Environmental, social and governance (ESG) disclosure and firm performance: Moderating role of board gender diversity and sustainability committee

Abstract

This paper aims to investigate the moderating effect of board gender diversity (BGD) and sustainability committee in the relationship between environmental, social and governance (ESG) disclosure and the performance of the firm in European countries. This study encompasses an analysis of data obtained from non‐financial firms listed in European markets spanning the years 2013–2022. The findings indicate that ESG disclosure has a pronounced and statistically significant influence on the performance of the firms. Furthermore, BGD plays a positive moderating role in enhancing the relationship between ESG disclosure and ROA. In addition, the sustainability committee showed a moderate positive relationship. The findings have substantial managerial implications for professionals spanning different sectors, such as practitioners, policymakers, senior executives, and corporate leaders. Firms are advised to strategically consider board restructuring to enhance effectiveness in overseeing and advancing ESG practices. Prioritizing ESG efforts is recommended as it enhances overall performance, with investing in gender diversity on boards further strengthening this relationship. Establishing a dedicated sustainability committee can also positively impact firm outcomes, highlighting the importance of proactive ESG integration within corporate strategies. Analyzing the role of BGD as a moderating factor represents a valuable addition to the current body of research. It enhances our comprehension of how ESG disclosure indirectly influences firm performance.