Governance and ESG: the role of board diversity and CEO ownership
(2025) NEKN02 20251Department of Economics
- Abstract
- This study examines how corporate governance relates to firms’ sustainability as measured by ESG performance. I operationalize sustainability using the Bloomberg ESG Performance Score and its E/S/G pillars; all effects are therefore interpreted as changes in ESG-measured sustainability. I begin with firm-fixed-effects and year-fixed-effects panel regressions that link within-firm changes in CEO equity ownership to ESG, allowing the slope to vary with board independence, the female-director ratio, and CEO duality. An instrumental-variables check based on exogenous CEO share-vesting addresses endogeneity in ownership changes. I then turn to a quasi-experimental difference-in-differences design around Nasdaq’s 2021 comply board-diversity... (More)
- This study examines how corporate governance relates to firms’ sustainability as measured by ESG performance. I operationalize sustainability using the Bloomberg ESG Performance Score and its E/S/G pillars; all effects are therefore interpreted as changes in ESG-measured sustainability. I begin with firm-fixed-effects and year-fixed-effects panel regressions that link within-firm changes in CEO equity ownership to ESG, allowing the slope to vary with board independence, the female-director ratio, and CEO duality. An instrumental-variables check based on exogenous CEO share-vesting addresses endogeneity in ownership changes. I then turn to a quasi-experimental difference-in-differences design around Nasdaq’s 2021 comply board-diversity rule, supported by event-time plots, placebo timings, and propensity-score matching. Two results stand out. First, higher CEO ownership is, on average, associated with slightly lower ESG within firms, and this ownership–ESG link is conditioned by leadership structure: the adverse association is strongest under an independent chair and largely attenuates when the CEO also serves as board chair. Second, the
diversity mandate is followed by a moderate improvement in ESG, most evident on the environmental pillar which relative to comparable controls. Taken together, the evidence shows that governance design, specifically board composition and leadership structure, channel executive incentives into ESG-measured sustainability. It also shows that policy-induced diversity can raise measured ESG outcomes. (Less) - Popular Abstract
- This study looks at whether the way companies are governed helps or hurts their sustainability, using widely followed ESG scores (environmental, social and governance) from Bloomberg. By tracking the same firms over time and by comparing companies around Nasdaq’s 2021 rule that encouraged more diverse boards, this study draws two clear patterns. Firstly, when CEOs own a larger share of their company, ESG performance is on average a bit lower. This link depends on how leadership is arranged: it is strongest when the board is led by an independent chair and much weaker when the CEO also serves as board chair. Secondly, after the board-diversity rule took effect, firms show a moderate improvement in ESG—most noticeably on the environmental... (More)
- This study looks at whether the way companies are governed helps or hurts their sustainability, using widely followed ESG scores (environmental, social and governance) from Bloomberg. By tracking the same firms over time and by comparing companies around Nasdaq’s 2021 rule that encouraged more diverse boards, this study draws two clear patterns. Firstly, when CEOs own a larger share of their company, ESG performance is on average a bit lower. This link depends on how leadership is arranged: it is strongest when the board is led by an independent chair and much weaker when the CEO also serves as board chair. Secondly, after the board-diversity rule took effect, firms show a moderate improvement in ESG—most noticeably on the environmental dimension—relative to comparable firms.
Taken together, this study shows that board composition and leadership structure steer executive incentives in ways that matter for ESG-measured sustainability, and that policy-driven diversity can lift measured sustainability outcomes. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9211218
- author
- Yang, Xinyue LU
- supervisor
-
- Marco Bianco LU
- organization
- course
- NEKN02 20251
- year
- 2025
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Corporate Governance, ESG-measured sustainability, board diversity, CEO ownership, difference-in-differences
- language
- English
- id
- 9211218
- date added to LUP
- 2025-09-12 10:47:02
- date last changed
- 2025-09-12 10:47:02
@misc{9211218,
abstract = {{This study examines how corporate governance relates to firms’ sustainability as measured by ESG performance. I operationalize sustainability using the Bloomberg ESG Performance Score and its E/S/G pillars; all effects are therefore interpreted as changes in ESG-measured sustainability. I begin with firm-fixed-effects and year-fixed-effects panel regressions that link within-firm changes in CEO equity ownership to ESG, allowing the slope to vary with board independence, the female-director ratio, and CEO duality. An instrumental-variables check based on exogenous CEO share-vesting addresses endogeneity in ownership changes. I then turn to a quasi-experimental difference-in-differences design around Nasdaq’s 2021 comply board-diversity rule, supported by event-time plots, placebo timings, and propensity-score matching. Two results stand out. First, higher CEO ownership is, on average, associated with slightly lower ESG within firms, and this ownership–ESG link is conditioned by leadership structure: the adverse association is strongest under an independent chair and largely attenuates when the CEO also serves as board chair. Second, the
diversity mandate is followed by a moderate improvement in ESG, most evident on the environmental pillar which relative to comparable controls. Taken together, the evidence shows that governance design, specifically board composition and leadership structure, channel executive incentives into ESG-measured sustainability. It also shows that policy-induced diversity can raise measured ESG outcomes.}},
author = {{Yang, Xinyue}},
language = {{eng}},
note = {{Student Paper}},
title = {{Governance and ESG: the role of board diversity and CEO ownership}},
year = {{2025}},
}