Bridging governance gaps: politically connected boards, gender diversity and the ESG performance puzzle in Iberian companies
Abstract
Purpose
The main goal of this paper is to analyse the impact of political connections and gender diversity shaping Environmental, Social and Governance (ESG) components’ effects on the performance of Iberian companies.
Design/methodology/approach
To achieve this aim, we have used panel data methodology, specifically the generalized method of moments system estimation method by Arellano and Bond (1991), using data from listed Iberian companies for the period between 2015 and 2020.
Findings
Our findings suggest that, although ESG components positively influence company performance, the presence of political connections weakens ESG commitments, compromising ethical standards and suggesting a lack of transparency or inadequate regulations. Our results also highlight that the presence of women on boards of directors has a nuanced impact on firm performance, as measured by the Market-to-Book ratio. While gender diversity interacts with ESG scores, external investors' perceptions may not always reflect immediate performance improvements.
Research limitations/implications
This work faces some limitations associated with challenges in securing comprehensive data for all variables, along with the complexity of acquiring information about political connections. Often, we had to rely on multiple sources and cross-reference the data to enhance its reliability. Another limitation for potential consideration or exploration in future research pertains to the omission of distinct industry sectors due to the limited number of companies, particularly notable in the context of Portugal.
Originality/value
Although there is a large volume of literature on the relationship between ESG and companies’ performance, as far as the authors are aware, this article is original and covers an important gap in the literature when considering political connections and board gender diversity impact on ESG components as determinants of the performance of Iberian companies.
Keywords
Acknowledgements
This work is financed by Portuguese national funds through FCT – Fundação para a Ciência e Tecnologia, under the project UIDB/05422/2020 and by the Research Unit on Governance, Competitiveness and Public Policies (GOVCOPP), through the Portuguese Foundation for Science and Technology (FCT – Fundação para a Ciência e a Tecnologia), references (UIDB/04058/2020) + (UIDP/04058/2020).
This work is financed by Portuguese national funds through FCT – Foundation for Science and Technology, under the project UIDP/00681/2020, DOI 10.54499/UIDP/00681/2020 & UIDB/05422/2020.
Citation
Guedes, R., Neves, M.E. and Vieira, E. (2024), "Bridging governance gaps: politically connected boards, gender diversity and the ESG performance puzzle in Iberian companies", Business Process Management Journal, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/BPMJ-01-2024-0039
Publisher
:Emerald Publishing Limited
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