FEMALES ON BOARD AND SUSTAINABILITY PERFORMANCE IN A DEVELOPING COUNTRY: EVIDENCE FROM EGYPT

How to cite this paper: Noureldin, N., & Basuony, M. A. K. (2021). Females on board and sustainability performance in a developing country: Evidence from Egypt [Special issue]. Corporate Ownership &


INTRODUCTION
Recently, it has been accepted by the public that companies should consider their profits as well as have more responsibility toward social and environmental issues (Carroll & Shabana, 2010). Consequently, contemporary studies have focused on sustainability performance, which examined the association between business practices and sustainability commitment (Ağan, Kuzey, Acar, & Açıkgöz, 2016; Mohamed, Abu-hashim, & Belal, 2018). Therefore, sustainability performance has been a fundamental part of companies, and it is no longer conventional to solely focus on economic goals. Although profit maximization is still imperative for all businesses, the board of directors should balance between both financial and nonfinancial objectives (Kilic, 2015), which emphasizes that management companies' boards should consider sustainability performance as a top priority (Elkington, 2006 . The growing attention to sustainability performance has aroused a greater need for nonfinancial reports (Torelli, Balluchi, & Lazzini, 2020).
It is claimed that when companies' board of directors and senior management consider social responsibility values, they attain economic value creation goals (Kemp, 2011), where the board of directors enhances the strategic and financial decision-making process (Ferreira, 2010), and the corporate sustainability practices (Liao, Luo, & Tang, 2015); thus protecting the interests of stakeholders of companies (Pérez Carrillo, 2007;Ayuso & Argandoña, 2009). The responsibilities of the board of directors have been diversified into a wider range to better satisfy the interests of multiple stakeholders; most importantly the diversity on board, which ratify ethical behaviors and promote transparency disclosure, which reveals that the board of directors diversity is a significant stimulus to social and ecological accomplishment (Post, Rahman, & Rubow, 2011; Laurence & Bentley, 2016).
Generally, the literature mostly agrees that the board of directors' composition of multiple characteristics impacts firm performance (Bhagat & Black, 1999;Duru, Iyengar, & Zampelli, 2016). Consistently, various board traits impact the effectiveness of corporate governance, and the quantity and quality of corporate social responsibility disclosure: board independence, size, CEO duality, and board diversity (Chan, Watson, & Woodliff, 2014). Thus, board diversity has captured the attention of policymakers, companies, media, and academic scholars in many countries (Dhir, 2015). Moreover, it has been argued that heterogeneous management attains better performance when the uncertainty level increases, while the homogeneous groups perform better in stable conditions. However, the latter does not have the ability to include multiple perspectives and have the ability to tolerate by social rules (Zhu, Shen, & Hillman, 2014;Adams et al., 2018), which may lead to more pressure toward conformity (Miller & del Carmen Triana, 2009), thus weakening the quality and multiplicity of board dispute (Grady, 1999 This study makes various pertinent contributions to the debate on the impact of females on board and sustainability performance, and more specifically in Egypt. Thus, this study adds major contributions as follows. First, it provides in-depth insights into both the theoretical and practical dimensions of females on board and its impact on sustainability performance literature in developing and emerging economies. Improving corporate sustainability performance by incorporating more females on boards in Egypt is imperative, as Egypt is one of the most imperative emerging economies in the MENA region, and hence providing value-added evidence to the theoretical framework. Secondly, the previous literature provides mixed results with regards to the association between females on board and sustainability performance; moreover, there have been few studies to scrutinize this relationship in emerging economies in the MENA region compared to developed ones. Thirdly, to the best of our knowledge, this is one of the foremost empirical investigations to document the impact of females on board on sustainability performance in Egypt. Fourth, it supports the significance of the presence of females on board in Egypt as well as in the MENA region. Finally, the study offers findings that might be useful to researchers, practitioners, and regulators.
The rest of this paper is organized as follows. In Section 2, we review the previous literature and sets out the hypotheses. Section 3 discusses the data collection and research methodology. Subsequently, the results are presented and discussed in Section 4. Finally, a conclusion as well as recommendations for future research are provided in Section 5.

Theoretical background
Companies' commitment to sustainability can be explained through stakeholder theory (Jo & Harjoto, 2012).
Stakeholder theorists insinuate that corporations have to focus on both the economic and the social perspectives (Russo & Perrini, 2010;Andreasson, 2011). In other words, stakeholder theory emphasizes the importance of good corporate governance, which assures that companies underlie responsibility to multiple stakeholders (Ntim, Opong, & Danbolt, 2012). However, the stakeholder theory cannot be utilized solely in this study, but the resource dependency theory is considered as well. According to the resource dependency theory, female responsibilities on boards offer various merits for organizations, where they assist them to better understand customers' needs, together with helping the access of more resources (Ntim et al., 2012). Accordingly, board gender diversity improves the availability of the resources, and therefore fosters problem-solving skills and allows wider network connection. Similarly, if the board of directors has adequate skills, competencies, and corporate governance, they may become leaders of sustainable performance (Pfeffer & Salancik, 2003). In addition to those theories, the critical mass theory is employed, which recommends that size identifies the kind of group interactions; whenever a minority group achieves a critical mass, the subgroup's influence grows dramatically, and its interactions within the larger group shift qualitatively (Kanter, 1987). Additionally, when the majority group is faced with a minimum of three perspectives from the minority group, the majority tends to deliberate and cram from the minority (Asch, 1955); more specifically when the minority opinions cling (Nemeth, 1986).
Recently, board gender diversity has become a significant factor of corporate governance structure around the world (Terjesen et al., 2009). Generally, diversity leads to finer strategic decisionmaking, a greater knowledge base, innovation, and creativity (Watson, Kumar, & Michaelesen, 1993). Hence, the board has to be compromised of diverse directors that have different backgrounds, skills, and perspectives to satisfy multiple needs of various stakeholders (Kaufman & Englander, 2005), which strategically attract human resources that consequently recuperate performance (Bhagat & Black, 1999). The more diverse the board of directors, the higher the sense of philanthropy that leads to more social and ethical involvement (Lau, Lu, & Liang, 2016).
Gender diversity is one key indicator of board diversity, which adds value to governance as it provides multiple merits (Wehrmeyer & McNeil, 2000;Galbreath, 2011Galbreath, , 2018 (Singh, Terjesen, & Vinnicombe, 2008). Moreover, the presence of females on board demonstrates a positive image to the stakeholders and the market, hence enhancing legitimacy to the company by confirming with the expectancies of the society (Hillman, Shropshire, & Cannella, 2007). Better firm performance may be achieved by higher female representation in top management focusing on innovation (Dezsö & Ross, 2012). It has been found that more females on board representation may lead to a more inclination towards CSR (Krüger, 2009). It has been argued that three females on board may raise their perspectives and voices; therefore affecting the board's dynamics (Konrad, Kramer, & Erkut, 2008). Furthermore, a study that has been conducted on a sample of electronic and chemical companies in the US has shown a better environmental strength score with a critical mass of female directors (Post et al., 2011). Whereas another study claimed that if the board has three female directors, the board's decisions may not be affected and neither CSR issues (Joecks, Pull, & Vetter, 2013). Likewise, it has been claimed that a positive association is found between the number of females on board and CSR (Bear et al., 2010). More effective corporate governance has prevailed with a higher percentage of females on board (Terjesen et al., 2009). It has been revealed that there is a positive relationship between the proportion of females on board and CSR (Zhang et al., 2013). According to previous studies, having female representation on the board of directors has a beneficial impact on business sustainability performance (

Board size and sustainability performance
According to resource dependency theory, large board sizes improve corporate sustainability performance (Chen, Ngniatedema, & Li, 2018). Consequently, members will have extensive external networks to quickly collect scarce resources and market data (Kor & Sundaramurthy, 2009). Similarly, a larger board size carries diverse skills, experience, which assists the company to contribute more to environmental and social issues (Haji, 2013). On the other hand, larger boards take more time for discussion and coordination doing more negotiations and concessions than smaller boards (Kogan & Wallach, 1966;Moscovici & Zavalloni, 1969), which impede company productivity (Jensen, 1993). It has been found that larger boards tend to have a lower sustainability performance (Fuente, García-Sanchez, & Lozano, 2017).
H2: Board size has a positive significant association with sustainability performance.

Board independence and sustainability performance
The appointment of independent directors is crucial to the corporate governance framework that can result in sound management (Said, Hj Zainuddin, & Haron, 2009), which aids in the implementation and execution of sustainability initiatives, as well as monitoring sustainability reporting transparency (Wang, 2017). There are mixed results in previous studies with regard to the relationship between independent directors and sustainability performance. Some studies have found a positive impact (Ho & Wong, 2001;Barako & Brown, 2008). Similarly, an increase in the number of independent directors can persuade firms to implement best practices in environmental and social sustainability while still serving the interests of shareholders (Ho & Wong, 2001;Nguyen & Nguyen, 2020). Moreover, another study has shown a positive relationship between the higher independent directors with social and environmental performance (Hussain, Rigoni, & Orij, 2018). However, some other studies have found a negative association between independent directors and corporate sustainability reporting (Ozordi et al., 2018).
H3: Board independence has a positive significant association with sustainability performance.

Company size and sustainability performance
It has been stipulated that companies that are larger in size have ample resources to engage in corporate social activities than smaller ones (Andrew, Gul, Guthrie, & Teoh, 1989). It has been found that larger size companies have a significant influence on social performance (Moore, 2001;Reverte, 2009;Gallo & Christensen, 2011). This could be verified as companies grow, they attempt to grasp more shareholders, and therefore, need to counter their needs more amenably (Hillman & Keim, 2001), which leads to a significant influence on corporate social responsibility (Chang, Oh, Jung, & Lee, 2012). It has been revealed that the third-largest budget item for corporate communication departments in Fortune 500 corporations is communication spending for social responsibility (Hutton, Goodman, Alexander, & Genest, 2001).
H4: Company size has a positive significant association with sustainability performance.

Company leverage and sustainability performance
Companies with a higher leverage ratio disclose more detailed information (Naser, Al-Hussaini, al-Kwari, & Nuseibeh, 2006). It has been argued that companies of higher leverage tend to rely more on debt, therefore, necessitating an increase in environmental actions and the presentation of additional environmental information in order to meet creditors' expectations on environmental issues (Roberts, 1992; Osazuwa & Che-Ahmad, 2016). Another study has shown that higher leverage has no effect on the relationship between eco-efficiency and firm value (Osazuwa & Che-Ahmad, 2016). It has been found that operating at a lower leverage level is associated with a high score in employee treatment (Bae, Kang, & Wang, 2011). Likewise, a study has shown that socially responsible businesses employ less leverage and prefer to use equity rather than debt financing (Pijourlet, 2013), which is supported by another study that demonstrated a negative association between leverage and social dimension, as well as no significant relationship between environmental dimension and leverage ratio (Goss & Roberts, 2011).
H5: Company leverage has a positive significant association with sustainability performance.

Company profitability and sustainability performance
It has been recommended that companies with strong financial performance are more likely to participate in social, environmental, and corporate governance activities (Campbell & Mínguez-Vera, 2008). Moreover, extensive social and environmental information is published by directors of profitable companies to their stakeholders (Haniffa & Cooke, 2005). Likewise, prior studies have acknowledged a positive association between the companies' profitability and the quality of sustainability practices (Giannarakis, 2014a; Ben-Amar, Chang, McIlkenny, 2017). Moreover, better financial situations could lead to greater corporate social responsibility levels; such as high profitability (Waddock & Graves, 1997).
H6: Company profitability has a positive significant association with sustainability performance.

Sample and data collection
In this empirical study, data has been obtained from the companies' annual reports of non-financial listed companies on the Egyptian Stock Exchange (EGX). The sample of the study covers a period of 8 years from 2012 to 2019. In developing the sample, the financial institutions were excluded owing to the fact that they have their unique accounting system (Reverte, 2009). Furthermore, they manage under a firm set of procedures and rules utilizing different disclosure requirements (Haniffa & Cooke, 2005), capitalization, and regulation (Cooper, Jackson, & Patterson, 2003). Therefore, they were excluded to avoid blemishing the results leading to a more homogenous and unbiased analysis. The board data has been collected depending on the companies' financial statements and websites, among all non-board data, has been extracted from the Thomson Reuters database.
The research population compromised of 120 listed firms on EGX during the period 2012-2019. After excluding 4 financial companies, the initial sample consists of 124 companies. A total observation of 1000 has been collected from the companies' annual reports and companies' websites for eight years. During the study period, companies with missing annual reports have been expelled from the assorted sample, so that the final number of observations was lessened to 904 observations.

Dependent variable
Corporate sustainability performance is illustrated in this study as the dependent variable. It has been measured utilizing the S&P/EGX ESG index that has been developed by the Egyptian Institute of Directors with the help of the EGX, S&P Dow Jones indices. The index is calculated by providing scores to companies in the three aspects of environmental, social, and corporate governance; considering the size and liquidity of companies. The companies' weight in S&P/EGX ESG is used as a proxy for measuring corporate sustainability performance.

Independent variables
In this study, the board gender diversity was introduced in the regression model to scrutinize the impact of females on board on the corporate sustainability performance in Egypt. To expansively comprehend such association, three proxies for board gender diversity have been used for data analysis: 1) the representation of females on board; 2) the number of females on board; 3) the percentage of females on board to a total size of the board.

Control variables
Multiple control variables that are theoretically associated with sustainability performance have been presented in the regression model to prevent model misspecification, and lessen the probability of any bias in the findings. According to a prior literature review, sustainability performance could be affected by various corporate governance and firm-specific factors. Consequently, the study includes control variables that have been previously used by preceding scholars as follows. First, controlling corporate governance mechanism in testing the impact of females on board on corporate sustainability performance. Therefore, board size and independence were included in the study model. Second, firm-specific characteristics were also included as control variables. Company size is measured using the natural logarithm of total assets. Leverage has also been controlled in the study and is calculated using leverage ratio. Profitability is controlled using the return on assets ratio (ROA). Control variables are shown in Table 1 as follows.

Model specification
The quantitative analysis has been applied in the study using panel data that includes both crosssectional and time-series data from 100 Egyptian companies listed in the EGX during the period 2012 to 2019. The regression model is utilized to test the impact of females on board on the sustainability performance of Egyptian companies, which are depicted in the development of hypotheses section along with control variables. The estimated models are as follows:

Model 2:
(2) where, i denotes firms in the sample; t refers to time period, is the constant; to represents the regression coefficients, and is a vector of the stochastic error term. Table 2 presents descriptive statistics of all variables. The lowest, maximum, mean as a measure of central tendency, and finally the standard deviation as a measure of dispersion, which is all included in the descriptive analysis. As can be seen from this table, the mean percentage of females is 0.096; whereas the mean females' number is 0.0884. The female representation of females in the sample represented 48%; however, 52% of companies do not have females on their boards. The mean and standard deviation of ESGR are 0.235 and 0.477 respectively.

Hypotheses testing
The fixed-effect model is used to examine the impact of females on board and sustainability performance on 120 Egyptian companies, using board size, board independence, company size, company leverage, and company profitability as control variables. Before applying the regression analysis for the three models, Hausman test is employed to compare the random and fixed effect estimates of coefficients. As illustrated in Table 4, the calculated values are significant at 5%; therefore, supporting the appropriateness of the fixed-effects model.

Analysis and discussion
As shown in Table 5, Model 1 examines the impact of females' representation on board and sustainability performance. The results reveal that females on board representation have a significant positive impact on sustainability performance at a 1% level. These results are consistent with previous studies whose findings confirm that boards with more female directors are more likely to engage in corporate social responsibility activities (Boulouta, 2013; Harjoto et al., 2015); together with another study that argued that representation of females on board has a positive association with social performance (Byron & Post, 2016) and other studies found that gender diversity has a positive impact on return on assets (Conyon & He, 2017; Abdelzaher & Abdelzaher, 2019; EmadEldeen, Elbayoumi, Basuony, & Mohamed, 2021). This is supported by literature that stipulates the gender-based differences between men and females, as men hold a different perspective concerning a leadership concept (Leary & Hoyle, 2009) and focus more on economic concerns; whereas females carry better communal attributes that lead them to encounter more stakeholders' interests (Adams, Licht, & Sagiv, 2011). Moreover, it has been argued that corporate governance systems can be thought of as a set of accountability measures that boost legitimacy (Aguilera, Williams, Conley, & Rupp, 2006), in which the appointment of females on board lends credibility to a company by conveying a good message to present and potential female employees, as well as stakeholders and the market that the company meets societal standards (Hillman et al., 2007). Model 2 examines the effect of the number of females on board and sustainability performance. The results show that there is no significant association between the number of females on board and sustainability performance. Model 3 scrutinizes the relationship between the percentages of females on board and sustainability performance. The results demonstrate that there is no significant impact of a percentage of females on board and sustainability performance, which is consistent with other studies that documented negative or no relationship between gender diversity and corporate social responsibility (Galbreath,   Moreover, company leverage has a significant positive impact on sustainability performance at a 5% level. Although companies that have a high leverage ratio are risky, managers tend to disclose more data information to reassure stakeholders (Naser et al., 2006). Consistently, it has been found that leverage is positively significant with ESG (Naser et al., 2006). However, the board size has demonstrated a non-significant negative impact on sustainability performance, concluding that the larger the board size, the lower the sustainability performance, which is consistent with the findings of prior research (Fuente et al., 2017). Furthermore, board independence has shown a negative non-significant influence on sustainability performance that is consistent with another study (Ozordi et al., 2018).

CONCLUSION
The purpose of this research is to provide empirical evidence on the influence of females on board on sustainability performance. The study has been undertaken in the light of stakeholder and resource dependency theories, in which each of them represents a unique perspective on gender diversity. Despite the various empirical studies that have been done across different countries and years, there is still no decisive evidence on the relationship between gender diversity and sustainability performance; more specifically in developing countries. By analyzing the case of Egypt, our study contributes to the still-growing academic knowledge base on board gender diversity and serves as a springboard for future research on this fascinating topic of the relationship between gender diversity and corporate sustainability performance. In our study, the analysis of the sustainable performance of 120 Egyptian companies over the period 2012-2019 has yielded a positive significant link between females' representation on board and sustainability performance; concluding that companies that have more females on their boards have higher sustainability performance. On the other hand, the number and percentage of females on board have no significant impact on sustainable performance. For future advancement, it is recommended that companies' boards enhance more representation of females as well as the number of female members on their boards. Thus, shifting the focus to more gender-diverse boards, which would further lead to amendments by regulators and policymakers in Egypt.
This study has some limitations where the sample of the study includes only the nonfinancial companies. Furthermore, it has been measured utilizing the S&P/EGX ESG index that has been developed by the Egyptian Institute of Directors with the help of the EGX, S&P Dow Jones indices. Future studies could use a bigger sample size and look at other sustainability performance measures. More analysis should be conducted on the impact of females on board on each of the three pillars of sustainability performance: environmental, social and corporate governance Furthermore, future studies should look at the role of women on board and its impact on companies' corporate sustainable performance, and how they relate to company success. The scope of this paper provides direction for future research, instead of using secondary data on ESG scores, survey and interviews methods can be utilized to collect primary data on sustainability performance. Finally, comparative studies of the results can also contribute to the existing literature review.