributes to the limited body of corporate governance and ESG studies that use PLS-SEM.

Keywords

Acknowledgements

The author would like to thank the editorial team of Society and Business Review and two anonymous reviewers for their constructive feedbacks and suggestions in improving the quality of the manuscript to a greater extent. The author would also like to express his gratitude to Mr Albert Kok Loon Wong and Ms Poh Leng Yap for their useful comments in the earlier draft of this paper.

Citation

Wong, S.L. (2024), "The impact of female representation and ethnic diversity in committees on environmental, social and governance performance in Malaysia", Society and Business Review, Vol. 19 No. 2, pp. 207-229. https://doi.org/10.1108/SBR-02-2023-0052

Publisher

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Emerald Publishing Limited

Copyright © 2023, Emerald Publishing Limited

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