Optimal thresholds of board gender diversity for maximizing sustainability performance

Abstract

Growing interest in corporate sustainability has prompted firms to rethink governance practices, particularly the role of gender diversity on boards. This study investigates whether the representation of women in executive and non-executive board roles influences Environmental, Social and Governance (ESG) performance across firms in 95 countries between 2018 and 2023. A dynamic panel analysis was conducted using the system Generalized Method of Moments (GMM) estimator, complemented by quantile regressions to assess distributional heterogeneity. The study identifies a non-linear, inverted U-shaped relationship between gender diversity and ESG performance, with optimal thresholds differing based on the type of board role. Female executive directors were found to influence ESG outcomes more directly through decision-making, while non-executive directors contributed through oversight and legitimacy signaling. These results suggest that diversity thresholds must be tailored by function to avoid symbolic appointments and maximize strategic effectiveness. The findings have implications for corporate governance reform, particularly in designing balanced diversity policies across board structures. For regulators and investors, this study offers empirical evidence to support role-specific diversity strategies that enhance sustainability performance without compromising governance efficiency. Recommendations include promoting targeted board reforms and reinforcing disclosure quality to strengthen ESG accountability