Board Monitoring, Shareholders' Rights, and <scp>CSR</scp> Strategy: Firm Value and Risk Implications

ABSTRACT In this study, we first examine the quadratic relationships between the three dimensions of the governance pillar of ESG (board monitoring, shareholders' rights, and CSR strategy) and firm value. Second, we investigate the relationship between these three governance pillar components and firm risk. Third, we examine the moderating effect of board monitoring on the relationship between shareholders' rights, CSR strategy dimensions, and firm value. We utilise cross‐country data based on 44,996 observations between 2004 and 2019 and executive country, industry, and year fixed‐effect regression analysis. The results confirm that board monitoring, shareholders' rights, and CSR strategy have a U‐shaped association with firm value; they decrease firm value up to a threshold after which they increase it. Furthermore, while board monitoring and CSR strategies alleviate firm risk, shareholders' rights do not mitigate it. Similarly, board monitoring positively moderates the relationship between CSR strategy and firm value, but it does not moderate the relationship between shareholders' rights and firm value. These results are robust to alternative tests and endogeneity concerns. However, further tests indicate that some results vary across Anglo‐Saxon versus non‐Anglo‐Saxon countries, as well as between 2004–2011 and 2012–2019. Thus, we suggest implications accordingly by differentiating the samples and periods, as well as from a holistic view.