ESG Controversies and the Financial Performance of MENA Firms: The Moderating Role of Board Characteristics

This paper empirically investigates the moderating role of the firm’s board characteristics in the relationship between ESG controversies and firm performance. The collected sample includes 461 non-financial companies in 10 MENA countries from 2010 to 2023. Data were collected from Refinitiv Eikon Platform (LSEG). This empirical paper applied panel GMM regression to estimate the relationship. The paper controls for firm characteristics such as firm size and leverage while controlling for macroeconomic variables such as inflation and GDP. The results indicate that there is a negative impact of ESG controversies on the performance of firms in the MENA region. Moreover, the analysis of corporate governance’s moderating role reveals that both board independence and gender diversity substantially diminish the adverse effects of ESG controversies on firm performance, indicating that well-governed firms are more adept at mitigating risks linked to ESG-related controversies. Our results hold based on the robustness of the results.