Article

Article Based On Issue

How Do ESG Performance and Board Diversity Evolve under Dual Governance? A Longitudinal Descriptive Evidence from Shariah-Compliant Companies

Authors

Mohd Fahmee Bahaudin

Universiti Teknologi Mara, Malaysia

Nor Balkish Zakaria

Universiti Teknologi Mara, Malaysia

Mohd Faizal Jamaludin

Universiti Teknologi Mara, Malaysia

Marziana Madah Marzuki

Universiti Teknologi Mara, Malaysia

Page :

138 - 151

Keyword : Board Diversity; ESG Performance; Shariah-Compliant Companies; Dual Governance; Emerging Markets

Abstract :

This study offers a longitudinal descriptive account of environmental, social and governance (ESG) performance and board diversity among Shariah-compliant public listed companies operating under dual governance arrangements in an emerging market setting. Drawing on a strongly balanced panel of 186 companies observed from 2019 to 2023, the analysis traces how ESG engagement and selected board attributes evolve over time within Islamic capital markets where market-based governance mechanisms coexist with Shariah-based oversight. The descriptive evidence points to a sustained improvement in ESG performance across the sample period. Both mean and median ESG scores rise steadily, accompanied by a clear rightward shift in the distribution of ESG outcomes. This pattern suggests that improvements in sustainability engagement are broad-based rather than concentrated among a small subset of companies. At the board level, diversity attributes exhibit uneven temporal dynamics. Gender diversity, measured using the Blau index, shows a gradual movement towards greater balance, while ethnic diversity, captured through a normalised entropy index, increases more modestly over time. In contrast, directors’ religiosity, proxied by the proportion of Muslim directors on the board, remains relatively stable at the aggregate level, despite marked variation across companies. Overall, these patterns highlight the multidimensional nature of board diversity evolution within Shariah-based governance frameworks. More broadly, the observed ESG trajectory indicates that contemporary sustainability expectations can coexist with, and potentially be reinforced by, value-oriented governance principles embedded in Shariah compliance. By documenting these developments descriptively, the study establishes an empirical baseline for future research on ESG and corporate governance in Islamic capital markets and other emerging economies characterised by hybrid governance arrangements. The findings also provide a foundation for subsequent inferential and network-based analyses examining governance mechanisms and sustainability outcomes in greater depth.