IDEAS home Printed from https://ideas.repec.org/a/wly/corsem/v30y2023i3p1457-1472.html
   My bibliography  Save this article

Diverse boards and firm performance: The role of environmental, social and governance disclosure

Author

Listed:
  • Um‐E‐Roman Fayyaz
  • Raja Nabeel‐Ud‐Din Jalal
  • Michelina Venditti
  • Antonio Minguez‐Vera

Abstract

The present study examines the relationship between the diverse board of directors and firm performance using a panel data sample of the top 73 EU nonfinancial sustainable firms across 13 countries from 2016 to 2020 based on the Dow Jones Sustainability Index (DJSI). We specifically examine the impact of structural (board independence) and demographical (age, gender, education, tenure and industry experience) board diversity on firm performance. Drawing on the agency and resource base perspective, the results indicate that firms with a diverse board of directors (structural and demographic) perform significantly better with firm performance. Additionally, when viewed through the lens of stakeholder theory, the findings indicate that environmental, social and governance disclosure (ESG) moderates and partially mediates the relationship between the diverse board of directors and firm performance. We also performed robust checks to validate our results. Diversity contributes to a firm's understanding of its market and, as a result, its overall performance. The current study demonstrates a considerable gap between the theoretical and empirical support for various board indicators (structural and demographic), their relationship to performance, and how ESG acts as an intervening element in increasing firm financial performance.

Suggested Citation

  • Um‐E‐Roman Fayyaz & Raja Nabeel‐Ud‐Din Jalal & Michelina Venditti & Antonio Minguez‐Vera, 2023. "Diverse boards and firm performance: The role of environmental, social and governance disclosure," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(3), pages 1457-1472, May.
    • Handle: RePEc:wly:corsem:v:30:y:2023:i:3:p:1457-1472
    DOI: 10.1002/csr.2430
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/csr.2430
    Download Restriction: no
    File URL: https://libkey.io/10.1002/csr.2430?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Jason Zhang & Hong Zhu & Hung-bin Ding, 2013. "Board Composition and Corporate Social Responsibility: An Empirical Investigation in the Post Sarbanes-Oxley Era," Journal of Business Ethics, Springer, vol. 114(3), pages 381-392, May.
    2. Harald Dale-Olsen & Pål Schøne & Mette Verner, 2013. "Diversity among Norwegian Boards of Directors: Does a Quota for Women Improve Firm Performance?," Feminist Economics, Taylor & Francis Journals, vol. 19(4), pages 110-135, October.
    3. Kamilah Kamaludin & Izani Ibrahim & Sheela Sundarasen & OVA Faizal, 2022. "ESG in the boardroom: evidence from the Malaysian market," International Journal of Corporate Social Responsibility, Springer, vol. 7(1), pages 1-15, December.
    4. Lisha Jiang & Jacob Cherian & Muhammad Safdar Sial & Peng Wan & José António Filipe & Mário Nuno Mata & Xiangyu Chen, 2021. "The moderating role of CSR in board gender diversity and firm financial performance: empirical evidence from an emerging economy," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 34(1), pages 2354-2373, January.
    5. Qiu, Yan & Shaukat, Amama & Tharyan, Rajesh, 2016. "Environmental and social disclosures: Link with corporate financial performance," The British Accounting Review, Elsevier, vol. 48(1), pages 102-116.
    6. Olga Hawn & Aaron K. Chatterji & Will Mitchell, 2018. "Do investors actually value sustainability? New evidence from investor reactions to the Dow Jones Sustainability Index (DJSI)," Strategic Management Journal, Wiley Blackwell, vol. 39(4), pages 949-976, April.
    7. James L. Medoff & Katharine G. Abraham, 1980. "Experience, Performance, and Earnings," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 95(4), pages 703-736.
    8. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    9. Brian Boyd, 1990. "Corporate linkages and organizational environment: A test of the resource dependence model," Strategic Management Journal, Wiley Blackwell, vol. 11(6), pages 419-430, October.
    10. C. José García Martín & Begoña Herrero, 2020. "Do board characteristics affect environmental performance? A study of EU firms," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(1), pages 74-94, January.
    11. Jyoti Mahadeo & Teerooven Soobaroyen & Vanisha Hanuman, 2012. "Board Composition and Financial Performance: Uncovering the Effects of Diversity in an Emerging Economy," Journal of Business Ethics, Springer, vol. 105(3), pages 375-388, February.
    12. Farrell, Kathleen A. & Hersch, Philip L., 2005. "Additions to corporate boards: the effect of gender," Journal of Corporate Finance, Elsevier, vol. 11(1-2), pages 85-106, March.
    13. Nikos Vafeas, 2003. "Length of Board Tenure and Outside Director Independence," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30, pages 1043-1064.
    14. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    15. Nina Smith & Valdemar Smith & Mette Verner, 2006. "Do women in top management affect firm performance?A panel study of 2,500 Danish firms," International Journal of Productivity and Performance Management, Emerald Group Publishing Limited, vol. 55(7), pages 569-593, October.
    16. Eng, L. L. & Mak, Y. T., 2003. "Corporate governance and voluntary disclosure," Journal of Accounting and Public Policy, Elsevier, vol. 22(4), pages 325-345.
    17. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    18. Muhammad Ali & Yin Ng & Carol Kulik, 2014. "Board Age and Gender Diversity: A Test of Competing Linear and Curvilinear Predictions," Journal of Business Ethics, Springer, vol. 125(3), pages 497-512, December.
    19. Alexander Guzmán & Belén Villalonga & María-Andrea Trujillo & Raphael Amit, 2015. "Governance of Family Firms," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 635-654, December.
    20. Liu, Yu & Wei, Zuobao & Xie, Feixue, 2014. "Do women directors improve firm performance in China?," Journal of Corporate Finance, Elsevier, vol. 28(C), pages 169-184.
    21. Flora Niu & Greg Berberich, 2015. "Director tenure and busyness and corporate governance," International Journal of Corporate Governance, Inderscience Enterprises Ltd, vol. 6(1), pages 56-69.
    22. Talavera, Oleksandr & Yin, Shuxing & Zhang, Mao, 2018. "Age diversity, directors' personal values, and bank performance," International Review of Financial Analysis, Elsevier, vol. 55(C), pages 60-79.
    23. Yoshiro Miwa & J. Mark Ramseyer, 2005. "Who Appoints Them, What Do They Do? Evidence on Outside Directors from Japan," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(2), pages 299-337, June.
    24. Na Li & Aida Sijamic Wahid, 2018. "Director Tenure Diversity and Board Monitoring Effectiveness," Contemporary Accounting Research, John Wiley & Sons, vol. 35(3), pages 1363-1394, September.
    25. Chen Lin & Yue Ma & Dongwei Su, 2009. "Corporate governance and firm efficiency: evidence from China's publicly listed firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(3), pages 1-1.
    26. Kevin Campbell & Antonio Mínguez-Vera, 2008. "Gender Diversity in the Boardroom and Firm Financial Performance," Journal of Business Ethics, Springer, vol. 83(3), pages 435-451, December.
    27. Aggarwal, Raj & Jindal, Varun & Seth, Rama, 2019. "Board diversity and firm performance: The role of business group affiliation," International Business Review, Elsevier, vol. 28(6), pages 1-1.
    28. Supriti Mishra & Damodar Suar, 2010. "Does Corporate Social Responsibility Influence Firm Performance of Indian Companies?," Journal of Business Ethics, Springer, vol. 95(4), pages 571-601, September.
    29. Brian R. Golden & Edward J. Zajac, 2001. "When will boards influence strategy? inclination × power = strategic change," Strategic Management Journal, Wiley Blackwell, vol. 22(12), pages 1087-1111, December.
    30. M. López & Arminda Garcia & Lazaro Rodriguez, 2007. "Sustainable Development and Corporate Performance: A Study Based on the Dow Jones Sustainability Index," Journal of Business Ethics, Springer, vol. 75(3), pages 285-300, October.
    31. Kahloul, Ines & Sbai, Hicham & Grira, Jocelyn, 2022. "Does Corporate Social Responsibility reporting improve financial performance? The moderating role of board diversity and gender composition," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 305-314.
    32. Giovanna Michelon & Antonio Parbonetti, 2012. "The effect of corporate governance on sustainability disclosure," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 16(3), pages 477-509, August.
    33. Adams, Renée B. & Ferreira, Daniel, 2009. "Women in the boardroom and their impact on governance and performance," Journal of Financial Economics, Elsevier, vol. 94(2), pages 291-309, November.
    34. Idoya Ferrero‐Ferrero & María Ángeles Fernández‐Izquierdo & María Jesús Muñoz‐Torres, 2015. "Integrating Sustainability into Corporate Governance: An Empirical Study on Board Diversity," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 22(4), pages 193-207, July.
    35. Nikos Vafeas, 2003. "Length of Board Tenure and Outside Director Independence," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(7‐8), pages 1043-1064, September.
    36. Al-Tuwaijri, Sulaiman A. & Christensen, Theodore E. & Hughes, K. II, 2004. "The relations among environmental disclosure, environmental performance, and economic performance: a simultaneous equations approach," Accounting, Organizations and Society, Elsevier, vol. 29(5-6), pages 447-471.
    37. Giovanna Michelon & Giacomo Boesso & Kamalesh Kumar, 2013. "Examining the Link between Strategic Corporate Social Responsibility and Company Performance: An Analysis of the Best Corporate Citizens," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 20(2), pages 81-94, March.
    38. David A. Carter & Betty J. Simkins & W. Gary Simpson, 2003. "Corporate Governance, Board Diversity, and Firm Value," The Financial Review, Eastern Finance Association, vol. 38(1), pages 33-53, February.
    39. Kim, Haksoon & Lim, Chanwoo, 2010. "Diversity, outside directors and firm valuation: Korean evidence," Journal of Business Research, Elsevier, vol. 63(3), pages 284-291, March.
    40. Elena Platonova & Mehmet Asutay & Rob Dixon & Sabri Mohammad, 2018. "The Impact of Corporate Social Responsibility Disclosure on Financial Performance: Evidence from the GCC Islamic Banking Sector," Journal of Business Ethics, Springer, vol. 151(2), pages 451-471, August.
    41. Donald C. Hambrick & Stephen E. Humphrey & Abhinav Gupta, 2015. "Structural interdependence within top management teams: A key moderator of upper echelons predictions," Strategic Management Journal, Wiley Blackwell, vol. 36(3), pages 449-461, March.
    42. Abagail McWilliams & Donald Siegel, 2000. "Corporate social responsibility and financial performance: correlation or misspecification?," Strategic Management Journal, Wiley Blackwell, vol. 21(5), pages 603-609, May.
    43. Sanja Pekovic & Sebastian Vogt, 2021. "The fit between corporate social responsibility and corporate governance: the impact on a firm’s financial performance," Review of Managerial Science, Springer, vol. 15(4), pages 1095-1125, May.
    44. Aida Sijamic Wahid, 2019. "The Effects and the Mechanisms of Board Gender Diversity: Evidence from Financial Manipulation," Journal of Business Ethics, Springer, vol. 159(3), pages 705-725, October.
    45. Nazim Hussain & Ugo Rigoni & René P. Orij, 2018. "Corporate Governance and Sustainability Performance: Analysis of Triple Bottom Line Performance," Journal of Business Ethics, Springer, vol. 149(2), pages 411-432, May.
    46. Helena Isidro & Márcia Sobral, 2015. "The Effects of Women on Corporate Boards on Firm Value, Financial Performance, and Ethical and Social Compliance," Journal of Business Ethics, Springer, vol. 132(1), pages 1-19, November.
    47. Don Knight & Craig L. Pearce & Ken G. Smith & Judy D. Olian & Henry P. Sims & Ken A. Smith & Patrick Flood, 1999. "Top management team diversity, group process, and strategic consensus," Strategic Management Journal, Wiley Blackwell, vol. 20(5), pages 445-465, May.
    48. Caspar Rose, 2007. "Does female board representation influence firm performance? The Danish evidence," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(2), pages 404-413, March.
    49. O'Connell, Vincent & Cramer, Nicole, 2010. "The relationship between firm performance and board characteristics in Ireland," European Management Journal, Elsevier, vol. 28(5), pages 387-399, October.
    50. Cheng, Lee-Young & Su, Yi-Chen & Yan, Zhipeng & Zhao, Yan, 2019. "Corporate governance and target price accuracy," International Review of Financial Analysis, Elsevier, vol. 64(C), pages 93-101.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pedro Torres, 2024. "Configurations of corporate governance mechanisms and sustainable development," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(4), pages 2900-2909, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bowo Setiyono & Amine Tarazi, 2018. "Does Diversity of Bank Board Members Affect Performance and Risk? Evidence from an Emerging Market," CSR, Sustainability, Ethics & Governance, in: Belén Díaz Díaz & Samuel O. Idowu & Philip Molyneux (ed.), Corporate Governance in Banking and Investor Protection, chapter 0, pages 185-218, Springer.
    2. Laura Cabeza-García & Esther B. Brío & Carlos Rueda, 2021. "The moderating effect of innovation on the gender and performance relationship in the outset of the gender revolution," Review of Managerial Science, Springer, vol. 15(3), pages 755-778, April.
    3. Ding Ning & Irfan-Ullah & Muhammad Ansar Majeed & Aurang Zeb, 2022. "Board diversity and financial statement comparability: evidence from China," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 12(4), pages 743-801, December.
    4. Mauro Romano & Alessandro Cirillo & Christian Favino & Antonio Netti, 2020. "ESG (Environmental, Social and Governance) Performance and Board Gender Diversity: The Moderating Role of CEO Duality," Sustainability, MDPI, vol. 12(21), pages 1-16, November.
    5. Ahmadi, Ali & Nakaa, Nejia & Bouri, Abdelfettah, 2018. "Chief Executive Officer attributes, board structures, gender diversity and firm performance among French CAC 40 listed firms," Research in International Business and Finance, Elsevier, vol. 44(C), pages 218-226.
    6. Sanjukta Brahma & Chioma Nwafor & Agyenim Boateng, 2021. "Board gender diversity and firm performance: The UK evidence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5704-5719, October.
    7. Naeem Tabassum & Satwinder Singh, 2020. "Corporate Governance and Organisational Performance," Springer Books, Springer, number 978-3-030-48527-6, December.
    8. Đặng, Rey & Houanti, L’Hocine & Reddy, Krishna & Simioni, Michel, 2020. "Does board gender diversity influence firm profitability? A control function approach," Economic Modelling, Elsevier, vol. 90(C), pages 168-181.
    9. Maria Lucas-Pérez & Antonio Mínguez-Vera & Juan Baixauli-Soler & Juan Martín-Ugedo & Gregorio Sánchez-Marín, 2015. "Women on the Board and Managers’ Pay: Evidence from Spain," Journal of Business Ethics, Springer, vol. 129(2), pages 265-280, June.
    10. Shahbaz, Muhammad & Karaman, Abdullah S. & Kilic, Merve & Uyar, Ali, 2020. "Board attributes, CSR engagement, and corporate performance: What is the nexus in the energy sector?," Energy Policy, Elsevier, vol. 143(C).
    11. Atif, Muhammad & Hossain, Mohammed & Alam, Md Samsul & Goergen, Marc, 2021. "Does board gender diversity affect renewable energy consumption?," Journal of Corporate Finance, Elsevier, vol. 66(C).
    12. Bennouri, Moez & Chtioui, Tawhid & Nagati, Haithem & Nekhili, Mehdi, 2018. "Female board directorship and firm performance: What really matters?," Journal of Banking & Finance, Elsevier, vol. 88(C), pages 267-291.
    13. Parveen P. Gupta & Kevin C. K. Lam & Heibatollah Sami & Haiyan Zhou, 2023. "Boardroom gender diversity and long-term firm performance," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 20(2), pages 119-137, June.
    14. Chenglong Zheng & Roy Kouwenberg, 2019. "A Bibliometric Review of Global Research on Corporate Governance and Board Attributes," Sustainability, MDPI, vol. 11(12), pages 1-25, June.
    15. Nguyen, Tuan & Locke, Stuart & Reddy, Krishna, 2015. "Does boardroom gender diversity matter? Evidence from a transitional economy," International Review of Economics & Finance, Elsevier, vol. 37(C), pages 184-202.
    16. Milagros Gutiérrez-Fernández & Yakira Fernández-Torres, 2020. "Does Gender Diversity Influence Business Efficiency? An Analysis from the Social Perspective of CSR," Sustainability, MDPI, vol. 12(9), pages 1-18, May.
    17. Maximiliano González & Alexander Guzmán & Eduardo Pablo & María Andrea Trujillo, 2020. "Does gender really matter in the boardroom? Evidence from closely held family firms," Review of Managerial Science, Springer, vol. 14(1), pages 221-267, February.
    18. Aggarwal, Raj & Jindal, Varun & Seth, Rama, 2019. "Board diversity and firm performance: The role of business group affiliation," International Business Review, Elsevier, vol. 28(6), pages 1-1.
    19. Mollah, Sabur & Liljeblom, Eva & Mobarek, Asma, 2021. "Heterogeneity in independent non-executive directors' attributes and risk-taking in large banks," Journal of Corporate Finance, Elsevier, vol. 70(C).
    20. Kent Baker, H. & Pandey, Nitesh & Kumar, Satish & Haldar, Arunima, 2020. "A bibliometric analysis of board diversity: Current status, development, and future research directions," Journal of Business Research, Elsevier, vol. 108(C), pages 232-246.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:corsem:v:30:y:2023:i:3:p:1457-1472. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1002/(ISSN)1535-3966 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.