ESG performance, board gender diversity and corporate financial performance: the role of countries’ cultural orientation in European companies

Purpose This paper aims to investigate the relationship between environmental, social and governance (ESG) performance and corporate financial performance (CFP), focusing on the moderating role of board gender diversity and the influence of national cultural orientation. Design/methodology/approach This study performs a fixed effects linear regression analysis with time effects on a panel data set of 889 European listed companies (5,004 firm-year observations) across 17 industries and 22 countries over the period 2016–2023. Findings The results of this study reveal that ESG performance reduces CFP. However, the presence of women sitting on the board positively moderates the above relationship. Also, the results show that the moderating role played by board gender diversity in the relationship between ESG performance and CFP varies according to the cultural orientation of the firm’s country of headquarters. Research limitations/implications This study focuses on the short-term financial effects of ESG performance and only includes European-listed companies with available data. It does not account for other board characteristics and uses the GLOBE project for cultural classification, which may not capture all institutional dimensions. Practical implications The findings of this study suggest that increasing board gender diversity can enhance the financial benefits of ESG performance, especially in countries with lower gender egalitarianism. This study also highlights the need for context-sensitive governance and sustainability strategies that align with national cultural characteristics. Originality/value This paper contributes to the literature by jointly examining internal (board gender diversity) and external (national culture) moderating factors in the ESG–financial performance relationship.