Climate Governance, ESG Reporting, and the Firm Performance: Does It Matter More for Europe or the GCC?

This paper empirically investigated the impact of climate governance on the relationship between ESG reporting and firm profitability. The collected sample is all the nonfinancial companies in Europe and Gulf countries during the period 2010–2023. All the data have been gathered from Refinitiv Eikon Platform (LSEG), annual reports, and the different stock exchanges. The panel GMM regression has been used to estimate the relationship to deal with the endogeneity problem. The findings revealed that ESG, board independence, growth, inflation, and GDP had a favorable impact on company performance in Europe and the Gulf Cooperation Council, but board meetings had a negative impact. The results indicate a notable difference in the influence of board size on companies’ performance. Within the GCC framework, an enlarged board size adversely impacts profitability, potentially attributable to inefficiencies or protracted decision-making. In Europe, a larger board size positively influences outcomes, possibly due to robust regulatory frameworks, more diversity of expertise, and improved strategic oversight. The findings demonstrate that company size positively influences performance in the GCC, indicating that larger firms gain advantages from economies of scale, enhanced market positioning, and improved access to resources in the area. In Europe, firm size adversely affects performance, likely due to increased operational difficulties, legal obligations, and potential inefficiencies linked to managing huge organizations. Based on the robust results reported, our results hold.