How the interaction between board gender diversity and ESG shapes dividend policy

Abstract

This study investigates the moderating role of ESG performance on the relationship between board gender diversity and dividend payout ratio in European listed non‐financial companies in 2014–2023. Additionally, it explores the threshold level of female directors required to influence dividend payouts and compares companies operating under Anglo‐Saxon (common law) and continental (civil law) systems. It employs two‐way fixed effects panel linear regression models on a balanced longitudinal dataset of 5230 firm‐year observations and system generalised method of moments (GMM‐SYS) GMM to address endogeneity concerns. The results suggest a negatively significant moderating role of ESG performance on the positive relationship between female board directors and companies' dividend payout ratios. Additionally, they provide evidence of a critical mass of female directors and emphasise the significance of regional variations stemming from governance norms and regulatory frameworks. The findings contribute to corporate practice and empirically enhance agency, signalling and critical mass theories.