The Relation between Board Characteristics and the Individual Components of ESG Performance
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2024-07-09
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en
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Companies face increasing pressure by different stakeholder groups to address Environmental, Social, and Governance (ESG) issues in their business practices. Studies have shown that the composition of the board of directors, i.e. board characteristics, impacts ESG performance, but results are mixed. This thesis examines the relationship between three different board characteristics – board size, gender diversity and board independence – and the individual components of ESG performance. No previous research specifically examined these individual components in relation to board characteristics. The aim of this thesis is to examine whether board size, gender diversity, and board independence influence Environmental, Social, and Governance performance differently. Based on a sample of companies listed on the STOXX Europe 600 over the period 2018-2020 and using fixed effects panel regression models, this research finds a negative relationship between board size and the governance rating of a company. The regression analyses also suggest that gender diversity as well as board independence positively impact environmental and governance ratings. Overall, the findings of this study suggest that smaller, gender diverse, and independent boards tend to achieve higher sustainability performance scores. These findings highlight the importance of optimizing board characteristics to improve the Environmental, Social, and Governance performance of a company.
Keywords: ESG Performance; Environment, Social, and Governance; Board Size; Gender Diversity; Board Independence; Board Characteristics; Corporate Governance.
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Faculteit der Managementwetenschappen