ESG Controversies and Firm Value: Moderating Role of Board Gender Diversity and Board Independence

Abstract

Despite the growing attention given to environmental, social and governance (ESG) practices, little is known about the financial implications of bad social performance. Hence, this article aims to investigate the impact of ESG controversies on firm value and the moderating effects of board gender diversity and board independence on this relationship. This article uses 1205 firm-year observations relating to 119 French companies listed on the CAC All-Tradable Index over the 2007-2021 period and employs fixed effects estimation. The results show a negative and significant relationship between ESG controversies and firm value. The findings also demonstrate that board gender diversity and board independence allow firms to mitigate the negative effects of controversies on firm value. Overall, our findings offer valuable insights to managers of firms engaged in ESG activities and emphasize the difficulty of restoring the relationships with stakeholders.