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Do ESG Risk Scores and Board Attributes Impact Corporate Performance? Evidence from Saudi-Listed Companies

Author

Listed:
  • Ines Chaabouni

    (Department of Finance, College of Business, Imam Mohammad Ibn Saud Islamic University (IMSIU), Riyadh 11552, Saudi Arabia)

  • Noura Ben Mbarek

    (Department of Finance, College of Business, Imam Mohammad Ibn Saud Islamic University (IMSIU), Riyadh 11552, Saudi Arabia)

  • Ezer Ayadi

    (Department of Finance, College of Business, Imam Mohammad Ibn Saud Islamic University (IMSIU), Riyadh 11552, Saudi Arabia)

Abstract

This research examines the link between environmental, social, and governance (ESG) risk ratings and board characteristics on corporate performance. Using 2023 data from 117 companies on the Saudi Stock Exchange, the study employs Ordinary Least Squares (OLS) regression and Python for data analysis. Our findings reveal a negative effect of ESG risk scores on financial performance measures, indicating that higher ESG risks hinder firm performance measured by ROE and ROIC. Furthermore, both the size and independence of the board decrease corporate performance in Saudi firms. Family-controlled ownership structures often limit the effectiveness of independent directors in enhancing performance. In Saudi firms, women’s board participation shows an insignificant impact on corporate performance, suggesting that the Tokenism Theory may apply. It is recommended that firms empower women in leadership roles and develop robust ESG risk management frameworks to mitigate risks and enhance financial performance.

Suggested Citation

  • Ines Chaabouni & Noura Ben Mbarek & Ezer Ayadi, 2025. "Do ESG Risk Scores and Board Attributes Impact Corporate Performance? Evidence from Saudi-Listed Companies," JRFM, MDPI, vol. 18(2), pages 1-15, February.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:2:p:83-:d:1583736
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    References listed on IDEAS

    as
    1. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    2. Mohsni, Sana & Otchere, Isaac & Shahriar, Saquib, 2021. "Board gender diversity, firm performance and risk-taking in developing countries: The moderating effect of culture," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 73(C).
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