Governing for a Sustainable Future: Quantile Evidence on the Role of Executive Compensation and Board Independence in ESG Disclosure Across GCC ‐Listed Firms

ABSTRACT This study examines whether executive compensation and board independence influence ESG disclosure among 834 GCC‐listed firms during 2017–2023. It further investigates their effects on the environmental, social, and governance pillars individually and explores whether the strength and direction of the effects differ by firm size. The empirical analysis relies on a comprehensive framework of panel data techniques. Baseline estimates are obtained using pooled ordinary least squares and fixed effects models with Driscoll–Kraay standard errors, while the Method of Moments Quantile Regression (MM‐QR) is employed to uncover heterogeneous effects across the conditional distribution of ESG disclosure. Finally, potential endogeneity concerns are addressed using the System GMM estimator and MM‐QR with lagged explanatory variables. At the aggregate level, the MM‐QR results reveal a robust positive association between board compensation and ESG disclosure. Conversely, the effect of board independence is relatively weak and significant only for firms with low‐to‐moderate initial ESG disclosure. When considering the different ESG pillars, the analysis indicates a positive relationship between board compensation and the disclosure of all ESG pillars. Board independence demonstrates a more pronounced positive impact on governance disclosure. When disaggregating the sample by size, the results reveal that board compensation positively impacts ESG in large firms, while board independence has similar effects in small firms. These findings remain robust after accounting for potential endogeneity using the System GMM estimator and MM‐QR with lagged explanatory variables. Overall, the study provides valuable insights for GCC firms seeking to strengthen ESG disclosure and advance sustainable corporate practices.