This study aims to understand how the Environmental, Social and Governance (ESG) pillar scores and board diversity influence the performance of Iberian companies, within the context of mandatory gender quotas and governance practices.
The analysis uses panel data and the Generalised Method of Moments (GMM) system estimator by Arellano and Bond (1991) and Arellano and Bover (1995), applied to 337 listed non-financial Iberian firms from 2013 to 2023.
Governance scores are positively linked to internal financial performance, short-term market valuation and long-term firm value, reflecting the importance of accountability and transparency. Environmental performance improves asset efficiency but negatively affects short-term market perception and shows no significant link with income generation. Social performance supports asset use but is negatively associated with earnings and long-term value, suggesting trade-offs between stakeholder engagement and financial results. Governance has the most consistent positive impact, while environmental and social factors show mixed effects. Board cultural diversity is associated with better internal financial indicators but lower market valuations, possibly due to coordination challenges or investor scepticism. A higher share of women on boards correlates with improved managerial efficiency and long-term value creation. Larger boards are linked to reduced operational performance and lower market valuation, indicating diminishing returns to size.
This study extends the literature by analysing ESG and board diversity within a regulatory setting shaped by gender quotas and ESG pressures. It highlights asymmetries in ESG effects and governance dynamics affecting performance, investor perception and long-term value.
