Gender Diversity, Board Size, and ESG Performance: Sectoral Evidence from GCC-Listed Firms

Abstract

This study examines the relationship between board gender diversity, board size, and environmental, social, and governance (ESG) performance among Gulf Cooperation Council (GCC) listed firms. Drawing on Resource Dependence Theory (RDT), the analysis uses panel data from GCC-listed firms over the period 2018–2023. The findings show that board gender diversity is positively and consistently associated with aggregate ESG performance and its environmental and social dimensions, with results remaining robust across financial and non-financial firms, as well as energy and non-energy sectors. In contrast, board size is negatively associated with ESG performance, although sectoral heterogeneity is evident. Board size is negatively related to environmental performance in financial firms, while it is positively associated with ESG performance in energy firms, driven by the environmental dimension. Overall, the results highlight that the role of board characteristics varies across contexts and sectors in shaping ESG performance within the GCC.

1. Introduction

ESG performance has emerged as a key driver of corporate legitimacy and long-term value creation in an era of heightened stakeholder scrutiny and sustainability expectations. Investors increasingly integrate ESG criteria into capital allocation decisions, regulators mandate sustainability disclosure, and consumers demand corporate accountability for environmental and social impacts [1]. This combination of pressures has transformed ESG from a secondary corporate social responsibility activity to an increasingly important strategic consideration, influencing how firms operate and compete globally.

The board of directors plays an important role in shaping firms’ ESG performance by overseeing strategy, monitoring management, and responding to stakeholder expectations. Resource Dependence Theory (RDT) posits that boards provide essential resources, including expertise, networks, and legitimacy, that enable firms to address complex issues [2]. However, the extent to which boards effectively translate these resources into improved ESG outcomes varies across institutional contexts, leading to heterogeneous empirical findings. Empirical evidence reveals that board characteristics influence ESG outcomes, yet findings remain mixed and context-dependent, with positive, negative, and non-significant relationships reported across different institutional settings [3,4,5].

The GCC, comprising Saudi Arabia, the United Arab Emirates (UAE), Kuwait, Qatar, Bahrain, and Oman, presents a particularly compelling yet not fully explored context for examining board characteristics and ESG performance. The region’s unique institutional environment diverges fundamentally from Western markets, characterized by concentrated family and state ownership, with sovereign wealth funds holding major stakes in strategically important sectors [6]. These countries are also undergoing significant economic diversification, supported by ambitious national sustainability agendas such as Saudi Arabia’s Vision 2030, which targets 50% renewable energy by 2030 and net-zero emissions by 2060 [7] and the UAE’s goal of achieving 75% clean energy by 2050 [8]. Moreover, GCC countries have implemented significant governance reforms, including the UAE’s 2021 mandate for female board representation [9] and Saudi Arabia’s ESG disclosure guidelines [10]. These national transformation agendas and regulatory developments create intense pressures for enhanced ESG performance, fundamentally shifting sustainability from secondary concerns to central strategic priorities.

This study investigates the effects of board gender diversity and board size on ESG performance among GCC-listed firms over the period 2018–2023 and examines sectoral heterogeneity, particularly in the financial and energy sectors. ESG performance is examined at the aggregate level using the overall ESG score and across the environmental and social dimensions. The governance dimension is not examined separately due to its close association with board composition variables, which may result in overlap with the explanatory variables. To address potential endogeneity concerns, the study employs an instrumental variable approach to account for possible reverse causality. Existing GCC studies exhibit several important limitations that may constrain the understanding of the relationship between board characteristics and ESG performance. Prior research predominantly relies on ESG disclosure measures based on firms’ self-reported sustainability narratives, which may capture symbolic compliance rather than realized sustainability outcomes. In addition, much of the existing evidence is based on relatively small samples and focuses primarily on non-financial firms, limiting the generalizability of findings across sectors.

In response to these limitations, the present study relies on externally assessed ESG performance measures to capture realized sustainability outcomes and draws on a larger sample observed over a longer time frame, encompassing both financial and non-financial firms. Moreover, the analysis explicitly accounts for sectoral heterogeneity, with particular attention to the financial and energy sectors, where regulatory conditions and sustainability exposure differ substantially. This approach enables a more comprehensive analysis of how board gender diversity and board size relate to ESG performance in the GCC region. This study provides robust evidence that board characteristics play a central role in shaping ESG performance among GCC-listed firms. Board gender diversity is consistently and positively associated with aggregate ESG performance as well as its environmental and social dimensions, and this relationship remains robust after addressing endogeneity concerns through an instrumental variable approach. This positive effect of board gender diversity holds across financial and non-financial firms, as well as across energy and non-energy sectors. These findings suggest that female directors strengthen boards’ capacity to integrate ESG considerations into strategic decision-making, particularly within the GCC’s evolving regulatory and institutional environment.

In contrast, board size is negatively associated with ESG performance in the baseline models, indicating that larger boards may reduce the effectiveness of sustainability oversight due to coordination difficulties and slower decision-making. However, further analysis reveals sectoral heterogeneity. For financial firms, board size has a significant negative association with environmental performance, while its relationship with overall ESG and social performance is not statistically significant. For financial firms, environmental performance appears to be an emerging and complex area that demands specialized expertise, and larger boards may therefore face greater coordination challenges and slower consensus-building. In contrast, for energy firms, board size is positively and significantly associated with aggregate ESG performance, driven primarily by the environmental dimension. It seems that energy firms face intensified oversight from regulators, sovereign wealth funds, and international investors, and are closely connected to regional energy transition initiatives.

The study makes several important contributions to the corporate governance and sustainability literature. First, it moves beyond the dominant focus on ESG disclosure by using independently evaluated ESG performance scores, which better capture actual sustainability outcomes in this context, where disclosure may reflect symbolic compliance rather than substantive performance. Second, the study employs a larger and more comprehensive sample of GCC-listed firms across both financial and non-financial sectors and explicitly distinguishes between financial and non-financial firms as well as between energy and non-energy firms. This allows for a detailed examination of how board characteristics differentially affect ESG performance across sectors with distinct regulatory and institutional environments. Third, the study jointly examines board size and board gender diversity and analyzes ESG performance at both the aggregate level, measured by the overall ESG score, and across its environmental and social dimensions, offering a more refined understanding of how board characteristics influence different aspects of ESG performance.

The remainder of the paper is organized as follows. Section 2 reviews the GCC sustainability context. Section 3 presents a literature review and hypothesis development. Section 4 describes the data and estimation approach. Section 5 reports the empirical findings, and Section 6 concludes.

2. The GCC Sustainability Context

The GCC region presents a distinctive institutional environment for examining the relationship between board characteristics and ESG performance. The combination of concentrated ownership structures, ambitious economic transformation agendas, evolving governance frameworks, and emerging sustainability priorities creates a unique context for understanding how board composition influences ESG outcomes in ways that diverge fundamentally from Western and other emerging market settings.

GCC firms are characterized by concentrated ownership structures, in contrast to the dispersed ownership type of Western markets. Family ownership dominates the private sector, with founding families maintaining substantial equity stakes and exercising significant control [6]. This extends to substantial state ownership in strategically important sectors, particularly energy, telecommunications, banking, and utilities. Sovereign wealth funds, including Saudi Arabia’s Public Investment Fund, the UAE’s Abu Dhabi Investment Authority, Kuwait Investment Authority, and Qatar Investment Authority, hold major stakes in domestic corporations, creating unique governance dynamics. These concentrated ownership structures have an important influence on how boards function. In contrast to firms with dispersed ownership, where boards mainly focus on monitoring management, boards in GCC firms often include representatives of controlling families or government entities. This can create multiple lines of accountability within the board. As a result, the effects of board gender diversity and board size may differ in the GCC context, where ownership is typically concentrated and controlling shareholders play a central role in shaping ESG priorities and investment decisions. For example, family owners may place greater emphasis on long-term sustainability to protect intergenerational wealth, and state-owned enterprises tend to balance commercial goals with national development objectives that increasingly incorporate sustainability considerations.

GCC economies have historically depended heavily on hydrocarbon revenues, with oil and gas exports constituting the primary source of government income. However, the past decade has witnessed a commitment to economic diversification. Saudi Arabia’s Vision 2030, introduced in 2016, outlines a broad economic reform framework that includes reducing reliance on hydrocarbon revenues and expanding non-oil sectors such as tourism, manufacturing, renewable energy, and financial services. The framework also incorporates environmental sustainability objectives, including targets related to renewable energy capacity, electricity generation, and long-term emissions reduction [7]. Related policy initiatives, such as the Saudi Green Initiative and the Middle East Green Initiative, set out environmental commitments including large-scale afforestation [11]. Similarly, the UAE’s Vision 2021 and subsequent energy strategies emphasize economic diversification and sustainability, with policy targets for clean energy generation extending to 2050 [8,12]. These national transformation agendas place increasing pressure on firms to improve their ESG performance. Governments increasingly link access to public contracts to firms’ sustainability commitments, while sovereign wealth funds consider ESG factors in their investment decisions, creating financial incentives for better ESG practices. Together, these factors change how corporate boards approach ESG issues, shifting them from secondary concerns to central strategic priorities that are closely aligned with national development goals.

The GCC region has experienced significant governance reforms over the past two decades, driven by objectives to attract foreign investment and align with international best practices. In the UAE, the Securities and Commodities Authority (SCA) amended the Governance Code in 2021, making it mandatory for all listed public companies to have at least one female board member [9]. Additionally, the UAE has mandated ESG disclosures for listed companies under guidelines to enhance transparency and investor confidence [13]. In Saudi Arabia, Tadawul, the Saudi Exchange, launched ESG Disclosure Guidelines in 2021 to support and encourage ESG reporting by listed companies, though formal mandatory ESG disclosure requirements are still evolving [10]. These regulations enhance transparency and allow investors to incorporate sustainability considerations into their investment decisions. At the same time, greater participation by international investors strengthens sustainability pressures, as foreign institutional investors typically apply ESG screening criteria and active engagement practices. As a result, firms seeking access to international capital markets face higher expectations regarding ESG performance.

Moreover, the region faces significant environmental challenges, including water scarcity, extreme heat, and climate vulnerability, which increase the importance of sustainability issues. These context-specific ESG challenges place additional demands on corporate governance and require greater attention and expertise at the board level.

This unique combination of concentrated ownership, ambitious transformation agendas, and evolving governance frameworks makes the GCC region compelling for examining board characteristics and ESG performance. The rapid pace of change creates opportunities to observe how board composition influences ESG outcomes during institutional transitions, providing insights relevant to other emerging markets.

3. Literature Review and Hypothesis Development

3.1. Theoretical Framework: Legitimacy Theory and RDT

Legitimacy Theory provides a foundational framework for understanding why firms engage in ESG practices. Organizations operate within social contracts and must align their activities with societal norms and expectations to maintain legitimacy and ensure continued access to resources [14]. Firms that fail to meet stakeholder expectations regarding environmental and social responsibility risk losing legitimacy through reputational damage, regulatory sanctions, and diminished stakeholder support.

Stakeholder expectations regarding corporate sustainability have intensified significantly. Investors increasingly incorporate ESG criteria into investment decisions, consumers demand environmentally responsible products, and regulators implement rigorous compliance requirements [1]. Consequently, firms engage in ESG practices as strategic responses to legitimacy pressures. ESG performance signals corporate commitment to meeting societal expectations, thereby enhancing organizational legitimacy [6].

While Legitimacy Theory explains why firms pursue ESG performance, RDT explains how board characteristics affect a firm’s ability to achieve stronger ESG performance. RDT posits that boards serve as critical linkages between organizations and their external environments, providing access to essential resources, including expertise, networks, and legitimacy [2]. Board composition could determine the quality and diversity of resources available for navigating sustainability challenges.

3.2. Board Gender Diversity and ESG Performance

Board gender diversity has been shown to be associated with firms’ ESG capabilities through multiple mechanisms. Female directors bring diverse perspectives and stakeholder orientations that expand boards’ cognitive resources [15]. Gender-diverse boards provide access to broader professional networks, including connections with socially responsible investors [16]. These mechanisms are particularly relevant in ESG contexts, where decision-making requires balancing financial objectives with societal and environmental considerations.

Empirical evidence from developed economies largely supports a positive association between board gender diversity and ESG performance, with particularly strong effects observed in the environmental and social pillars [3,4,17]. Further evidence indicates that gender-diverse boards are especially effective in strengthening the social pillar through improved employee relations, community engagement, and sustainability disclosure, thereby reinforcing firms’ social legitimacy [18]. Environmental outcomes also tend to improve, particularly when gender diversity reaches a critical mass, with studies reporting enhanced environmental practices and reductions in carbon emissions once female representation approaches 25–30% of board membership [19,20,21,22,23].

However, evidence is not unequivocal: an inverted U-shaped relationship between female board representation and ESG performance is documented, suggesting diminishing returns to gender diversity beyond an optimal level [24]. Sector-specific evidence further suggests that these effects are more pronounced in regulated industries such as banking and utilities, showing that board composition and context both affect whether gender diversity improves ESG performance [22,25].

Evidence from Asian, Middle Eastern, and North African (MENA) markets remains mixed and context-dependent. While some studies report positive effects of board gender diversity on aggregate ESG performance [26], these relationships are often mediated or moderated by institutional factors such as technological innovation, Corporate Social Responsibility (CSR) committees, or media scrutiny [27,28,29]. Other studies find insignificant relationships, suggesting that the effectiveness of gender-diverse boards depends on broader governance and institutional conditions [30,31].

3.3. Board Size and ESG Performance

Board size represents another critical characteristic. From an RDT perspective, larger boards provide access to more diverse resources, expertise, and external connections beneficial for addressing ESG challenges [2]. Larger boards enable greater specialization and broader environmental scanning [29]. However, agency theory warns that excessively large boards may suffer from coordination problems [32].

Empirical evidence reflects this theoretical tension. Several studies report positive associations between board size and ESG or environmental performance, particularly in emerging markets and regulated sectors, where additional expertise and stakeholder representation may be beneficial [26,29,33]. Similarly, evidence from European and Italian banking sectors documents a positive association between board size and ESG performance [22,24]. In contrast, recent evidence finds no significant association between board size and ESG performance, suggesting that larger boards do not necessarily lead to improved ESG outcomes [30].

However, other studies document negative relationships. Larger boards have been linked to higher ESG controversies and weaker sustainability outcomes in certain institutional contexts, especially where state ownership is high [5,34]. Recent evidence also points to inverted U-shaped relationships, indicating that beyond an optimal size, additional directors may reduce board effectiveness in ESG-related decision-making [35]. Taken together, these findings suggest that the impact of board size on ESG performance is highly context-specific and sensitive to institutional, sectoral, and governance environments.

3.4. Research Gap and Hypothesis Development

Prior GCC studies have predominantly examined ESG practices from a disclosure-based perspective, relying largely on firms’ self-reported sustainability information. This aligns with recent evidence highlighting the rapid growth of ESG and environmental disclosure research, while also noting that much of the literature remains focused on developed economies and emphasizes disclosure practices rather than realized sustainability performance [36]. Such reliance on disclosure-based measures could involve some degree of bias in the GCC context, where disclosure practices can reflect symbolic compliance or regulatory pressures rather than actual sustainability performance.

Moreover, existing GCC evidence is largely focused on non-financial firms and relatively small samples [37,38], offering limited insight into whether governance mechanisms operate differently across sectors with distinct regulatory and institutional environments. In particular, the roles of financial institutions and energy firms remain underexplored, despite their indirect yet influential impact on ESG outcomes through lending, investment, and resource allocation decisions. This gap limits the understanding of the role of sectoral heterogeneity in the relationship between board characteristics and ESG performance. Additionally, prior research has tended to focus on individual board attributes or narrow dimensions of sustainability, often emphasizing social engagement while overlooking environmental performance [6,37]. Addressing these gaps is essential for developing a more comprehensive understanding of how board characteristics affect sustainability performance in the GCC context.

Given the predominance of positive findings in recent studies, the following hypotheses are proposed:

H1: 

Board gender diversity is positively associated with ESG performance.

H2: 

Board size is positively associated with ESG performance.

4. Data and Estimation Approach

4.1. ESG Performance

The data for ESG performance is derived from the London Stock Exchange Group (LSEG) ESG database, which is among the most comprehensive global datasets, covering over 90% of worldwide market capitalization. The database provides ratings for more than 14,500 listed companies, with records extending back to 2002. These ratings assess a firm’s performance across the three key pillars of sustainability: Environmental, Social, and Governance.

In this paper, I use the aggregate ESG score (ESG) as the primary dependent variable, while the individual environmental dimension (Environmental) and social dimension (Social) are also analyzed separately to examine the impact of board characteristics on each of them. While the aggregate ESG score includes environmental, social, and governance components, the governance dimension is not examined separately, as governance mechanisms are closely linked to board composition and are theoretically grounded in corporate governance theories, particularly agency theory and resource dependence theory. Additionally, the LSEG governance dimension is partly constructed using indicators related to board composition and board structure. Thus, analyzing the governance dimension separately may introduce overlap with the explanatory variables.

4.2. Board Characteristics

Board gender diversity (Board gender diversity) is measured as the proportion of female directors relative to the total number of board members. Board size (Board size) is measured by the total number of directors serving on the board. Data on board composition and board characteristics are derived from the LSEG database.

4.3. Controls

Grounded in legitimacy theory, the control variables are selected to account for firm characteristics that influence firms’ visibility, stakeholder scrutiny, and incentives to engage in ESG activities, as documented in prior empirical research. I control for firm size (Size) and market capitalization (Market Capitalization), as larger firms attract greater attention from investors and analysts and face higher reputational exposure, making them more likely to invest in ESG activities that can reduce financing costs [39]. Size is measured as the natural logarithm of total assets, and Market capitalization is measured by the number of outstanding shares multiplied by the share price. I also control for firm profitability (Profitability) because prior evidence shows CSR engagement is positively related to financial performance [40,41]; thus, profitable firms have greater capacity to invest in ESG activities. However, another piece of evidence suggests that the relationship between corporate social performance and financial performance can be nonlinear, and sometimes negative or positive depending on firm strategy, stakeholder expectations, and context [42]. I use return on assets as a profitability measure, which is calculated as pre-tax income divided by total assets. Similarly, I control for a firm’s growth (Growth), which is measured using the market-to-book ratio. Rapid-growth firms face competing pressures, prioritizing expansion over ESG investments due to resource constraints [43] while simultaneously needing to build legitimacy with stakeholders and capital providers [44]. I control for firm leverage (Leverage) because Higher leverage and the associated financial constraint would generally be expected to negatively affect ESG performance. Nevertheless, highly leveraged firms may increase CSR to mitigate lender scrutiny and reduce the cost of capital [45]. Leverage is measured as long-term debt divided by total assets. Finally, I control for firms’ age (Age) as mature firms tend to allocate more to CSR, reflecting accumulated experience and more stable profitability and cash flows [46,47].

4.4. Sample and Summary Statistics

The sample includes all publicly traded GCC firms with available ESG data during 2018–2023, forming an unbalanced panel of 905 firm-year observations across 226 firms. Not all firms have ESG data available for six years, which results in fewer than six observations per firm on average. The study period 2018–2023 was selected because the quality and coverage of ESG disclosures have significantly improved during these years. Table 1 presents the sample firms classified by sector using the LSEG Business Classification. The financial sector accounts for the largest number of firms in the sample (38.05%), followed by basic materials (15.49%) and real estate (7.52%).

Table 1. Industrial classification of sample firms.

Sector	Number of Firms	Percentage (%)
Academic & Educational Services	2	0.88
Basic Materials	35	15.49
Consumer Cyclicals	13	5.75
Consumer Non-Cyclicals	15	6.64
Energy	12	5.31
Financials	86	38.05
Healthcare	7	3.10
Industrials	15	6.64
Real Estate	17	7.52
Technology	15	6.64
Utilities	9	3.98
Total	226	100%

Table 2 reports the distribution of the sample across countries. Saudi Arabia represents the largest share of the sample (37.17%), followed by the UAE (32.74%) and Qatar (15.49%).

Table 2. Distribution of firms by country.

Country	Number of Firms	Percentage (%)
Bahrain	16	7.08
Kuwait	11	4.87
Oman	6	2.65
Qatar	35	15.49
Saudi Arabia	84	37.17
United Arab Emirates	74	32.74
Total	226	100.00

Table 3 presents the summary statistics of the main variables of interest. The average scores for the ESG, Environmental, and Social are 34.18, 20.22, and 29.85, respectively. Given that the percentile scores of ESG measures range from 1 to 100, these values indicate a relatively low level of ESG performance among the sampled firms. The proportion of female directors averages 4.1%, calculated as the ratio of female board members to total board size and averaged across all firm-year observations during the sample period, with a maximum of 33.33%, suggesting that while a few firms have achieved substantial female representation, gender diversity overall remains limited among listed firms. On average, boards consist of approximately nine members, indicating moderately sized boards across the sample firms.

Table 3. Summary statistics.

Variable	Observations	Mean	Min	Max	Std. Dev.
ESG	905	34.18	0.85	86.78	18.7
Environmental	905	20.22	0.0	87.99	21.68
Social	905	29.85	0.28	91.79	20.58
Board gender diversity	905	4.1	0.0	33.33	6.63
Board size	905	8.96	5.0	23.0	1.9
Size (log)	905	22.26	17.26	27.22	1.95
Market capitalization	905	21.56	16.52	28.39	1.84
Profitability	905	0.05	−0.35	0.5	0.07
Growth	905	2.43	0.22	103.89	4.77
Leverage	905	0.12	0.0	0.76	0.14
Age	905	29.67	0.0	66.0	15.53

Table 4 presents the Pearson correlation matrix for the main variables. ESG performance and its environmental and social pillars are positively and significantly correlated with board gender diversity, suggesting that firms with higher female representation on boards tend to exhibit stronger sustainability performance. Board size shows a weaker but positive correlation with ESG outcomes. The correlations among the explanatory and control variables are generally moderate, indicating that multicollinearity is unlikely to pose a concern in the regression analysis.

Table 4. Pearson correlation matrix.

Variable	ESG	Environmental	Social	Board Gender Diversity	Board Size	Size	Market Capitalization	Profitability	Growth	Leverage	Age
ESG	1.000
Environmental	0.791 ***	1.000
Social	0.920 ***	0.746 ***	1.000
Board gender diversity	0.227 ***	0.177 ***	0.177 ***	1.000
Board size	0.098 ***	0.065 *	0.092 ***	−0.033	1.000
Size	0.472 ***	0.486 ***	0.435 ***	−0.035	0.311 ***	1.000
Market capitalization	0.426 ***	0.499 ***	0.399 ***	0.031	0.228 ***	0.838 ***	1.000
Profitability	0.013	0.105 ***	0.007	0.122 ***	−0.061 *	−0.030	0.316 ***	1.000
Growth	0.012	−0.001	0.013	0.123 ***	−0.091 ***	−0.062 *	0.187 ***	0.324 ***	1.000
Leverage	0.055 *	0.106 ***	0.080 **	−0.008	−0.066 **	0.008	0.091 ***	−0.005	0.206 ***	1.000
Age	0.143 ***	0.122 ***	0.160 ***	−0.019	0.249 ***	0.114 ***	−0.000	−0.102 ***	−0.147 ***	−0.193 ***	1.000

*** p < 0.01, ** p < 0.05, * p < 0.1

4.5. Estimation Approach

This study examines the association between firms’ ESG performance and board characteristics using the following estimation model:

$$ES{G}_{it}={\beta }_0+{\beta }_{1}Boar{d}_{it}+{\beta }_{2}Control{s}_{it}+{\epsilon }_{it}$$

where $ES{G}_{it}$ represents the level of ESG engagement of firm i in year t, and refers to one of three dependent variables: ESG, Environmental and Social. $Boar{d}_{it}$ denotes board characteristics of firm i in year t, including gender diversity and size. $Control{s}_{it}$ is a vector of firm-level control variables, including firm size, market capitalization, profitability, growth, leverage and age. ${\epsilon }_{it}$ is the error term. The model also accounts for year and industry fixed effects to control unobserved heterogeneity across time and sectors.

5. Findings

5.1. Main Findings

The main results are reported in Table 5. Columns (1)–(3) present the estimates of the effect of board gender diversity on ESG performance, using ESG, Environmental and Social scores as dependent variables. The coefficient of Board Diversity is positive and statistically significant at the 1% level across all specifications (β = 0.441, p = 0.000; β = 0.466, p = 0.000, and β = 0.379, p = 0.000, respectively). A 10-percentage-point increase in board gender diversity is associated with an increase of approximately 4.4 points in the aggregate ESG score, 4.7 points in the environmental score, and 3.8 points in the social score, holding other factors constant. These results indicate that firms with more gender-diverse boards tend to exhibit stronger ESG performance, which is consistent with Hypothesis 1, and aligns with RDT, as gender diversity expands boards’ cognitive and relational resources relevant for addressing sustainability challenges.

Table 5. The impact of board gender diversity and board size on ESG performance.

	(1)	(2)	(3)	(4)	(5)	(6)
Variables	ESG	Environmental	Social	ESG	Environmental	Social
Board gender diversity	0.441 ***	0.466 ***	0.379 ***
	(0.087)	(0.100)	(0.099)
Board size				−0.683 **	−1.036 ***	−0.644 **
				(0.302)	(0.331)	(0.305)
Size	2.513 **	6.139 ***	2.154 **	2.580 **	6.280 ***	2.225 **
	(1.043)	(1.118)	(1.085)	(1.066)	(1.105)	(1.109)
Market capitalization	2.944 ***	1.265	3.529 ***	2.976 ***	1.293	3.555 ***
	(0.906)	(0.949)	(0.991)	(0.920)	(0.948)	(1.001)
Profitability	−17.890 *	−13.420	−21.165 **	−14.589	−10.044	−18.349 *
	(9.460)	(9.757)	(10.022)	(9.650)	(10.178)	(9.782)
Growth	0.270	0.255	0.115	0.377 *	0.356	0.205
	(0.205)	(0.253)	(0.228)	(0.206)	(0.263)	(0.220)
Leverage	17.218 ***	−11.059 *	17.835 ***	16.516 ***	−11.418 *	17.301 ***
	(5.778)	(6.233)	(6.380)	(5.761)	(6.288)	(6.351)
Age	0.151 ***	0.169 ***	0.179 ***	0.176 ***	0.204 ***	0.201 ***
	(0.039)	(0.046)	(0.043)	(0.042)	(0.049)	(0.046)
Constant	−108.417 ***	−143.102 ***	−130.645 ***	−101.538 ***	−133.916 ***	−124.387 ***
	(12.192)	(14.941)	(13.558)	(12.349)	(14.833)	(13.619)
Observations	905	905	905	905	905	905
R-squared	0.498	0.512	0.465	0.484	0.504	0.457
Year fixed effects	√	√	√	√	√	√
Industry fixed effects	√	√	√	√	√	√

Robust standard errors in parentheses. *** p < 0.01, ** p < 0.05, * p < 0.1.

Columns (4)–(6) present the estimates of the effect of board size on ESG performance, using ESG, Environmental and Social scores as dependent variables. The coefficient of Board size is negative and statistically significant across all specifications (β = −0.683, p = 0.024; β = −1.036, p = 0.002 and β = −0.644, p = 0.035, respectively). The addition of one board member is associated with a decline of approximately 0.7 points in the aggregate ESG score, 1.0 points in the environmental score, and 0.6 points in the social score, holding other factors constant. These results suggest that firms with smaller boards tend to exhibit stronger ESG performance, which is inconsistent with Hypothesis 2, and consistent with the argument that increasing board size can hinder communication and cohesion among directors, thereby reducing board efficiency. From a theoretical perspective, this finding suggests that, in the GCC context, the coordination costs associated with larger boards may outweigh the potential resource advantages emphasized by RDT.

As expected, the results show a positive and significant correlation between a firm’s size and ESG performance across all specifications. As explained earlier, larger firms typically attract greater scrutiny from investors and analysts and face higher reputational exposure, which makes them more motivated to engage in ESG activities. A similar rationale applies to the positive and significant impact of market capitalization on ESG performance, reflecting stronger legitimacy pressures faced by more visible firms.

Interestingly, Profitability is found to be significantly and negatively associated with ESG performance, with this relationship primarily driven by its adverse effect on the social dimension. This finding is consistent with slack resources theory, which suggests that firms with limited discretionary resources may perceive ESG investments—particularly social initiatives—as short-term costs, thereby reducing short-term profitability, especially in contexts such as the GCC, where sustainability practices are still evolving. This could indicate that for GCC firms, ESG initiatives, particularly those related to social activities, are seen as costs rather than value-adding investments, which reduces short-term profitability. Leverage is found to be significantly and positively associated with ESG performance, particularly driven by the social dimension. This finding supports the argument that highly leveraged firms engage more in CSR to reassure lenders and lower borrowing costs [45]. Finally, and as expected, the coefficient of Age is positive and statistically significant at the 1% level across all specifications, which is consistent with the argument that mature firms are more likely to invest in ESG activities.

Overall, the findings provide evidence that board gender diversity is positively and significantly associated with ESG performance in GCC firms, supporting the view that female board representation functions as a strong governance mechanism rather than a symbolic one. Within the distinctive GCC institutional environment, characterized by concentrated ownership structures, evolving governance frameworks, and increasing sustainability pressures, gender-diverse boards are more capable of responding to rising ESG expectations from regulators, sovereign wealth funds, and international investors. These pressures have intensified in recent years due to national transformation agendas such as Saudi Vision 2030 and related GCC sustainability strategies, which have increased the importance of ESG considerations for listed firms. Female directors enhance boards’ capacity to integrate ESG considerations into strategic decision-making, particularly in a region undergoing rapid economic and regulatory transformation. This role is further reinforced by GCC-level governance reforms, including ESG disclosure guidelines and board diversity initiatives introduced by capital market authorities, which increase the demand for substantive board-level engagement with sustainability issues. Consistent with RDT, this relationship reflects the role of gender diversity in expanding boards’ cognitive and relational resources, as female directors bring diverse perspectives and a stronger focus on stakeholders.

In contrast to the proposed hypothesis, the results reveal a significant negative relationship between board size and ESG performance in GCC firms, suggesting that larger boards may hinder effective sustainability oversight in this context. While larger boards are often expected to enhance access to resources and expertise, the governance structures in the GCC, characterized by concentrated ownership and multiple accountability lines, may limit these potential benefits. As board size increases, coordination challenges and slower decision-making may emerge, reducing boards’ ability to respond effectively to ESG-related strategic expectations. These challenges are particularly salient in the GCC, where recent governance reforms, evolving ESG disclosure guidelines, and national transformation agendas such as Saudi Vision 2030 have increased the importance of timely and focused board-level engagement with sustainability issues. The findings therefore suggest that smaller, more cohesive boards may be better positioned to integrate ESG considerations into strategic decision-making. While this study focuses on GCC firms, the findings should be interpreted in light of the region’s distinctive institutional environment, characterized by concentrated ownership, economic transformation initiatives, evolving governance frameworks, and growing sustainability priorities. Nevertheless, the results may offer relevant insights for other emerging or resource-dependent economies with similar institutional features. At the same time, differences in ownership structures, governance maturity, and sustainability regulations may limit the extent to which these relationships generalize beyond the GCC.

5.2. Instrumental Variable Estimation

I employ an instrumental variable (IV) approach to address the potential concern of reverse causality between Board Diversity and ESG performance. For example, firms with higher ESG performance may attract or appoint more diverse boards to signal their commitment to sustainability and inclusiveness. I calculated the average proportion of female directors in the same industry and year, excluding the firm itself. This reflects the external pressure within the same industry, which strongly influences a firm’s likelihood of appointing female directors. The underlying assumption here is that the average gender diversity of peer firms is unlikely to directly affect the firm’s ESG performance, except through its impact on the firm’s own board composition. Thus, the IV results should be interpreted with appropriate caution, as potential endogeneity concerns may not be fully eliminated despite the use of instrumental variables.

Table 6 reports the results of the IV analysis. The reduction in observations from 905 to 833 in the IV estimation is due to the construction of the peer-based instrument. In some industries, the focal firm is the only firm classified in that industry. Once the focal firm is excluded, no peer firms remain to compute the average, and those firm–year observations are therefore omitted from the IV regression. Column (1) reports an estimate of the impact of Gender diversity on ESG performance using ESG as a dependent variable. The coefficient of Gender diversity remains positive and significant at the 1% level (β = 1.760, p = 0.005) and is larger in magnitude than in the baseline specification. Columns (2) and (3) repeat the specification in column (1) but substitute ESG with Environmental and Social, respectively. The coefficients of Environmental and Social remain positive and significant at the 1% level (β = 1.548; p = 0.010 and β = 2.409; p = 0.007, respectively) and are larger in magnitude than in the baseline specifications. The related first-stage F-statistics (11.97) are satisfactory and greater than 10.

Table 6. IV regression results: the impact of board gender diversity and ESG performance.

	(1)	(2)	(3)
Variables	ESG	Environmental	Social
Board gender diversity	1.760 ***	1.548 ***	2.409 ***
	(0.621)	(0.598)	(0.893)
Size	2.395 *	6.121 ***	1.765
	(1.310)	(1.339)	(1.586)
Market capitalization	3.216 ***	1.421	4.184 ***
	(1.207)	(1.189)	(1.504)
Profitability	−32.634 **	−25.366 *	−43.246 **
	(14.957)	(13.541)	(21.435)
Growth	−0.233	−0.166	−0.816
	(0.475)	(0.486)	(0.635)
Leverage	21.927 ***	−6.845	26.073 ***
	(7.590)	(7.514)	(9.466)
Age	0.135 ***	0.155 ***	0.151 ***
	(0.042)	(0.047)	(0.050)
Constant	−115.922 ***	−149.257 ***	−142.923 ***
	(14.584)	(16.736)	(17.841)
Observations	833	833	833
R-squared	0.311	0.407	0.140
Year fixed effects	√	√	√
Industry fixed effects	√	√	√

Robust standard errors in parentheses. *** p < 0.01, ** p < 0.05, and * p < 0.1.

5.3. Subsamples

5.3.1. Financial vs. Non-Financial

As explained in Section 4.2, the financial sector accounts for the largest number of firms in the sample. As a result, I examine the relationship between board characteristics and ESG performance for financial and non-financial firms. Table 7 reports the correlation estimates between board gender diversity and ESG performance for financial and non-financial firms. Gender diversity is positively and significantly associated with ESG performance at the 1% level across financial and non-financial firms, and this relationship holds consistently for the aggregate ESG score as well as the environmental and social dimensions.

Table 7. The impact of board gender diversity and ESG performance: financial vs. non-financial firms.

Variables	ESG		Environmental		Social
	(1)	(2)	(3)	(4)	(5)	(6)
	Financial	Non-Financial	Financial	Non-Financial	Financial	Non-Financial
Board gender diversity	0.365 ***	0.443 ***	0.402 ***	0.489 ***	0.415 ***	0.330 **
	(0.130)	(0.117)	(0.142)	(0.137)	(0.142)	(0.141)
Size	−0.638	4.104 ***	4.624 **	6.904 ***	2.242	2.254 *
	(1.816)	(1.286)	(1.855)	(1.374)	(1.976)	(1.258)
Market capitalization	4.539 ***	2.542 **	1.710	1.279	2.637	4.488 ***
	(1.557)	(1.146)	(1.527)	(1.172)	(1.728)	(1.219)
Profitability	−33.789	−20.373 *	−33.580	−11.892	−26.316	−26.460 **
	(21.224)	(11.065)	(20.503)	(11.210)	(21.876)	(11.805)
Growth	0.365	0.275	0.258	0.193	0.260	0.030
	(0.377)	(0.256)	(0.377)	(0.295)	(0.463)	(0.286)
Leverage	48.453 ***	11.642 *	16.289	−14.079 **	34.903 **	16.534 **
	(18.582)	(6.475)	(15.371)	(6.981)	(17.026)	(7.345)
Age	0.144 ***	0.202 ***	0.175 ***	0.189 ***	0.109 *	0.272 ***
	(0.053)	(0.058)	(0.063)	(0.067)	(0.063)	(0.061)
Constant	−43.424 ***	−134.768 ***	−97.976 ***	−167.615 ***	−71.093 ***	−154.699 ***
	(14.448)	(17.016)	(17.432)	(19.912)	(16.692)	(18.139)
Observations	369	536	369	536	369	536
R-squared	0.398	0.551	0.489	0.561	0.390	0.515
Year fixed effects	√	√	√	√	√	√
Industry fixed effect		√		√		√

Robust standard errors in parentheses. *** p < 0.01, ** p < 0.05, and * p < 0.1.

Table 8 reports the correlation estimates between board size and ESG performance for financial and non-financial firms. Board size is negatively and statistically significantly associated with ESG performance among non-financial firms. This negative relationship is consistent for the aggregate ESG score and the social dimension, while the association with the environmental dimension remains significant at the 10% level. For financial firms, board size exhibits a negative and statistically significant correlation only with the environmental dimension (β = 1.447; p = 0.005).

Table 8. The impact of board size and ESG performance: financial vs. non-financial firms.

Variables	ESG		Environmental		Social
	(1)	(2)	(3)	(4)	(5)	(6)
	Financial	Non-Financial	Financial	Non-Financial	Financial	Non-Financial
Board size	−0.572	−0.823 **	−1.447 ***	−0.756 *	−0.294	−0.833 **
	(0.469)	(0.394)	(0.510)	(0.459)	(0.542)	(0.367)
Size	−0.697	4.259 ***	4.660 **	7.029 ***	2.131	2.435 *
	(1.899)	(1.288)	(1.897)	(1.330)	(2.050)	(1.271)
Market capitalization	4.444 ***	2.653 **	1.721	1.426	2.478	4.538 ***
	(1.586)	(1.158)	(1.545)	(1.161)	(1.741)	(1.228)
Profitability	−28.332	−19.193 *	−26.861	−10.549	−20.421	−25.638 **
	(22.745)	(11.285)	(21.213)	(11.789)	(22.926)	(11.557)
Growth	0.524	0.374	0.450	0.306	0.433	0.098
	(0.382)	(0.260)	(0.357)	(0.306)	(0.458)	(0.276)
Leverage	55.744 ***	9.239	27.963 *	−16.815 **	41.603 **	14.870 **
	(18.466)	(6.576)	(15.454)	(7.114)	(16.683)	(7.333)
Age	0.179 ***	0.219 ***	0.232 ***	0.203 ***	0.140 **	0.291 ***
	(0.056)	(0.062)	(0.065)	(0.071)	(0.066)	(0.064)
		(8.401)		(7.797)		(15.496)
Constant	−36.232 **	−129.616 ***	−86.850 ***	−163.040 ***	−64.314 ***	−149.261 ***
	(14.569)	(17.363)	(17.372)	(20.076)	(16.549)	(18.425)
Observations	369	536	369	536	369	536
R-squared	0.387	0.540	0.488	0.550	0.378	0.512
Year fixed effects	√	√	√	√	√	√
Industry fixed effect		√		√		√

Robust standard errors in parentheses. *** p < 0.01, ** p < 0.05, and * p < 0.1.

Taken together, the effect of board gender diversity remains consistently positive and statistically significant across both financial and non-financial firms, indicating that its contribution to ESG performance is robust to sectoral differences. However, the findings reveal sector heterogeneity in board size effects on ESG performance. For financial firms, board size exhibits a significant negative effect exclusively on environmental performance, while effects on aggregate ESG and social performance are not significant. In contrast, non-financial firms show significant negative board size effects across aggregate ESG scores as well as the environmental and social dimensions. This finding reflects the distinctive nature of financial institutions, whose environmental impact is largely indirect through lending, investment, and portfolio allocation decisions rather than through direct operations. Within the GCC regulatory environment, financial institutions are increasingly exposed to sustainability-related expectations through green finance initiatives and ESG-related investment considerations, making environmental performance a complex and emerging governance domain. Larger boards thus appear to increase coordination difficulties and slower consensus building, suggesting that in this context the coordination costs may outweigh the potential benefits highlighted by RDT. The absence of significant effects on social performance reflects that social issues, such as customer relations and employee welfare, are institutionalized in the financial sector and less sensitive to board size variations. These findings extend the literature by demonstrating that board size effects vary not only across sectors but also across ESG dimensions within sectors.

5.3.2. Energy vs. Non-Energy

I examine the relationship between board characteristics and ESG performance separately for energy and non-energy firms, given the substantial differences in environmental exposure, regulatory pressure, and stakeholder scrutiny faced by the energy sector, which may intensify the role of board characteristics in shaping ESG outcomes. Table 9 reports the correlation estimates between board gender diversity and ESG performance for energy and non-energy firms. Gender diversity is positively and significantly associated with ESG performance at the 1% level across energy and non-energy firms, and this relationship holds consistently for the aggregate ESG score as well as the environmental and social dimensions.

Table 9. The impact of board gender diversity and ESG performance: energy vs. non-energy firms.

Variables	ESG		Environmental		Social
	(1)	(2)	(3)	(4)	(5)	(6)
	Energy	Non-Energy	Energy	Non-Energy	Energy	Non-Energy
Board gender diversity	1.296 ***	0.443 ***	1.958 ***	0.453 ***	0.961 **	0.383 ***
	(0.314)	(0.088)	(0.594)	(0.099)	(0.431)	(0.101)
Size	14.301 **	1.871 *	31.337 ***	5.128 ***	5.578	1.728
	(5.543)	(1.036)	(10.612)	(1.090)	(6.568)	(1.081)
Market capitalization	−4.265	3.442 ***	−13.257	1.921 **	0.965	3.956 ***
	(5.079)	(0.900)	(9.131)	(0.928)	(6.572)	(0.985)
Profitability	−77.380 **	−18.475 *	−60.865	−21.484 **	−83.311	−18.809 *
	(37.848)	(10.290)	(41.629)	(10.161)	(60.719)	(10.534)
Growth	1.853 ***	0.097	2.850 **	−0.043	1.186	−0.058
	(0.582)	(0.182)	(1.145)	(0.213)	(0.776)	(0.214)
Leverage	−38.431 **	19.499 ***	−81.938 **	−11.621 *	−27.912	21.476 ***
	(16.151)	(6.281)	(30.972)	(6.433)	(20.056)	(6.919)
Age	−0.216 *	0.183 ***	−0.015	0.204 ***	−0.355 **	0.208 ***
	(0.108)	(0.040)	(0.216)	(0.046)	(0.140)	(0.044)
Constant	−210.073 ***	−117.704 ***	−416.209 ***	−148.317 ***	−135.838 **	−110.018 ***
	(39.339)	(17.336)	(57.958)	(19.724)	(60.550)	(20.117)
Observations	47	858	47	858	47	858
R-squared	0.847	0.495	0.800	0.498	0.791	0.463
Year fixed effects	√	√	√	√	√	√
Industry fixed effect		√		√		√

Robust standard errors in parentheses. *** p < 0.01, ** p < 0.05, and * p < 0.

Table 10 reports the correlation estimates between board size and ESG performance for energy and non-energy firms. Board size is negatively and statistically significantly associated with ESG performance among non-energy firms. This negative relationship is consistent for the aggregate ESG score, as well as the environmental and social dimensions. For energy firms, board size exhibits a positive and statistically significant association with the aggregate ESG score, driven primarily by its significant impact on the environmental dimension at the 1% level. (β = 7.006; p = 0.003).

Table 10. The impact of board size and ESG performance: energy vs. non-energy firms.

Variables	ESG		Environmental		Social
	(1)	(2)	(3)	(4)	(5)	(6)
	Energy	Non-Energy	Energy	Non-Energy	Energy	Non-Energy
Board size	2.550 *	−0.791 **	7.006 ***	−1.171 ***	2.122	−0.749 **
	(1.342)	(0.307)	(2.187)	(0.333)	(1.482)	(0.309)
Size	3.893	1.985 *	9.040	5.310 ***	−2.623	1.839 *
	(4.505)	(1.060)	(7.683)	(1.072)	(6.334)	(1.106)
Market capitalization	2.377	3.465 ***	1.271	1.949 **	6.220	3.977 ***
	(4.263)	(0.914)	(6.729)	(0.920)	(6.347)	(0.996)
Profitability	−44.514	−15.250	−3.895	−18.154 *	−58.402	−16.010
	(34.926)	(10.501)	(45.445)	(10.485)	(55.503)	(10.301)
Growth	1.413 ***	0.199	1.715 *	0.054	0.824	0.029
	(0.464)	(0.179)	(0.900)	(0.215)	(0.624)	(0.203)
Leverage	−4.705	18.966 ***	−9.422	−11.526 *	−1.320	21.128 ***
	(16.939)	(6.211)	(28.459)	(6.430)	(21.158)	(6.852)
Age	−0.264	0.209 ***	−0.205	0.241 ***	−0.399 *	0.233 ***
	(0.178)	(0.042)	(0.283)	(0.048)	(0.199)	(0.046)
Constant	−151.081 ***	−82.471 ***	−318.208 ***	−114.402 ***	−89.644	−77.117 ***
	(35.524)	(9.633)	(48.510)	(11.007)	(54.592)	(9.959)
Observations	47	858	47	858	47	858
R-squared	0.771	0.482	0.762	0.491	0.760	0.456
Year fixed effects	√	√	√	√	√	√
Industry fixed effect		√		√		√

Robust standard errors in parentheses. *** p < 0.01, ** p < 0.05, and * p < 0.

Overall, the effect of board gender diversity remains consistently positive and statistically significant across both energy and non-energy firms, indicating that its contribution to ESG performance is robust to sectoral differences. However, the findings reveal sector heterogeneity in board size effects on ESG performance. For energy firms, board size exhibits a positive and statistically significant effect on the aggregate ESG score, driven by its significant impact on the environmental dimension, while its effect on social performance is not statistically significant. In contrast, non-energy firms show significant negative board size effects across aggregate ESG scores, as well as the environmental and social dimensions. For energy firms, the positive and significant effect of board size on aggregate ESG performance, driven by the environmental dimension, is consistent with RDT, which suggests that larger boards provide access to specialized expertise and external resources necessary to manage complex environmental risks. In the GCC context, energy firms are subject to heightened scrutiny from regulators, sovereign wealth funds, and international investors and are closely aligned with national transformation agendas such as Vision 2030 and regional energy-transition initiatives. Under these conditions, larger boards can enhance firms’ capacity to address environmental challenges, ensure regulatory compliance, and maintain legitimacy, while social performance remains less sensitive due to the institutionalized nature of social practices in the sector. Although this analysis is based on a relatively small subsample of 12 energy firms and 47 observations, which limits the generalizability of the findings, the results remain informative. They warrant further investigation, particularly given the strategic importance of the energy sector and the limited existing evidence in the GCC context.

6. Conclusions

This study examines how board gender diversity and board size influence ESG performance among GCC-listed firms over the period 2018–2023. The findings provide robust evidence that board composition plays a critical role in shaping ESG outcomes, yet these depend on sectoral and institutional contexts rather than being uniform across all firms.

Board gender diversity exhibits consistently positive and statistically significant associations with ESG performance across all specifications, including aggregate ESG scores and environmental and social dimensions. This relationship remains robust after addressing endogeneity concerns through instrumental variable estimation and holds across financial versus non-financial firms as well as energy versus non-energy sectors. These findings support RDT’s predictions that female directors enhance boards’ cognitive diversity, stakeholder engagement capabilities, and monitoring effectiveness, thereby strengthening firms’ capacity to integrate sustainability considerations into strategic decision-making. In the GCC context, where female board representation remains relatively low compared to Western markets, even modest increases in gender diversity yield substantial ESG benefits, validating recent regulatory reforms such as the UAE’s 2021 mandate for female board representation.

In contrast, board size effects on ESG performance reveal significant sectoral heterogeneity. In baseline models, larger boards exhibit negative associations with ESG performance, consistent with agency theory’s warnings about coordination costs, communication difficulties, and diffused accountability. However, subsample analyses reveal important heterogeneity. For financial firms, board size exhibits a significant negative association with environmental performance, while its relationship with aggregate ESG and social performance is not statistically significant. Environmental performance in the financial sector represents an emerging and complex domain that requires specialized expertise; consequently, larger boards may face greater coordination challenges and slower consensus-building, which can hinder effective environmental oversight. In contrast, for energy firms, board size positively and significantly affects aggregate ESG performance, driven primarily by the environmental dimension, while effects on social performance remain non-significant. This positive relationship aligns with RDT’s emphasis on expertise access and resource provision. Larger boards in energy firms accommodate specialized environmental expertise, government representatives aligned with national transformation agendas, and international directors familiar with global sustainability standards. The technical complexity of energy transition initiatives, including renewable energy integration, carbon capture technologies, and hydrogen economy development, requires diverse board expertise that smaller boards cannot provide.

The findings offer several important implications for policymakers and corporate practitioners. For policymakers, the consistently positive effects of board gender diversity across all sectors and specifications provide strong empirical support for regulatory initiatives mandating or encouraging female board representation. The UAE’s 2021 mandate appears well-justified and should be maintained and potentially strengthened. However, the sectoral heterogeneity in board size effects suggests that one-size-fits-all regulations regarding optimal board size may be counterproductive. Policymakers should consider sector-specific governance guidelines that recognize the distinct needs of energy firms requiring specialized expertise versus non-energy firms benefiting from smaller, more cohesive boards. For corporate practitioners, the findings suggest several practical implications. All firms, regardless of sector, should prioritize board gender diversity as a mechanism for enhancing ESG performance, with benefits accruing through improved cognitive diversity, stakeholder engagement, and monitoring effectiveness. Energy firms should consider larger boards with diverse expertise spanning environmental science, renewable energy technologies, regulatory compliance, and international sustainability standards, while ensuring adequate governance infrastructure to manage coordination challenges. Other firms should focus on board quality over quantity, maintaining smaller and cohesive boards.

This study is subject to several limitations that also open avenues for future research. First, the analysis of energy firms relies on a relatively small subsample, which limits statistical power and generalizability despite the strategic importance of the sector; future studies employing larger energy-sector samples would enhance the robustness of these findings. Second, the analysis focuses on board gender diversity and board size, while other potentially relevant governance attributes, such as director independence and board structure, remain unexplored. Third, the study period (2018–2023) captures a specific phase of regulatory development in the GCC, suggesting that the relationship between board characteristics and ESG performance may evolve as governance frameworks mature and sustainability pressures intensify. Accordingly, longitudinal research could provide valuable insights into the dynamic nature of these relationships over time. Fourth, the empirical analysis assumes that LSEG ESG scores serve as an appropriate measure for sustainability performance. Future research may explore these relationships using alternative ESG metrics, such as Bloomberg ESG scores. Further research could also examine the mechanisms through which board characteristics influence ESG outcomes, such as stakeholder engagement practices.