Revisiting the impact of board characteristics on environmental, social and governance performance: lesson from European firms

Abstract

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Stakeholders' concerns are no longer limited to firms' financial performance today. They are also concerned about the environmental, social and governance (ESG) performance which represents the non-financial performance of a firm. However, there are no consistent findings on how board characteristics can influence ESG performance. This study aims to revisit the impact of board characteristics on the ESG performance of a firm in the context of European firms, Europe being at the forerunner for ESG regulations globally. To test the study's hypothesis, a linear model with fixed effect GLS (generalised least squares) is used on a 12-year panel dataset from the year 2008 to 2020 of 180 listed firms categorised in ten economic sectors operating in 18 countries. It has been found that among other board characteristics, women on the board and the presence of CSR committee have a significant positive impact on ESG performance. However, board size, number of board meetings and board independence have a negative or insignificant impact.