The Influence of Directors’ Diversity and Corporate Sustainability Practices on Firm Performance

This study aims to examine the relationship between directors’ diversity (DIRDIV) and financial performance (FP) with a particular focus;on the moderating effect of corporate sustainability practices (CSP). The study analyzes a sample of 104 firms listed on the Bursa Malaysia;for the period from 2015 to 2017. Directors’ diversity is measured by the Blau index, and Tobin’s Q is used as a proxy of FP of the firms;while the content analysis method is adopted to measure CSP. The study also employs three control variables, namely, board size, firm size,;and leverage. Panel corrected standard errors (PCSE) estimator model has been used to test the hypotheses by STATA software. It is found;that directors’ diversity in terms of independent and non-independent directors significantly and positively affect the financial performance;of the firms. Furthermore, this study reveals that CSP significantly moderates the relationship between directors’ diversity and financial;performance. This study suggests that the government and regulatory bodies should put more emphasis on diversifying the board and follow;up the mandatory CSP to enhance financial performance of the firms, which is likely to ensure their long-term survival and to reduce the;risk of collapse in the future.