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Does the Cultural Dimension Influence the Relationship between Firm Value and Board Gender Diversity in Saudi Arabia, Mediated by ESG Scoring?

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  • Laila Mohamed Alshawadfy Aladwey

    (Department of Accounting, Imam Mohammad Ibn Saud Islamic University (IMSIU), Riyadh 11432, Saudi Arabia
    Department of Accounting, Tanta University, Gharbia 31521, Egypt)

  • Raghad Abdulkarim Alsudays

    (Department of Accounting, Imam Mohammad Ibn Saud Islamic University (IMSIU), Riyadh 11432, Saudi Arabia)

Abstract

The scarcity of female directors on Saudi boards is linked to cultural and social barriers deeply rooted in traditional masculine norms. Our study investigates the mediating role of ESG scores in the relationship between board gender diversity and firm value within the Saudi context. The Structural Equation Model (SEM) was utilized based on a sample of 54 Saudi-listed financial companies on (Tadawul) during 2021–2022. The study unveiled a negative correlation between female director presence and Saudi firm value. This association is attributed to the prevailing male-dominated Saudi societal norms, where boards with more female members may hesitate to prioritize performance-driven actions due to concerns about their perceived legitimacy within traditional gender roles. Conversely, a positive correlation was observed between female director presence and ESG scores, aligning with existing research highlighting the role of board gender diversity in improving sustainability performance. The sustainability framework prevails over the influence of gender diversity, fully integrating it within the broader context of sustainability to enhance the value of Saudi companies. Our results are consistent when considering alternative measures of firm value. Our findings offer valuable insights for investors assessing board gender diversity’s impact on company value and emphasize the role of gender diversity in enhancing sustainability. They suggest that greater female representation on boards is vital for ESG score improvement, promoting sustainable initiatives and overall firm value. This calls for policymakers to promote sustainability disclosures and establish guidelines for increased female board participation, considering the absence of mandatory quotas.

Suggested Citation

  • Laila Mohamed Alshawadfy Aladwey & Raghad Abdulkarim Alsudays, 2023. "Does the Cultural Dimension Influence the Relationship between Firm Value and Board Gender Diversity in Saudi Arabia, Mediated by ESG Scoring?," JRFM, MDPI, vol. 16(12), pages 1-21, December.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:12:p:512-:d:1297838
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    References listed on IDEAS

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    1. Pascal Nguyen & Nahid Rahman & Alex Tong & Ruoyun Zhao, 2016. "Board size and firm value: evidence from Australia," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 20(4), pages 851-873, December.
    2. Laila Aladwey & Ahmed Diab, 2023. "The determinants and effects of the early adoption of IFRS 15:Evidence from a developing country," Cogent Business & Management, Taylor & Francis Journals, vol. 10(1), pages 2167544-216, December.
    3. Caroline Flammer, 2015. "Does Corporate Social Responsibility Lead to Superior Financial Performance? A Regression Discontinuity Approach," Management Science, INFORMS, vol. 61(11), pages 2549-2568, November.
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    5. Sanjukta Brahma & Chioma Nwafor & Agyenim Boateng, 2021. "Board gender diversity and firm performance: The UK evidence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5704-5719, October.
    6. Pallab Kumar Biswas & Larelle Chapple & Helen Roberts & Kevin Stainback, 2023. "Board Gender Diversity and Women in Senior Management," Journal of Business Ethics, Springer, vol. 182(1), pages 177-198, January.
    7. Peter Agyemang-Mintah & Hannu Schadewitz, 2019. "Gender diversity and firm value: evidence from UK financial institutions," International Journal of Accounting & Information Management, Emerald Group Publishing Limited, vol. 27(1), pages 2-26, March.
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