The moderating effect of board gender diversity in the environmental sustainability and financial performance nexus

Abstract

The study investigates the moderating effect of board gender diversity on the relationship between environmental performance indicators (emissions, innovations, and resources) and financial performance. The study adopts a robust research design, drawing on a diverse sample of 6,104 companies operating in various countries. It employs a sophisticated panel data analysis with a fixed-effect model. The findings indicate a significant effect of environmental performance on financial performance. The results also reveal that higher gender diversity on a board is linked to lower returns on assets (ROA). Moreover, there is a positive interaction between management teams, board gender diversity, and financial performance. This study explores the relationship between corporate governance, environmental performance, and financial outcomes, offering practical insights for businesses, policymakers, and stakeholders. It also provides actionable insights for companies to align sustainability practices with financial success, enhancing their environmental stewardship and potentially improving financial performance. Policymakers can use this knowledge to design regulations and guidelines, while stakeholders, including investors and environmental advocacy groups, can use it to make informed decisions. The study's originality lies in its exploration of the moderating impact of board diversity on the relationship between firms' environmental performance and financial performance, using a large sample from different countries. As there is still a lack of consensus on the effect of environmental performance on financial performance, this study contributes to the understanding of corporate governance, environmental responsibility, and financial performance.