The moderating effect of board gender diversity on the relation between corporate social responsibility and firm value

Abstract

We examine whether female board representation moderates the effect of corporate social responsibility (CSR) performance on firm value. Using a two-stage dynamic panel generalized method of moments method, we find that the effect of CSR strengths (CSR concerns) on the market assessed firm value, measured by Tobin’s Q and annual stock return, is incrementally more positive (more negative) for firms with greater female representation on the board. Further analysis suggests that female board representation positively moderates the effect of CSR strengths on firm financial performance measured by return on assets (ROA); however, female board representation does not significantly moderate the impact of CSR concerns on ROA. Our findings suggest that board gender diversity enhances the effect of positive CSR performance on firm value, but exacerbates the negative market reactions to CSR concerns. Overall, our evidence suggests that board gender diversity may enhance or destroy firm value depending on a firm’s social and environmental performance in dimensions other than diversity.