Disaggregated ESG Pillars and Firm Value: The Moderating Role of Board Diversity in European Listed Companies (Research Square)

Summary

• The study uses a dynamic panel of European listed companies (2014–2023) and a two-step system GMM estimator.p.2
• ESG pillars, assessed independently, have no significant direct effect on firm value, while board diversity significantly moderates the relationship.p.2
• The dataset contains 12545 observations for most variables.p.9
• In the environmental pillar model the interaction term is negative and significant (β = -0.801, p = 0.008).p.10
• In the social pillar model the interaction term is positive and significant (β = 0.142, p = 0.020).p.10

Key insights

1. ESG initiatives do not enhance performance on their own; they require governance structures able to interpret and execute sustainability strategies.p.2
2. Board gender diversity has a marginally significant positive association with performance in models that include the environmental pillar (β = 2.308, p = 0.069).p.10
3. Excessive reliance on governance diversity may dampen the effectiveness of environmental initiatives in enhancing firm value.p.10
4. Social practices are more effective when combined with diverse governance structures.p.12
5. The findings are consistent across the Tobin's Q and alternative TQS specifications.p.10
6. Board diversity is measured with a composite index derived via principal component analysis.p.2