Board Gender Diversity and Innovation Strategies: Sectoral Effects on ESG Performance in Financial and Non-Financial Firms

We empirically examine the combined influence of innovation intensity strategies and boardrooms gender diversity on ESG performance. The theoretical lenses underpinning this study are rooted in Resource-Based View (RBV) and Upper Echelons Theory (UET). The empirical analysis is based on a sample of financial and non-financial firms selected from FTSE 350 listed companies, publicly listed companies on the London Stock Exchange (LSE) over the period (2012-2023). The findings of this study reveal that innovation intensity strategies have positive and significant relationship with ESG performance, for both financial and non-financial firms. Further, the percentage of women on the board has a positive and significant relationship with ESG performance, for both financial and non-financial firms. However, the magnitude of the coefficient for financial firms suggests that this effect is very negligible and not significant for non-financial firms. The percentage of women employees has a negative and significant relationship with ESG performance in financial firms. Unlike financial firms, the percentage of women employees has a positive and significant relationship with ESG performance in non-financial firms. For both financial and non-financial firms, the percentage of women in management has a positive and significant relationship with ESG performance in the Nested models. Further, these relationships become insignificant in the full model, suggesting that other factors may overshadow the impact of women in management roles. In both financial and non-financial firms, the number of female executives has a positive and significant relationship with ESG performance across models. This underscores the importance of gender diversity in leadership roles for driving ESG initiatives. The results suggest that companies with a high-level of board boardrooms diversity strengthen innovation strategies intensity and leverage external resources for sustainability initiatives. The lack of a significant relationship between innovation strategies and ESG performance challenges the innovation-driven sustainability theory, which posits that innovation is a key driver of environmental and social sustainability. This suggests that traditional innovation strategies, R&D metrics, may not adequately capture sustainability-focused innovation, particularly in financial firms. The additional analysis resulted consistent results with the baseline findings, reinforcing the conclusion that the results of this study robust and minimise endogeneity concerns. Findings have theoretical and managerial implications.