Assessing the moderating role of ESG performance on corporate governance and firm value in developing countries

Abstract

This study investigates the effects of corporate governance (CG) attributes on firm value (FV), considering the moderating effect of ESG performance. This study considers the three strands of corporate governance, thus board’s structural, diversity and process attributes, which have not been considered in prior studies. The study employed the Common Correlated Effects Mean Group (CCEMG) and the Augmented Mean Group (AMG) for the empirical analysis. The study utilized a quantitative research methodology sourcing data from 362 manufacturing companies from Sub-Saharan Africa from 2010 to 2022. The findings indicate that regarding board diversity attributes, both gender diversity and the presence of foreign nationals exhibit positive associations with FV. Regarding board structural attributes, independent boards and board size also influenced FV positively. However, CEO duality shows a negative assosciation with FV. Regarding the process attributes, holding regular board meetings enhances FV, while low meeting attendance negatively affects FV. Moreover, the study also evidenced that ESG performance exerts a substantial positive impact on the link between CG and FV. The findings underscore the need for policymakers to enact stringent regulations compelling firms to integrate ESG principles into their governance structures, as it enhances firm value.

Keywords:

• Corporate governance
• firm value
• ESG performance
• manufacturing companies
• developing countries

REVIEWING EDITOR:

• Ntim Collins, University of Southampton, United Kingdom of Great Britain and Northern Ireland

SUBJECTS:

• African studies
• environment & the developing world
• business, management and accounting

Acknowledgment

No funding was received for conducting this study.

Author contributions

Ayishetu Bukari: conceptualization & design; analysis & interpretation; drafting of the paper; and revising it critically for intellectual content. Andrew Osei Agyemang: conceptualization & design; analysis & interpretation; methodology; drafting of the paper; and revising it critically for intellectual content. Bernard Bawuah: conceptualization & design; drafting of the paper; and revising it critically for intellectual content. All authors agree to be accountable for all aspects of the work.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The data that support the findings of this study are available from the corresponding author, [A.O.A], upon reasonable request.