The Board of Directors and Firm Value: The Moderating Role of ESG Performance-Evidence from the Financial and Insurance Sector

Abstract

This study examines the relationship between board characteristics and firm value in Taiwan’s financial and insurance sector and investigates the moderating role of environmental, social, and governance (ESG) performance. Using panel data from 52 listed financial and insurance firms during 2015–2022, the study employs pooled ordinary least squares (OLS) regression with year effects and a hierarchical regression approach. The results show that board characteristics have different effects on accounting- and market-based measures of firm value. Board independence is positively associated with both ROE and Tobin’s Q, while board meeting frequency is negatively associated with both measures. Board gender diversity is negatively associated with ROE but not significantly related to Tobin’s Q, whereas board size is positively associated with ROE. ESG performance significantly moderates several board–firm value relationships. Specifically, ESG positively moderates the relationship between board gender diversity and ROE and strengthens the relationships of board size, board independence, and board meeting frequency with Tobin’s Q. These findings suggest that ESG performance may complement board governance, with its moderating effects varying across accounting- and market-based measures of firm value. JEL classification numbers: G21, G34, M14. Keywords: ESG, firm value, Board of directors, Financial and insurance sector.