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Board diversity and firm performance: impact of ESG activities in China

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  • Yao Dong
  • Chen Liang
  • Zhong Wanyin

Abstract

The investigation of association between board diversity and the firm performance is the subject of many studies. However, the empirical results presented in the extant literature are inconclusive at best. The inconclusive empirical results could be due to several factors and one of them could be that the relationship is contingent on some key factors. Given the rising trend of Environmental, Social and Governance (ESG) activities, in this paper the relationship between board diversity and the firm performance is tested in the context of ESG activities. The subject of examination in this study is the listed Chinese firms. The sample period spans for 6 years and is collected from 2014 to 2019. This work uses a dynamic approach to modelling relationships. The generalised method of moments (GMM) is used in a two-step system. An endogeneity-free estimate may be achieved by using this strategy. We can learn a great deal from these hypotheses. There is a positive and substantial correlation between board diversity and the firm's success, which suggests that diverse boards are beneficial to businesses. Both ESG activities and a positive coefficient on company performance are significant. This shows investors appreciate companies that are involved in ESG activities because they see this as an investment that pays off. Last but not least, the report shows that board diversity has a negative and considerable impact on ESG efforts. According to the results, board diversity and ESG efforts are not necessary for a company's success. According to the data, board diversity is not particularly beneficial in the context of significant ESG initiatives. Board diversity really hurts a company's success when it engages in high ESG activities. The study also discusses the work's policy ramifications. Finally, the work lays out a clear path for further study.

Suggested Citation

  • Yao Dong & Chen Liang & Zhong Wanyin, 2023. "Board diversity and firm performance: impact of ESG activities in China," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 36(1), pages 1592-1609, March.
    • Handle: RePEc:taf:reroxx:v:36:y:2023:i:1:p:1592-1609
    DOI: 10.1080/1331677X.2022.2090406
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    Cited by:

    1. Wu, Zihao & Gao, Jun & Luo, Chengdi & Xu, Hui & Shi, Guanqun, 2024. "How does boardroom diversity influence the relationship between ESG and firm financial performance?," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 713-730.
    2. Rim Boussaada & Abdelaziz Hakimi & Majdi Karmani, 2025. "Board Cultural Diversity and Nonperforming Loans: What Role Does Boardroom Gender Diversity Play?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(2), pages 965-979, March.
    3. Sedki Zaiane, 2025. "Critical Mass And Bank Risk: Examining The Threshold Effect Of Women On Boards In The Mena Region," HSE Working papers WP BRP 98/FE/2025, National Research University Higher School of Economics.

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