Board Characteristics and ESG: Evidence from New Zealand

Environmental, Social, and Governance (ESG) is increasingly recognized as an important contributor to firm performance and market value. Several studies have identified a multitude of factors that influence ESG considerations. In this study, we investigate the influence of board characteristics on the ESG performance of publicly listed New Zealand publicly listed companies. The keyboard attributes examined were gender diversity, board size, number of board meetings, and corporate social responsibility/sustainability committees (CSRs). The study sample included quarterly data of New Zealand-listed companies from 2010 to 2021 collected from Thomson Reuters Datastream. For testing the hypotheses, we applied panel data regression with a one- and two-year lag to capture time effects as board characteristics may take some time to be incorporated into an organization's ESG performance. The empirical findings show that gender diversity and the existence of a CSR/sustainability committee have a significant positive impact on the ESG performance of companies. When one and two-year lags were used in our empirical model, the relationship between these factors became stronger. Conversely, there exists a negative relationship between board size and ESG performance. Furthermore, the results indicate that there is no significant relationship between ESG performance and board diversity or the number of board meetings. The study significantly contributes to the existing literature by providing valuable insights into the specific factors that enhance ESG scores. For practitioners including CEOs and policymakers, the empirical findings emphasize the importance of promoting gender diversity on boards and establishing robust corporate governance committees to improve ESG outcomes.