Unlocking value: exploring the impact of ESG performance and board gender diversity on mitigating stock price crash risk

Abstract

We examine the role of environmental, social and governance performance (ESGP), board gender diversity (BGD), and their interactive effect on stock price crash risk (SPCR). Using a dataset of Chinese companies listed in the A-share market between 2015 and 2022 and employing three-stage least squares statistics to address the endogeneity issue, we found that ESGP is negatively associated with SPCR. Notably, BGD exhibits a positive association with SPCR. However, the interaction between ESGP and BGD reveals a negative relationship with SPCR, suggesting that ESGP moderates the positive effect of BGD on crash-related risk. Our results still hold even after conducting a series of robustness checks, such as using a fixed effect model, a two-step GMM estimator, and alternative measures of ESGP and BGD. This study contributes to the governance and sustainability literature by highlighting the influence of ESGP and BGD on SPCR and their interactive role in mitigating crash risk through enhanced transparency, stronger stakeholder relations, and improved risk management. It offers valuable organisational and policy implications, suggesting that Chinese listed companies can leverage ESGP to effectively reduce SPCR and strengthen corporate governance practices.