Multidimensional Board Diversity and Sustainable Company Performance: An Empirical Study of Shariah-compliant Companies in Malaysia

Abstract

The growing emphasis on environmental, social and governance (ESG) performance has repositioned corporate boards as central actors in shaping firms’ sustainability trajectories, particularly within emerging markets characterised by institutional complexity. While prior governance research has predominantly examined board diversity through a single-dimensional lens, empirical evidence remains limited on how multiple diversity attributes jointly influence sustainability outcomes in Shariah-compliant firms. Addressing this gap, this study investigates the effects of multidimensional board diversity, encompassing gender, ethnicity and religiosity, on both ESG performance and financial outcomes among Shariah-compliant, public listed companies in Malaysia. Using an unbalanced panel data set covering 186 firms from 2019 to 2023, fixed-effects regressions are employed to account for unobserved firm-specific heterogeneity. The findings reveal that board gender diversity consistently exerts a strong positive influence on ESG performance and return on equity (ROE), underscoring its role as a strategic governance resource rather than a symbolic compliance mechanism. Ethnic diversity is also positively associated with ESG outcomes, reflecting the governance value of cultural representation in Malaysia’s multiethnic corporate environment. In contrast, religiosity exhibits a more nuanced and context-dependent relationship, suggesting that religious affiliation alone may be insufficient to drive sustainability outcomes without complementary institutional mechanisms. This study contributes to the corporate governance literature by advancing a multidimensional conceptualisation of board diversity within an Islamic governance setting. The findings offer important implications for regulators, policymakers and boards seeking to strengthen ESG integration through inclusive and context-sensitive governance structures.