Board gender diversity, ESG impact on firm performance: empirical evidence corporate from OECD in the period 2015-2022

Abstract

The ESG model, which combines the three factors of Environmental, Social, and Governance, is currently regarded as a particularly important criterion for building a sustainable company brand. Companies and corporations worldwide are pursuing the ESG model to develop their companies for the future. Not only does it bring value to the company's brand, but the ESG index also offers many benefits to companies, such as easy access to capital and government support in their operations and production. Additionally, gender diversity within a board of directors provides a favorable perception for investors and strengthens the image of a company that is gender-neutral in the public eye. With these two current trends in mind, this research aims to investigate the impact of gender diversity within the board of directors and ESG performance scores on the operational efficiency of companies through three main indicators: Tobin's Q, ROE, and ROA. The research sample was collected from OECD member countries and involved 263 non-financial companies during the period from 2015 to 2022. The data was filtered and outliers were removed using quantitative methods. The research findings indicate that the social pillar has a positive impact on operational efficiency. The environmental pillar has a negative impact on operational efficiency, as measured by ROE and ROA, but no evidence was found to support the impact of the environmental pillar on Tobin's Q. The research also did not find any evidence to demonstrate the impact of the governance pillar on operational efficiency. Regarding gender diversity within the board of directors, the authors found a negative impact on operational efficiency measured by Tobin's Q and ROE, but no evidence was found to suggest that gender diversity affects operational efficiency as measured by ROA. Based on this research, the authors recommend that managers should pay attention to environmental and corporate governance issues and improve the representation of women on the board of directors to enhance operational efficiency and firm value.