Examining the Nexus between Corporate Governance Mechanisms and Environmental, Social, and Governance: A Case Study of Malaysian Listed Firms
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Abstract
The study examines the influence of corporate governance propositions
concerning board composition and characteristics, board deliverables, and board
cognitive and experiential diversity on the environment, social and governance (ESG)
performance of publicly listed companies on the Main Board of Bursa Malaysia. The
board’s composition and characteristics are measured by members’ performance and
diversity, encompassing nationality, gender, age, and ethnicity, followed by industry
knowledge, technical skills, emotional intelligence, persuasive skills, and diverse insights.
The board deliverables are measured by how well the members enact ESG purposes
within the company, connecting ESG purpose to company strategy, ownership of ESG,
compensation metrics for championing ESG purposes, and exemplifying what the
company is doing to fulfil its corporate purpose. Lastly, board cognitive and experiential
diversity is measured with awareness of critical ESG issues, ability to articulate and
communicate ESG strategic plans, adequate knowledge of core sustainability subjects, risk
material disclosure, emerging-area regulations, and stance on social and political activity.
The final data sample consists of 119 Bursa Malaysia companies with ESG disclosure.
The findings indicate that the board composition, characteristics, and deliverables enhance
ESG performance. However, board cognitive and experiential diversity is negatively
related to ESG performance. This study provides new insights into the importance of board composition, characteristics, and deliverables towards ESG performance in the Malaysian context.
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