Do firms with environmental, social and governance reputational risk take into account board gender diversity? An analysis on a global scale

Abstract

This research paper studies whether a firm’s environmental, social and governance reputational risk influences board gender diversity. Besides, we are also interested in the moderating role of gender equality and country development level towards the relationship between reputational risk and board gender diversity. Using a comprehensive sample of 42,982 observations of 5,873 unique firms in 52 countries between 2007 and 2019, we document that companies with high levels of ESG reputational risk tend to add more women directors to resolve these problems. Furthermore, the empirical results point out that compared to other countries, the positive relationship of ESG reputational risk and board gender diversity is more pronounced for countries with a higher degree of gender equality or developed countries. Our findings are robust after using alternative measures of variable and even addressing endogeneity caveats by employing two-stage systems generalized method of moments estimation and instrumental variable approach. Overall, our study is the first to link ESG reputational risk via media channels to board gender diversity.