The Power of Diversity: Board Diversity as a Driver of Enhanced ESG Performance

The Study examines the impacts of board diversity on Environmental, Social, and Governance (ESG) performance using a multidimensional index that includes six different diversity measures. The results consistently show that greater board diversity leads to improved ESG performance. Additionally, the Study develops a Structural Diversity Index derived from four board structure measures, revealing that higher structural diversity improves ESG performance. Further analysis highlights that the presence of foreign directors on the Board is particularly associated with enhanced ESG performance. These results are robust across various tests for endogeneity and other potential sources of bias, reinforcing the reliability and validity of the findings.