Corporate Sustainability Disclosure, Firm Profitability, and Board Diversity: Unveiling the Interrelationships in a Developing Economy

Drawing on stakeholder theory, agency theory, and critical mass theory, this study investigates the relation between board diversity and firm profitability channeled through sustainability disclosure. Employing structural equation modeling, this study analyzes data from annual reports of all publicly listed Georgian entities from 2018 to 2023, covering 246 firm-year observations. The research findings reveal that board diversity (including gender representation, nationality, and number of members) significantly enhances sustainability disclosure, but does not have a measurable impact on firm profitability. Moreover, the results indicate a nonsignificant effect of sustainability disclosure on firm profitability. This study exhibits that control variables such as ownership concentration and CEO duality negatively impact sustainability scores weakening the relationship between ESG disclosure and firm profitability. Report language negatively affects sustainability score and company size plays a favourable role in ESG performance. The results are explained by the country context. This research contributes to the academic discourse on sustainability disclosure, board diversity, and firm profitability and provides new insight into board diversity’s role in fostering a sustainable corporate environment from an emerging market’s perspective.