Bridging Governance and Sustainability: Audit Committees as Moderators in the Board Gender Diversity–ESG Nexus in the MENAT Context

Abstract

Using a sample of 68 listed banks in the MENAT region from 2017 to 2023, this study examines the effect of gender diversity on ESG disclosure and the moderating role of audit committees, employing the system GMM estimator to address potential endogeneity concerns. The results reveal that the proportion of women on boards has a positive impact on ESG disclosure. Nonetheless, the relation is negatively moderated by audit committees, revealing the boundaries of the beneficial effect of gender diversity in the presence of traditional governance. The findings should be interpreted with caution but suggest that gender diversity may be associated with improved transparency and sustainability practices among firms in the MENAT region. These results may inform policy discussions regarding the potential role of gender diversity in strengthening corporate governance and sustainability outcomes. Furthermore, the evidence provides indicative support for the need for audit committees to adopt more targeted monitoring approaches across individual ESG pillars to improve oversight effectiveness.

1. Introduction

The issue of gender representation on company boards is of increasing interest in accounting and finance research, as it is hypothesized to influence a company’s environmental, social and governance (ESG) disclosure. In a context where stakeholders demand greater transparency and social responsibility, the structure of governance bodies, especially the presence of women, is a driver of improvement in sustainable and ethical practices. Women’s presence in decision-making bodies facilitates a richer diversity of perspectives, improves the integration of ESG issues in strategic processes and enhances organizational legitimacy. By introducing more inclusive, socially and environmentally conscious management styles, women can encourage more balanced and sustainable decision-making, thereby enhancing stakeholder trust [1,2].

Theoretically, the relationship between ESG disclosure and gender could be explained using different approaches, specifically, agency and stakeholder approaches. According to agency theory, greater numbers of women on boards help reduce issues regarding opportunistic managerial behavior due to information asymmetry between managers and shareholders by facilitating effective monitoring [3]. Similarly, stakeholder theory emphasizes that gender diversity enhances a company’s capacity to fulfil the diverse expectations of its stakeholders (e.g., employees, customers, investors, regulators), thereby bolstering its legitimacy and sustainability [4]. These theoretical advances suggest that the involvement of women in corporate governance is not only a matter of equity, but also a catalyst for the creation of long-term value through improved ESG disclosure.

However, previous study findings are heterogeneous, and this relationship requires further investigation. Women’s involvement on decision-making boards can be beneficial in terms of diversifying perspectives, enhancing the integration of ESG issues and organizational legitimacy, particularly in developed countries with more formal corporate governance [5,6]. Conversely, a lack of female participation in certain environments, particularly in emerging countries, can restrict strategic perspectives, reduce ESG awareness and impede the creation of sustainable value [7]. These imbalances highlight the significance of investigating institutional and cultural factors that influence the effectiveness of gender diversity on boards of directors.

The audit committee, apart from the overall composition of the board, plays a critical role in determining the link between gender and ESG disclosure. As a governance and monitoring mechanism, it enhances quality, credibility and transparency in financial as well as non-financial reporting. Previous papers suggest that gender-diverse audit committees may strengthen ethical orientation, stakeholder sensitivity and attention to social and environmental responsibilities—reinforcing ESG disclosure practices [8,9]. However, this relationship may not always be complementary. From a substitution and governance-overlap perspective, excessively strong monitoring mechanisms may generate diminishing returns. If both board gender diversity and audit committee oversight intensify control functions at the same time then firms could end up with over-monitoring, coordination costs or conflicts in strategic priorities. Such governance complexity would slow down decision-making processes as well as reduce managerial flexibility when it comes to implementing and communicating ESG initiatives. Also, highly heterogeneous committees might create divergent perspectives and operational frictions especially in emerging institutional environments with weaker governance harmonization. Hence, the moderating role of the audit committee may turn negative once monitoring intensity exceeds optimal governance efficiency.

Prior studies have looked at MENA or GCC countries a great deal, but there has not been much focus on the bigger MENAT region that includes Turkey as a separate institutional and economic setting [1]. This difference matters because GCC countries are usually known as economies reliant on oil, fixed exchange-rate systems, and somewhat similar institutional setups, while the MENAT region shows more differences in financial development, governance quality, macroeconomic policies and market openness. Specifically, Turkey is an interesting case due to its varied industrial base, more significant connection to international financial markets, and other monetary and institutional dynamics. Consequently, refocusing the discussion on the MENAT region rather than the MENA/GCC region better highlights institutional differences and strengthens the application of this study’s results.

This paper aims to investigate the influence of gender on ESG disclosure of banks in MENAT. In addition, it examines the audit committee’s moderating effect to determine the extent to which this governance mechanism can promote the quality and transparency of ESG disclosure in a context of low female participation and weaker sustainability reporting regulations.

Certainly, the study makes several contributions. Firstly, it contributes to the literature on governance and ESG criteria by offering evidence drawn from an emerging institutional context. Secondly, it emphasizes the role of core governance, particularly the audit committee, in ensuring broader and more credible ESG disclosure. Finally, it presents policy implications in the MENAT region, urging organizations to progress inclusive governance and women’s participation to boost corporate sustainability and legitimacy. The study is organized as follows. In Section 2, a literature review is reported and hypotheses developed. In Section 3, the research design is outlined. In Section 4, the outcomes are presented and discussed. In Section 5, conclusions are presented.

2. Literature Review and Hypothesis Development

2.1. Board Gender Diversity and ESG Disclosure

The debate on governance structure is increasingly focusing on gender on director boards, as it is viewed as one of the most important drivers of improving ESG. Having a balanced number of men and women in decision-making roles increases the variety of perspectives and promotes a more inclusive and responsible corporate strategy. This diversity leads to closer scrutiny of environmental, social and ethical issues, thereby strengthening the credibility and legitimacy of organizations among their stakeholders [1,10].

In the literature, the link between gender diversity on boards and ESG disclosure is supported by numerous studies, in which stakeholder and agency theories are the most prominently discussed.

Under stakeholder theory, it is implied that companies need to think about the interests of all stakeholders (employees, customers, communities, regulators, shareholders), and not shareholders alone. Gender diversity facilitates knowledge acquisition and expression of the varied interests of these stakeholders [4]. With women as part of decision-making roles, boards benefit from nore inclusive thinking, which provides for better consideration of social and environmental factors in corporate strategy. Female top-level executives have typically been associated with expression of greater concern for matters of social responsibility and a more sustainable approach to governance. This may be expressed in improved ESG practice, particularly on matters of sustainable development, transparency and social fairness. Diverse boards, for example, tend to adopt rigorous ESG reporting processes and implement green policies [1,11]. Finally, stakeholder theory proposes that alignment with stakeholder expectations reduces interest conflicts and maximizes firm legitimacy. Increased board gender diversity has the potential to build stakeholder reputation and trust, ultimately driving improved ESG disclosure and sustainable firm value creation.

In addition, according to agency theory, board of directors diversity plays a pivotal role in mitigating conflicts of interest between managers and shareholders. The existence of women on boards has the potential to enhance control and monitoring mechanisms, resulting in stronger governance and more efficient alignment with ESG objectives [3]. Following [1], female managers can faciliate the adoption of a more cautious and observant approach to risk and ESG management. Gender diversity is also likely to bring greater variety in leadership styles and skills, thereby improving the quality of strategic decision-making. Female directors may be anticipated to be more likely to support social responsibility policies and monitor the environmental performance of a firm’s operations [12]. This increased awareness helps to prevent opportunistic behavior among managers who might neglect ESG issues in favor of short-term profits. Agency theory also predicts that including women on boards would reduce agency costs relating to information and transparency [12]. Variety of representation on boards is also linked with broader ESG reporting and the establishment of governance arrangements that boost accountability. This leads to better ESG risk management and improved overall performance.

Many previous research studies have examined the link between gender and ESG, yielding varied outcomes. There are several research studies that have found a positive relationship, which indicates that female gender representation is a significant predictor of ESG disclosure. However, a number of research studies have also indicateded a negative or null relationship between these two variables. For example, ref. [13] suggests that female board member presence significantly improves the ESG disclosure of European Union listed firms, both overall and along each of its dimensions, highlighting its key contribution to supporting governance and transparency of non-financial information. In addition, ref. [5] demonstrated that female gender representation generally improves ESG disclosure by energy organizations. However, this relationship was found to only apply to firms in developed countries, implying that the effect of woman on boards on ESG transparency changes between developed and emerging economies. The authors also highlight the need for developing economies to strengthen accounting standards, recommending that future studies investigate the various aspects of ESG individually. Furthermore, ref. [6] found that the presence of women, particularly on committees, positively affected the ESG disclosure of Canadian companies. Using a structural equation model, these authors found that women have a more profound influence when they sit on specialized committees, showing that the effect of gender extends beyond the overall composition of the board. Ref. [14], providing similar evidence, found that female gender representation has a direct and considerable effect on enhancing ESG. This was observed to be notably high in those nations with a narrow stakeholder regime and poor quality of information, where the addition of female directors offered greater value. Moreover, the phased implementation of gender quotas enhanced this phenomenon, validating the primary role of diversified boards in enhancing corporate social responsibility globally. In research on developed countries, ref. [2] found that gender is a significant determinant of UK firms’ ESG disclosure. This study affirmed the predictions of critical mass theory that there must be sufficient female directors to improve this disclosure. Ref. [15] noted that ESG disclosure remains low overall, and that wide variation exists even among energy firms from emerging BRICS countries. These authors highlight that board composition and attendance, and gender diversity, are linked to this disclosure. These findings reiterate the pivotal role of board member characteristics in guaranteeing ESG transparency. Ref. [16] demonstrated that, within the GCC region, female gender representation has an important and positive influence on the effect of ESG pillars, as well as each of its dimensions, on firm performance.

However, ref. [17] found that gender diversity is not statistically correlated with ESG or any of its three dimensions. Finally, ref. [18] found that women directors’ presence has no relationship with the level of ESG disclosure in the USA and, therefore, confirmed the predictions of critical mass theory. According to this study, a larger percentage of females on the board does not necessarily ensure American firms disclose ESG more. Considering the existing literature overall, the following hypothesis is proposed, based on the initial empirical and theoretical results reported:

Hypothesis 1.

Gender diversity on the board of directors improves ESG disclosure.

2.2. Moderating Role of Audit Committee

While female gender representation is related to better understanding of stakeholder expectations, transparency and sustainability-related issues, this positive orientation does not automatically translate into substantive ESG disclosure, as ESG information is often complex, partly non-standardized, and exposed to managerial discretion, inconsistency and greenwashing risk. In this context, the audit committee can be expected to play a positive moderating role because it is the governance mechanism most directly responsible for overseeing reporting processes, internal controls, risk management and assurance practices, thereby strengthening the credibility and quality of non-financial disclosure and reducing information asymmetry between managers and stakeholders. This reasoning is consistent with the broader literature on board characteristics and ESG disclosure, which commonly relies on resource dependence, agency, legitimacy, signalling, and stakeholder perspectives to explain how governance attributes shape disclosure outcomes.

The audit committee may not necessarily moderate gender effects on ESG in a substitutive way, even though it is required to improve clarity and disclosure quality through stronger monitoring mechanisms. Prior articles have shown that audit committees are more concerned with the consistency of financial reporting, obedience with laws and risk control [19]. A compliance-oriented approach may lead to conservative reporting behavior by limiting wider voluntary ESG disclosures that gender-diverse boards might want to promote. From an agency theory perspective, excessive monitoring and procedural formalism reduce managerial flexibility and constrain strategic sustainability communication [3]. In this context, highly structured audit committees may inadvertently undermine the impact of female directors on ESG-related decisions, specifically, when sustainability disclosure is perceived as risky, subjective or reputationally sensitive. In addition, overlapping responsibilities between board and audit committee can create coordination difficulties as well as governance frictions. Although research on board dynamics indicates that female directors tend to promote stakeholder engagement, ethical sensitivity and long-run orientation [20,21], their influence becomes less effective when audit committees adopt rigid monitoring practices focusing primarily on financial accountability rather than sustainability strategy.

In addition, symbolic governance theory provides another possible explanation for this negative moderating effect. In some firms, audit committees may exist mainly to satisfy institutional or regulatory expectations without substantively supporting sustainability governance initiatives. As highlighted by [22], formal ESG oversight structures do not always translate into effective sustainability engagement when governance mechanisms are characterized by limited expertise, board overload or weak coordination across committees. Under these conditions, it is likely that audit committees will constrain innovative practices of communication about ESG issues and thereby weaken the positive contribution of gender to ESG. Thus, the moderating effect of the audit committee becomes substitutive rather than complementary in explaining the link between gender and ESG.

To our knowledge, research on the moderating effect of the audit committee on the gender–ESG relationship remains in its infancy, with [9] being among the first studies to address this issue directly. They show that gender positively influences overall ESG as well as its ESG dimensions in Chinese energy firms, and that the audit committee further strengthens this relationship. Other studies, although not always focused on the same moderating mechanism, also support the idea that governance structures condition the influence of gender on ESG outcomes. For instance, ref. [8] showed that gender reduces ESG decoupling, whereas this impact was more pronounced in low-religiosity countries and among firms involved in greenwashing or operating in sensitive sectors. Ref. [23] likewise reported that gender improves ESG in Italian firms, although CEO–chair duality weakens this positive effect. Similarly, ref. [17] showed that Saudi governance reforms strengthened the connection between board characteristics and ESG, suggesting that stronger governance structures improve firms’ sustainability reporting. Ref. [24] observed that audit committees enhanced the relationship between ESG disclosure and firm value in Indonesia, while [25] documented a moderating effect of ESG and audit committees in the ESG–performance nexus. Ref. [26] further showed that gender and audit committees jointly enhanced ESG disclosure and profitability in European firms. Related evidence by ref. [27] indicates that gender positively moderates the connection between ESG and firm value, while ref. [28] demonstrated that audit committee quality strengthens the effectiveness of ESG practices in progressing performance. Taken together, these arguments and findings suggest that the audit committee acts as an enabling governance mechanism through which the positive influence of gender is more likely to be translated into more extensive, credible and effective ESG disclosure. According to the existing literature and most significant empirical and theoretical advancements, we put forward the further hypothesis:

Hypothesis 2.

The audit committee negatively moderates the connection between gender and ESG, as stronger monitoring and coordination complexity may weaken the positive influence of gender on ESG reporting.

3. Research Design

3.1. Sample and Data

We used a sample of 68 banks operating in seven countries (United Arab Emirates, Kuwait, Morocco, Qatar, Bahrain, Saudi Arabia, and Turkey) in the MENAT region during 2017–2023. Information on the banks was collected from individual annual financial statements available in the Refinitiv Eikon database, while country-specific macroeconomic variables were obtained from the World Bank database. The sample was selected primarily based on the availability of ESG scores. The distribution of the selected banks is presented in

Table 1. Breakdown and distribution of banks.

Panel A. Distribution
Country	Number of banks	%
Bahrain	9	13%
Kuwait	8	12%
Morocco	6	9%
Qatar	8	12%
Saudi Arabia	10	15%
Turkey	10	15%
UAE	17	25%
Total	68	100%
Panel B. Breakdown
Number of listed banks		108
Excluding commercial banks that do not have three successive years of data available during the period under consideration based on the ESG variable		40
The final sample		68

. Before performing the econometric estimations, all variables were checked to identify missing data and outliers. Furthermore, continuous variables were winsorized at the 1st and 99th percentile levels to limit the effect of extreme observations on the empirical results.

Sample construction based on the availability of ESG data does not necessarily mean that there is high selection bias. It just mirrors how things are concerning ESG reporting practices in emerging markets. Because ESG disclosure is still voluntary or poorly implemented across several MENAT countries, only banks with sufficient and consistent ESG information can be used to ensure that the data are reliable and comparable. This approach is consistent with prior literature on ESG which used Refinitiv Eikon data. Furthermore, using publicly listed banks improves transparency and quality of reporting, thus enhancing the consistency of the empirical analysis. Although banks with ESG scores may have better transparency and governance standards, it is important to limit the sample to banks that have ESG data available to prevent inconsistencies in measurement and distortion due to missing values.

The choice of the 2017–2023 period and the focus on the MENAT region are based on several methodological and strategic arguments. First, this period corresponds to a significant improvement in the availability of ESG data in the Refinitiv Eikon database, thus providing a more appropriate empirical framework for analysis. It is also characterized by significant economic transformations and the strengthening of initiatives in favor of sustainable development in a context marked by major shocks, notably the COVID-19 pandemic, which profoundly affected economic and financial systems. Furthermore, the MENAT region occupies a strategic position in the global economy, which gives banking institutions a central role in supporting the transition to more sustainable economic models. Furthermore, the cultural, economic and regulatory heterogeneity of the countries in this region provides a particularly relevant analytical framework for studying the effect of gender on the connection between ESG and bank performance, especially in environments often considered less conducive to inclusive practices. Finally, the readiness of reliable, harmonized and accessible data on listed banks strengthens the methodological robustness of the study and enhances the relevance of the empirical findings.

The MENAT region constitutes a specifically relevant setting for testing the relationship between gender and ESG scores due to its distinctive institutional, cultural and governance characteristics. Compared with developed economies, MENAT countries are characterized by evolving ESG regulatory frameworks, concentrated ownership structures and relatively low female representation in corporate leadership positions. In addition, the MENAT region has recently experienced pressure from regulators, investors and international organizations to improve sustainability practices and corporate transparency. Therefore, investigating the MENAT context provides valuable insights into how gender may influence ESG-related practices in emerging and under-explored markets. Although the institutional environment of MENAT differs from that of other regions, the findings may have implications for other developing economies facing similar governance and sustainability challenges.

Table 2. Comparative characteristics of included and excluded banks.

Characteristics	Included Banks	Excluded Banks
Number of banks	68	40
Average total assets	21.765	18.981
Average ROA	0.080	0.062
ESG data available	100%	2%
Main countries represented	Bahrain, Kuwait, Morocco, Qatar, Saudi Arabia, Turkey and United Arab Emirates	Oman, Tunisia, Egypt, Jordan

presents a comparison between included and excluded banks in the final sample. Country distribution, bank size, profitability and ESG data availability are some of the characteristics on which this comparison is based. This analysis is aimed at checking if the final sample is representative and at verifying whether excluding some banks could create a possible bias due to sample selection.

Table 3. Descriptive statistics.

Variable	Obs.	Mean	Std. Dev.	Min	Max
ESG	408	39.718	17.982	5.92	77.852
ESGE	408	20.912	23.239	0	83.990
ESGS	408	35.797	20.114	1.249	82.457
ESGG	408	53.059	22.546	1.275	93.300
BGD	408	0.063	0.010	0.000	0.475
AC	408	0.383	0.272	0	1
ACS	408	39.983	39.973	0	100
ACI	408	67.209	43.980	0	100
ACM	408	3.703	4.320	0	27
ROA	408	0.080	0.104	−0.481	0.479
LAONS	408	2.778	13.093	−67.828	131.008
SIZE	408	21.765	1.520	18.645	25.928
GDPG	408	0.746	5.113	−8.600	13.787
INF	408	0.142	11.063	−25.958	84.300

presents the main descriptive statistics associated with all the variables in the study. The results show that the average ESG score is 39.718, with a standard deviation of 17.982, reflecting a reasonably large dispersion among the banks in the sample. The observed values reveal significant heterogeneity in ESG practices: some banks exhibit very low levels of ESG disclosure (minimum = 5.92), while others record significantly higher scores, reaching up to 77.852. As for BGD, the average observed score is 6.296, with a standard deviation of 10.114, reflecting notable differences between banks in terms of female representation. Furthermore, the variable relating to the quality of the audit committee (ACO) has an average of 0.383 and a standard deviation of 0.2722. These results suggest that a relatively limited proportion of banks have an audit committee that meets high quality standards.

As shown in

Table 4. Correlation coefficient matrix.

Variables	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
(1) ESG	1.000
(2) BGD	0.049 *	1.000
(3) AC	0.082 *	−0.099 *	1.000
(4) ROA	−0.109 *	0.077	−0.004	1.000
(5) LAONS	−0.042	−0.082	0.018	0.175 *	1.000
(6) SIZE	0.447 *	−0.315 *	0.056	−0.142 *	−0.088	1.000
(7) GDPG	0.051 *	0.233 *	0.078	0.230 *	−0.075	−0.104 *	1.000
(8) INF	−0.054	0.160 *	−0.094	0.128 *	0.027	−0.152 *	0.227 *	1.000

Note: * presents significant at 5% level.

, none of the correlation coefficients among the explanatory variables exceed the threshold of 0.80, suggesting that multicollinearity is unlikely to bias the empirical estimations of the study.

Furthermore, the result of the variance inflation factor (VIF) shows that there is no multicollinearity between the variables and that it is less than 10 (

Table 5. VIF correlation results.

Variable	VIF	1/VIF
BGD	1.19	0.841
SIZE	1.15	0.873
GDPG	1.13	0.885
ROA	1.09	0.921
LAONS	1.06	0.942
INF	1.05	0.953
AC	1.04	0.960
Mean VIF	1.10

).

3.2. Variables

3.2.1. Dependent Variable

ESG is a comprehensive indicator used to assess banks’ level of commitment to social responsibility. It integrates several complementary dimensions, including environmental initiatives aimed at lowering carbon footprint, social practices linked to diversity and human capital, and governance mechanisms focused on transparency and quality of management. ESG scores thus synthesize the policies, practices and information published by banks around three fundamental pillars: environmental responsibility, social impact and governance quality. A high score reflects greater commitment to environmental practices and responsible business conduct, while a low score reflects more limited involvement in these areas. For this purpose, the ESG score is considered a continuous variable ranging from 0 to 100 [28].

3.2.2. Main Independent Variable

To determine gender diversity, we follow several papers [12] employing the ratio of the number of female directors divided by the total number of directors on the board [29].

3.2.3. Moderator Variable

To measure the audit committee effectiveness (AC), we constructed a composite indicator. To assess the characteristics of the audit committee, this study uses three main indicators. The first is the size of the audit committee (ACS), calculated according to the total number of members. The second indicator concerns the independence of the audit committee (ACI), assessed by the percentage of independent non-executive directors on the committee relative to its total membership. Finally, the third indicator relates to the activity of the audit committee (ACM), evaluated by the number of meetings held annually by the audit committee [30].

To construct this indicator, we rely on the approach adopted in several previous studies, notably [30,31], using Principal Component Analysis (PCA). To verify the appropriateness of the data for this factorial method, Bartlett’s and Kaiser–Meyer–Olkin (KMO) sphericity tests were performed after applying the PCA. The outcomes, presented in

Table A1. Principal Component Analysis (PCA) Results for the Corporate Governance Index Construction.

Panel A. Total variance explained
Component	Eigenvalue	Difference	Proportion	Cumulative
Comp1	1.957	1.24529	0.652	0.652
Comp2	0.712	0.381	0.237	0.890
Comp3	0.331		0.110	1.0000
Panel B. Bartlett test of sphericity and Kaiser–Meyer–Olkin (KMO)
Bartlett test of sphericity				0.000
KMO test				0.691
Panel C. Principal component loadings and communalities
	Comp1 loading	Communality
Comp1	0.6236	0.389
Comp2	0.6068	0.368
Comp3	0.4929	0.243

, support the relevance of using this technique. Furthermore, to facilitate the interpretation of the resulting index, a min-max normalization was applied. After transformation, the index values range from 0 to 1, where a value close to 0 indicates low audit quality, while a value close to 1 reflects high audit quality.

To measure audit committee effectiveness, we constructed a composite index based on three audit committee attributes, namely, committee size (CC), committee independence (CCC) and committee meeting frequency (CTT). Following prior studies, we employed Principal Component Analysis (PCA) to aggregate these variables into a single composite indicator. Because the objective is to construct a synthetic index rather than identify latent factors, PCA is considered an appropriate dimensionality reduction technique.

Before PCA, the data were tested for suitability using Bartlett’s test of sphericity and the Kaiser–Meyer–Olkin (KMO) measure of sampling adequacy. As noted in Table A1, Bartlett’s test was significant (p < 0.001) and the KMO statistic was 0.691 which means that the correlation structure is adequate for PCA. The results from PCA indicated that the first principal component has an eigenvalue of 1.957 explaining 65.2 percent of total variance which implies that a single component can adequately describe common information shared by three characteristics of an audit committee; hence, only this first component should be retained based on the Kaiser criterion (eigenvalue > 1). Additionally, all variables have positive loadings on this first principal component with coefficients of 0.6236 for committee size, 0.6068 for committee independence and 0.4929 for frequency of meeting of committees—suggesting larger, more independent and more active audit committees positively contribute towards overall effectiveness The audit committee further communalities calculated as squared component loadings indicate that the retained components capture reasonable proportions of the variances of the original variables, with the finally resulting PCA score normalized using the min-max normalization procedure, where values closer to zero lindicate lower audit committee effectiveness, and those closer to one, higher effectiveness.

3.2.4. Control Variables

Several control variables are employed. To control profitability, we employ return on assets (ROA) measured by net income to total assets. To control bank size, this study uses the natural logarithm of total assets. Bank debt levels are assessed using the loan-to-asset ratio (LOANS). Furthermore, two macroeconomic variables are integrated into the model to account for the overall economic environment. The first is the gross domestic product (GDP) growth rate, while the second is the inflation rate, measured using the consumer price index expressed as an annual percentage [28,32,33].

Table 6. Definition of variables.

Variable	Acronyms	Definition	Source
ESG disclosure	ESG	Economic, social and governance score	Refinitiv Eikon
Board gender diversity	BGD	Number of female directors divided by the total number of directors on the board	Refinitiv Eikon
Audit committee effectiveness	AC	Composite indicator using PCA.	Refinitiv Eikon
Audit committee size	ACS	Total number of members to audit committee	Refinitiv Eikon
Audit committee independent	ACI	Independent non-executive directors in the audit committee to total committee members	Refinitiv Eikon
Audit committee meeting	ACM	Number of meetings per year held by audit committee	Refinitiv Eikon
Returns on assets	ROA	Net income to total assets	Refinitiv Eikon
Loans	LOANS	Total loan to total assets	Refinitiv Eikon
Bank size	SIZE	Natural logarithm of total assets	Refinitiv Eikon
GDP growth	GDP	GDP growth rate (annual %) (gross domestic product growth rate (at constant 2015 prices))	WDI, World Bank
Inflation rate	INF	Consumer prices index (annual %)	WDI, World Bank

summarizes the definition of variables.

3.3. Econometric Models

This study is grounded in an augmented production–function framework in which firm sustainability performance is influenced not only by conventional firm resources but also by governance-related organizational capabilities. Following the extended Cobb–Douglas perspective, ESG performance may be viewed as an outcome of productive and managerial efficiency embedded within corporate governance structures. In this context, board gender diversity contributes to enhanced monitoring, broader stakeholder orientation and improved strategic decision-making, thereby increasing organizational effectiveness and sustainability outcomes. Audit committees further strengthen this mechanism by enhancing transparency, reporting quality, internal control effectiveness and governance oversight.

Accordingly, the governance dimension is incorporated into the productivity component of the firm as follows:

$$ES{G}_{it}=A_{it}{K}_{it}^{\alpha }{L}_{it}^{\beta }$$

(1)

where $A_{it}$ captures governance quality and organizational efficiency, which are assumed to depend on gender and audit committee effectiveness.

Based on this framework, to estimate the effect of BGD on ESG disclosure, we employ the System Generalized Method of Moments (SGMM) method. Equation (2) for the dynamic model is as follows:

$$\begin{array}{c}ES{G}_{cit}={\alpha }_i+{\beta }_{1}ES{G}_{cit-1}+{\beta }_{2}BG{D}_{cit}+{\beta }_{3}ROA+{\beta }_{4}LOAN{S}_{cit}+\hfill \\ {\beta }_{5}SIZ{E}_{cit}+{\beta }_{6}GD{P}_{ct}+{\beta }_{7}IN{F}_{ct}+{\epsilon }_{it}\hfill \end{array}$$

(2)

where $ES{G}_{cit}$ is the ESG score for country, firm i at time t; $BG{D}_{cit}$ is board gender diversity; ROA, LOANS, SIZE, GDP and INF are control variables.

A substantial body of empirical research has employed the System Generalized Method of Moments (SGMM) technique to examine the determinants and effects of bank ESG disclosure. The SGMM estimator offers several methodological advantages, particularly in addressing endogeneity concerns, omitted variable bias, measurement errors and the dynamic nature of panel data models. This approach is especially appropriate for studies characterized by a relatively small time dimension and a larger cross-sectional dimension, as is the case in our sample, which comprises 68 banks observed over a period of 6 years (N = 68; T = 6). Moreover, the Arellano and Bond [34] second-order autocorrelation test yields non-significant AR (2) statistics, indicating the absence of serial correlation in the residuals and, consequently, confirming the correct specification of the dynamic model. This result suggests that the inclusion of a single lagged dependent variable is sufficient to capture the persistence of bank performance over time. In addition, the robustness of the SGMM estimator is reinforced through the appropriate use of lagged instruments, namely, lagged values at t-1 and t-2 in the differenced equation and one lag in the level equation. Finally, the validity and overall reliability of the instrumental variables are confirmed by Hansen’s J-test of overidentifying restrictions, which indicates that the selected instruments are statistically valid and properly specified. To check Hypothesis 2, the original model is extended by incorporating the following interaction terms into Equation (3):

$$\begin{array}{c}ES{G}_{cit}={\alpha }_i+{\beta }_{1}ES{G}_{cit-1}+{\beta }_{2}BG{D}_{cit}+{\beta }_{3}A{C}_{cit}+{\beta }_{4}BG{D}_{cit}\times A{C}_{cit}\hfill \\ +{\beta }_{5}ROA+{\beta }_{6}LOAN{S}_{cit}+{\beta }_{7}SIZ{E}_{cit}+{\beta }_{8}GD{P}_{ct}+{\beta }_{9}IN{F}_{ct}+{\epsilon }_{it}\hfill \end{array}$$

(3)

where AC is the audit committee.

4. Empirical Outcomes and Discussion

4.1. Baseline Outcomes

4.1.1. Gender Diversity–ESG Disclosure

This subsection presents empirical outcomes concerning the outcome of audit committee quality on ESG disclosure in the MENAT region. The various estimates are reported in

Table 7. Baseline results.

VARIABLES	(1) ESG	(2) ESG	(3) ESG
ESGt+1	−0.429 ***	−0.634 ***	−0.386 ***
	(0.046)	(0.064)	(0.055)
BGD	0.561 ***		0.168 ***
	(0.090)		(0.029)
AC		0.199 ***	0.433 ***
		(0.073)	(0.015)
BGD*AC			−0.253 ***
			(0.060)
ROA	−0.322 ***	−0.222 **	−0.387 ***
	(0.076)	(0.011)	(0.011)
LOANS	−0.153 ***	−0.906 ***	−0.987 ***
	(0.032)	(0.313)	(0.336)
SIZE	0.704 ***	0.505 ***	0.693 ***
	(0.061)	(0.081)	(0.075)
GDPG	0.199	0.264	0.187 ***
	(0.208)	(0.221)	(0.026)
INF	−0.051	−0.100 **	−0.013
	(0.055)	(0.047)	(0.039)
Constant	−0.967 ***	−0.530 ***	−0.115 **
	(0.136)	(0.018)	(0.015)
Observations	340	340	340
Number of Banks	68	68	68
Number of instruments	26	27	27
AR (1) (p-value)	0.006	0.027	0.005
AR (2) (p-value)	0.099	0.248	0.059
Hansen test (p-value)	0.190	0.107	0.136
Difference-in-Hansen test (p-value)	0.328	0.289	0.421
Endogeneity test	0.000	0.000	0.000

Notes: Standard errors are displayed in brackets. *** and ** denote statistical significance at the 1% and 5% levels, respectively.

. The findings obtained from the two estimated models confirm the relevance of using the GMM method in this study. Indeed, the Hansen-J statistics indicate that the selected instruments are valid and sufficiently differentiated. Furthermore, the autocorrelation tests AR (1) and AR (2) support the hypotheses of no first-order or second-order autocorrelation, respectively, which strengthens the robustness of the estimates. Model (1) examines the effect of gender diversity on ESG disclosure, while model (2) analyzes the direct impact of audit committee quality on this same variable. Finally, model (3) looks at the effect of the interaction term between gender diversity and the quality of the audit committee on the ESG performance of the banks studied.

Specifically, the results reveal that the coefficient of the ESG disclosure (ESG_t−1) has a negative and statistically significant effect on all three models at the 1% significance level. This finding implies that activities conducted during the previous period tend to absorb high organizational, financial and human resources. These activities may have a saturation effect or decreasing marginal increment on short-term benefits and thus reduce current ESG disclosure. Moreover, some ESG activities require time to exert their influence; such a temporal lag between investment and impact may enhance the negative correlation found between past and current ESG disclosure.

In reference to the variable BGD, Model (1) estimations indicate that gender diversity positively affects ESG disclosure. This economic interpretation reflects that the positive influence of gender diversity on MENAT banks’ ESG disclosure is due to increased women’s participation on boards of directors and governance committees. The involvement of women produces greater sensitivity to social and environmental issues, enhanced risk management and greater vision of social responsibility. This diversity improves decision making in strategy, curbs opportunistic behavior and increases the credibility of the bank with stakeholders, leading to greater ESG disclosure. This result is in contrast with those found by [5,13]. However, it is in line with the results of [6,14,16]. In this regard, hypothesis H1 is therefore accepted.

Moving on to the control variables, it can be seen from the three models that the coefficient of the ROA variable is negative and significant in all the models, indicating that ROA lowers ESG disclosure. It follows from this result that the negative impact of ROA on ESG disclosure is because the most profitable banks prefer profit maximization and financial efficiency over socially responsible investment. Profitability at a high level can lead to pressure for managers to conform to profit-centered strategies that maximize returns in the short term over investing in programs of ESG, which are perceived as costly or providing delayed returns. Therefore, the quest for greater financial returns is at the expense of ESG commitment and works toward a negative nexus between ROA and ESG disclosure.

Furthermore, in each of the three models, the coefficient on the loan’s variable is negative and significant. The result shows that reduction in loans lowers ESG disclosure. Specifically, large credit growth compels banks to focus on loan portfolio expansion and financial profitability at the expense of social and environmental considerations. This credit amount and profitability focus can limit resources and support conservative practices or even encourage lending for non-viable projects. Hence, an increase in loans can result in a slowdown in ESG participation, as reflected in a decline in ESG disclosure.

However, the coefficient of the size variable is positive and statistically significant for all three models. This suggests that larger banks have more technological financial and human resources to invest in sustainable activities and regulatory compliance. Their increased visibility also pushes them to practice responsibility to maintain their image and increase stakeholder confidence. In addition, their ability to diversify their business and embrace global best practices allows them to enforce ESG approaches more efficiently, which improves overall disclosure in this regard.

Country-specific factors are also important in explaining ESG disclosure. Indeed, the result of Model 3 is that GDP growth is positively and significantly affected at the 1% level. This shows that GDP growth improves ESG performance. On economic grounds, the positive relationship between GDP growth and ESG disclosure is a pointer to the fact that favorable economic conditions allow banks and companies to have better financial resources and stability to devote to responsible conduct. Expansion also creates demand for green banking products and increases stakeholder pressure to adopt higher environmental and social standards. Thus, in a situation of economic growth, institutions are better placed to adopt ESG into their strategies, and thus their performance gets better in this aspect. The results from Model (2) show that the inflation rate has a significant and negative impact at the 5% level. This shows that the inflation rate decreases ESG disclosure. This can be explained because rising prices increase operating costs and decrease the profitability of banks, thus reducing their scope to finance or maintain initiatives. In an inflationary environment, funds are steered towards sustaining margins of finance and addressing pressing threats at the cost of long-term ESG-type investments. Moreover, inflation can also heighten social and economic tensions, which hinder the implementation of responsible approaches, resulting in a decline in ESG disclosure.

4.1.2. Moderating Effect

In this section, we consider the moderating effect of audit committee practice on the gender diversity–ESG disclosure nexus. The findings are also illustrated in Table 6, which highlights that the influence of the audit committee (AC) on ESG disclosure is also positive and significant at the 1% level in both Models (2) and (3). Economically, the result suggests that the beneficial influence of the audit committee on the ESG performance of banks is due to its control and monitoring role, which promotes transparency, compliance and good governance. An active and alert audit committee ensures the integrity of financial and non-financial data and thus reduces the risk of opportunistic behavior or greenwashing [29]. It directly contributes to improved ESG disclosure by improving accountability and promoting the integration of ESG factors in banking strategy.

For Model (3), we tested for the moderating role of the audit committee on the gender diversity–ESG disclosure relationship. The findings indicate that the interaction term of audit committee quality–gender diversity has a negative and statistically significant 1% coefficient. This indicates that the audit committee negatively moderates gender diversity and ESG disclosure effects, thereby lending support to hypothesis H2. From an economic perspective, this result implies that the negative effect of the interaction between gender diversity and audit committee on ESG disclosure is due to a coordination and organizational complexity effect. Having both an audit committee and high gender diversity can create conflicting priorities, task redundancies and slow decision-making, thus limiting the success of ESG initiatives. Beyond this, a more thorough audit and stronger controls to include these factors will increase audit costs, resulting in greater expenditure of human and financial capital. This combination of increased expenses and organizational complexity might restrict banks’ ability to invest fully in ESG practices. This result contrasts with that of [26], where the authors found that female gender representation positively moderates the impact of an audit committee on the disclosure of ESG criteria and the profitability of European companies.

4.2. Robustness Analysis

4.2.1. Change in Dependent Variable

To consider the relationships in greater depth, in line with [28,33], we used the three components of ESG (environmental, social and governance) instead of the global variable of ESG. This allowed us to support findings and to examine in depth the association between gender diversity and each of the dimensions of ESG. Also, it enabled fuller analysis of the role of the audit committee in moderating the relationship between gender diversity and all aspects of ESG (

Table 8. Alternative measure of ESG.

VARIABLES	(1) ESGE	(2) ESGS	(3) ESGG
ESGt−1	−0.310 ***	−0.201 ***	−0.239 ***
	(0.056)	(0.066)	(0.053)
BGD	0.170	1.285 ***	1.685 ***
	(0.396)	(0.349)	(0.359)
AC	−0.362 **	1.279	0.267 *
	(0.152)	(13.465)	(0.145)
BGD*AC	2.103 **	−1.745 **	−2.042 **
	(0.837)	(0.796)	(0.836)
ROA	0.860	−0.126	−0.750 ***
	(1.295)	(0.105)	(0.117)
LOANS	0.232	−1.297 ***	−1.261 ***
	(0.740)	(0.411)	(0.201)
SIZE	0.866 ***	0.836 ***	0.547 ***
	(0.074)	(0.072)	(0.010)
GDPG	0.264	−0.377	1.282 ***
	(0.254)	(0.285)	(0.359)
INF	−0.210 **	0.133 *	−0.278 **
	(0.082)	(0.074)	(0.120)
Constant	−0.154 ***	−0.142 ***	−0.659 **
	(0.015)	(0.016)	(0.249)
Observations	340	340	340
Number of Banks	68	68	68
Number of instruments	30	30	30
AR (1) (p-value)	0.005	0.009	0.004
AR (2) (p-value)	0.310	0.264	0.458
Hansen test (p-value)	0.228	0.116	0.190
Difference-in-Hansen test (p-value)	0.452	0.392	0.407
Endogeneity test	0.000	0.000	0.000

Notes: Standard errors are displayed in brackets. ***, ** and * denote statistical significance at the 1%, 5% and 10% levels, respectively.

).

Under Model (2), gender diversity was shown to have a strong and positive relationship with social disclosure (ESGS). This is due to the inclusion of women in the board of governance, which provides heightened sensitivity towards matters concerning society such as equity, employee well-being and responsiveness to people. Female representatives are assumed to place greater value on communication, participation and social justice, which can further strengthen internal human resource management policies and improve a bank’s external reputation. Gender diversity then translates into greater attention to stakeholder expectations and real improvement in social disclosure.

In Model (3), we found that gender diversity has a positive and significant impact on disclosure of governance practices (ESGG). This stems from the fact that the presence of women on boards of directors and supervisory committees strengthens transparency, independence and the quality of internal control. Diversity promotes a plurality of points of view and limits opportunistic behavior or biased decision-making. It also improves the accountability and oversight of managers, thus reducing the risks of mismanagement. By integrating diverse perspectives, governance becomes more balanced and effective, resulting in better overall governance disclosure. These results are consistent with those observed by [9].

For the variable of audit committee coefficient, it is significant and negatively associated with environmental disclosure (ESGE (Model (1)). This result can be ascribed to the reality that good-quality audit imposes stringent controls as well as greater transparency that highlights the actual costs and risks involved in environmental projects. Faced with such stringency, firms and banks may be less willing to undertake certain investments that are viewed as expensive or risky, since they restrict or delay such investments. In turn, instead of encouraging environmental disclosure, high audit committee quality may, in the short term, impede green projects and lower reported environmental disclosure.

However, in Model (3), the audit committee variable is positively and significantly associated with governance disclosure. This finding reflects the significant impact auditing can have in promoting transparency, information quality and internal control. Good-quality audits reduce information asymmetry, place checks on managerial opportunism and contribute to better protection of stakeholders. This intensity of focus creates greater confidence among investors and prompts boards of directors to adopt more responsible and more standards-based management practices. Audit committee quality at high levels, hence, directly contributes to more effective and credible governance.

In addition, the findings on the moderating influence of audit committee (AC) on the relationship between gender diversity and ESG components seem to vary across different models. The gender diversity and audit committee interaction term (BGD*AC) is positively and significantly related to environmental disclosure (ESGE) in Model (1). The complementary roles explain the positive effect. Gender diversity raises sensitivity to environmental issues and encourages decision-making based on sustainability, while the audit committee raises concerns with transparency, credibility and accountability for environmental activities. Combined, these two factors work to contain the threat of greenwashing, upgrade the quality of non-financial reporting, and to channel more funds into green initiatives. The synergy amounts to an actual enhancement of the environmental disclosure of the banks.

However, the interaction term gender diversity and audit committee (BGD*AC) has a negative and significant influence on social (ESGS) and governance (ESGG) disclosure (Models (2) and (3)). More precisely, the interaction term gender diversity and audit committee (BGD*AC) is found to have a negative and significant effect on social (ESGS) and governance (ESGG) disclosure (see Models (2) and (3)). In Model (2), this result is explained by the effect of complexity and coordination costs. When both gender diversity and the audit committee are present, multiplication of viewpoints and control requirements can slow down decision-making and create tensions in governance [29]. Furthermore, compliance focus and stringent oversight can divert funds and energies from concrete social activities (well-being of workers, acceptance, community participation). This organizational weight can then reduce the effectiveness of social activities, a sign of adverse social disclosure.

Similarly, in Model (3), the negative influence of the interaction term between gender diversity and the audit committee on governance disclosure may be due to organizational complexity and priority divergence. The presence of high gender diversity and an active audit committee can generate coordination disputes, slow down decision-making, and increase oversight expenses. Instead of improving governance, this intersection may result in administrative overload or disagreement regarding strategic priorities, sabotaging the effectiveness of control mechanisms and causing a decline in governance disclosure.

4.2.2. Change in Independent Variable

To assess the robustness of the independent variable, we replaced the original continuous measure (e.g., the percentage of women on the board) with a binary variable. This new variable takes the value 1 if at least one woman is present on the board and 0 otherwise. The results obtained using this binary specification remain consistent with those of the initial model, indicating that the observed effect of gender diversity is robust to changes in variable definition (

Table 9. Alternative measure of BGD.

VARIABLES	(1) ESGE	(2) ESGS	(3) ESGG
ESGt−1	−0.310 ***	−0.201 ***	−0.239 ***
	(0.056)	(0.066)	(0.053)
BGD	0.170	1.285 ***	1.685 ***
	(0.396)	(0.349)	(0.359)
AC	−0.362 **	1.279	0.267 *
	(0.152)	(13.465)	(0.145)
BGD*AC	2.103 **	−1.745 **	−2.042 **
	(0.837)	(0.796)	(0.836)
ROA	0.860	−0.126	−0.750 ***
	(1.295)	(0.105)	(0.117)
LOANS	0.232	−1.297 ***	−1.261 ***
	(0.740)	(0.411)	(0.201)
SIZE	0.866 ***	0.836 ***	0.547 ***
	(0.074)	(0.072)	(0.010)
GDPG	0.264	−0.377	1.282 ***
	(0.254)	(0.285)	(0.359)
INF	−0.210 **	0.133 *	−0.278 **
	(0.082)	(0.074)	(0.120)
Constant	−0.154 ***	−0.142 ***	−0.659 **
	(0.015)	(0.016)	(0.249)
Observations	340	340	340
Number of Banks	68	68	68
Number of instruments	30	30	30
AR (1) (p-value)	0.005	0.009	0.004
AR (2) (p-value)	0.310	0.264	0.458
Hansen test (p-value)	0.228	0.116	0.190
Difference-in-Hansen test (p-value)	0.452	0.392	0.407
Endogeneity test	0.000	0.000	0.000

Notes: Standard errors are displayed in brackets. ***, ** and * denote statistical significance at the 1%, 5% and 10% levels, respectively.

). This alignment strengthens the robustness of our results and further emphasizes the significant role played by female representation in corporate governance.

4.2.3. Change in Econometric Technique

To further confirm the validity of our results, we also estimated a static regression model. The Hausman test yielded a p-value of 0.236 and 0.105, which is greater than the 5% value (

Table 10. Alternative econometric technique.

VARIABLES	(1) Linear Model	(2) Moderating Effect
BGD	0.506 ***	0.303 ***
	(0.111)	(0.070)
AC		0.115 ***
		(2.644)
BGD*AC		−0.689 ***
		(0.229)
ROA	−0.296 ***	−0.129 **
	(0.011)	(0.063)
LAONS	−0.118	−0.380
	(0.096)	(0.251)
SIZE	0.611 ***	0.993 *
	(0.054)	(0.521)
GDPG	0.186	0.308 *
	(0.172)	(0.172)
INF	−0.035	0.128 **
	(0.069)	(0.065)
Constant	−0.954 ***	0.127 ***
	(0.122)	(0.011)
Observations	476	476
Number of Banks	68	68
Wald chi2 (p-value)	0.000	0.000
Hausman test (p-value)	0.236	0.105
Heteroscedasticity test (p-value)	0.000	0.000
Autocorrelation test (p-value)	0.087	0.128

Notes: Standard errors are displayed in brackets. ***, ** and * denote statistical significance at the 1%, 5% and 10% levels, respectively.

). This means that the null hypothesis is not rejected. That is, there is no systematic variation between fixed-effects and random-effects estimators. Therefore, the random-effects model was applied because it allows us to control individual heterogeneity and offers more statistical power. The results on the gender diversity effect on ESG disclosure as well as the interaction effect associated with audit committees are like those in the foregoing regressions. They confirm hypotheses H1 and H2.

5. Conclusions and Policy Implications

The objective of this article is to investigate the impact of gender diversity on the ESG disclosure of banks in the MENAT region and the moderating influence of the audit committee on this association. The most important results show that gender diversity can be increased at the board of directors’ level to improve ESG disclosure. Moreover, the findings suggest that the audit committee has a negative moderating influence on the relationship between gender diversity and ESG disclosure.

Considering these results, the findings indicate that regulators in the MENAT region may consider incentive-based policies to promote gender diversity on boards of directors and enhance audit committee effectiveness. However, such policy discussions should recognise the potential for paradoxical or unintended effects that may arise from the joint use of these governance mechanisms. For managers, this evidence can assist in developing coordination mechanisms and continuous training programs that will help achieve complementarity between gender-diverse boards and audit committees. Since the ESG components are differently affected—gender diversity having stronger associations with social and governance dimensions while audit committee effectiveness relates more closely to environmental monitoring and disclosure—more differentiated governance strategies might be called for. In this respect, banks could seek to harness the possible contributions of board diversity to social, ethical and governance-related concerns while relying on audit committees for strengthening control mechanisms and compliance as well as environmental disclosure. These recommendations should thus be viewed as indicative rather than prescriptive due to the observational nature of the study and its measurement approach.

Finally, the design of the study will not permit clear cause and effect determination since the analysis is based on observational data and depends on how gender diversity, audit committee effectiveness and ESG performance were measured. Therefore, practical recommendations based on the findings should be adopted with caution as indicative associations rather than proof of causal effects. Further studies could use longitudinal designs or quasi-experimental approaches to provide stronger evidence about the causal mechanisms that connect board gender diversity to audit committee effectiveness and ESG outcomes.