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The ESG-financial performance relationship : Does the type of employee board representation matter?

Author

Listed:
  • Mehdi Nekhili

    (ARGUMans - Laboratoire de recherche en gestion Le Mans Université - UM - Le Mans Université)

  • Amal Boukadhaba

    (ARGUMans - Laboratoire de recherche en gestion Le Mans Université - UM - Le Mans Université)

  • Haithem Nagati

    (EM - EMLyon Business School)

Abstract

Research Question/Issue We examine the impact of two differing types of employee board representation (i.e., labor board representation and employee shareholder board representations) on environmental, social, and corporate governance components of ESG performance and the moderating role of each type of employee board representation on the relationship between ESG performance and the firm's market value. Research Findings/Insights Using a propensity score matching approach on a sample of French firms listed in the SBF 120 index from 2007 to 2017, our findings reveal that labor board representatives act in the opposite direction to employee shareholder board representatives by focusing exclusively on improving social performance and reducing environmental and corporate governance performance. The way employees are represented on the board of directors also moderates the corporate ESG–financial performance relationship differently. Theoretical/Academic Implications Employee directors are not a homogenous group. The differentiation between the two types of employee directors (i.e., labor board representatives and employee shareholder board representatives) brings a deeper understanding of the effect of stakeholders' representation on the board. Practitioner/Policy Implications Our results are of interest to governance policymakers because they provide them with a fresh understanding of the key role of employee board representation. A meaningful inference to be drawn from our findings is that employee ownership and the representation of employees on the board as employee shareholders may bring about fundamental changes in employees' attitudes and behavior on the board and may, in this regard, be considered as a credible way of generating social harmony and constructive relationships between employees and shareholders. Video Abstract https://youtu.be/GqB_6GxtH2A

Suggested Citation

  • Mehdi Nekhili & Amal Boukadhaba & Haithem Nagati, 2021. "The ESG-financial performance relationship : Does the type of employee board representation matter?," Post-Print hal-03193727, HAL.
    • Handle: RePEc:hal:journl:hal-03193727
    DOI: 10.1111/corg.12345
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    Cited by:

    1. Du, Anna Min & Sun, Zhennan & Li, Zhongyuan & Boateng, Agyenim, 2025. "Green business performance and innovation willingness: Exploring the impact of ecosystem-oriented business models," International Review of Financial Analysis, Elsevier, vol. 105(C).
    2. Yang, Xiaodong & Shira, Ruba Khalid & Dang, Lan Phuong & Hao, Pu, 2025. "Unforeseen benefits: Can ESG enhance corporate access to commercial credit financing?," Research in International Business and Finance, Elsevier, vol. 75(C).
    3. Bai, Chengyu & Liu, Dan & Liu, Yong, 2024. "Executive team restructuring and corporate ESG disclosure quality," Finance Research Letters, Elsevier, vol. 66(C).
    4. Leonardo Becchetti & Emanuele Bobbio & Federico Prizia & Lorenzo Semplici, 2022. "Going Deeper into the S of ESG: A Relational Approach to the Definition of Social Responsibility," Sustainability, MDPI, vol. 14(15), pages 1-22, August.
    5. Asif Saeed & Umara Noreen & Akbar Azam & Muhammad Sohail Tahir, 2021. "Does CSR Governance Improve Social Sustainability and Reduce the Carbon Footprint: International Evidence from the Energy Sector," Sustainability, MDPI, vol. 13(7), pages 1-16, March.
    6. Muhammad Azeem Qureshi & Ammar Ali Gull & Tanveer Ahsan, 2024. "Sentry eyes? Women directors and corporate penalties," Post-Print hal-04844672, HAL.
    7. Li, Yanqiong & Li, Sihao, 2024. "ESG performance and innovation quality," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 1361-1373.
    8. Xiao Yan Zhou & Ben Caldecott & Andreas G. F. Hoepner & Yao Wang, 2022. "Bank green lending and credit risk: an empirical analysis of China's Green Credit Policy," Business Strategy and the Environment, Wiley Blackwell, vol. 31(4), pages 1623-1640, May.
    9. Martínez-Ferrero, Jennifer & Ramón-Llorens, M. Camino & García-Meca, Emma, 2024. "CEO narcissism and ESG misconduct," Research in International Business and Finance, Elsevier, vol. 69(C).

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