The Influence of Board Characteristics on Firm Performance: the Mediating Role of ESG Adoption in Malaysia’s Consumer Products Sector

Chen, Kun Sing (2025) The Influence of Board Characteristics on Firm Performance: the Mediating Role of ESG Adoption in Malaysia’s Consumer Products Sector. Masters thesis, Tunku Abdul Rahman University of Management and Technology.

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Abstract

This study examines the relationship between board characteristics and firm performance, with a specific focus on public-listed companies in Malaysia’s consumer products sector. The variables under investigation include boardroom gender diversity, board size, and board independence as independent variables, firm performance as the dependent variable, and ESG (Environmental, Social, and Governance) adoption as a mediating variable. Grounded in agency theory and stakeholder theory, the research adopts a quantitative approach, using secondary data from 150 companies’ 2023 annual reports. Structural Equation Modeling (SEM) was employed to test both direct and mediating effects. The findings reveal that gender diversity and board independence significantly and positively influence firm performance, while board size has no statistically significant effect. ESG adoption, contrary to expectations, does not have a significant direct effect on performance, nor does it mediate the relationships between board characteristics and firm outcomes. These findings suggest that while governance reforms have encouraged structural improvements, ESG practices in the Malaysian context may still be compliance-oriented rather than strategically integrated. The study contributes to the growing body of literature on corporate governance in emerging markets and offers practical insights for boards and regulators aiming to align governance structure with sustainability and performance objectives.