The Role of Gender Diversity in the Board of Directors in Enhancing Social Sustainability: The Moderating Role of Financial Performance in Palestine

Abstract

The study aims to examine the impact of board diversity on the social sustainability of companies listed on the Palestine Exchange (PEX). It also aims to explore the indirect effect by incorporating financial performance as a mediating variable. This study was conducted on a sample of 20 industrial and service companies listed on the PSE during the period 2016-2022, resulting in a total of 140 observations. Multiple regression analysis was employed using three methods: fixed effects, random effects, and pooled OLS. The random effects model was selected as the most appropriate. The study findings reveal a positive relationship between board diversity and social sustainability. Additionally, a significant positive effect of financial performance as a moderating variable was identified in the relationship between board diversity and social sustainability. The study is timely as gender diversity plays a pivotal role in improving decision-making processes, and corporate governance, and contributing more skills and community service. However, previous research has not extensively addressed the impact of board gender diversity on corporate social sustainability. Palestine lacks a legal quota for women's representation in boardrooms, resulting in a dearth of female representation in companies. Hence, it becomes imperative to study the influence of board diversity on the social sustainability of companies listed on the Palestine Exchange.