IMPACT OF ENVIRONMENTAL, SOCIAL, AND GOVERNANCE FACTORS ON FIRM PERFORMANCE: MODERATING ROLE OF BOARD DIVERSITY
DOI:
https://doi.org/10.61421/IJSSMER.2026.4205Keywords:
ESG, Firm Performance, Board Diversity, Panel Data, Corporate GovernanceAbstract
This study examines the relationship between environmental, social, and governance (ESG) factors and firm performance, with a particular focus on the moderating role of board diversity. Using panel data from 84 non-financial firms listed in the S&P 100 index over the period 2019–2023, the study employs panel regression techniques, including random-effects models selected based on the Hausman test. Firm performance is measured using return on assets (ROA) and return on equity (ROE), while ESG is analyzed through its environmental, social, and governance dimensions.
The findings reveal that ESG factors exhibit mixed and generally weak effects on firm performance. Environmental and social variables do not show consistent statistically significant relationships with ROA and ROE, whereas governance variables demonstrate partial significance, particularly in relation to ROA. The moderating role of board diversity is also found to be conditional, with interaction effects varying across models and remaining insignificant in several cases.
These results suggest that the financial benefits of ESG practices may not be immediate and depend on firm-specific governance structures and contextual factors. The study contributes to the existing literature by disaggregating ESG dimensions and incorporating board diversity as a moderating mechanism. However, limitations related to sample scope, time horizon, and variable measurement should be considered. Future research may explore broader datasets, extended time periods, and multidimensional measures of board diversity to better capture the ESG–performance relationship.
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