Abstract/Description
Using data from S&P 500 corporations from 2016 to 2023, this study explores the strategic significance of corporate governance in linking Environmental, Social, and Governance (ESG) policies to corporate financial success. Using Structural Equation Modeling (SEM), it investigates how board features, especially size, gender diversity, and independence, mediate the link between ESG activities and financial performance, as evaluated by Return on Assets (ROA) and Return on Equity (ROE). The findings show that ESG performance has subtle effects: the Environmental pillar positively promotes board size, implying that significant sustainability concerns need broader knowledge, but strengthened governance procedures seem to favor smaller, more nimble boards. Gender-diverse boards show a substantial positive correlation with ROE, emphasizing the need for inclusive leadership. In contrast, higher board independence has a negative correlation with ROA, indicating potential trade-offs between supervision and short-term success. The report emphasizes the need for context-sensitive governance frameworks that may link ESG commitments with long-term financial benefit. Implications for corporate executives, investors, and politicians seeking to include responsible governance in business plans that benefit both people and the environment. Future study should look at these processes across many industries and institutional settings to help develop more flexible and sustainable governance structures.
Keywords
Corporate Governance, ESG, Financial Performance, Board Diversity, Sustainable Business, Return on Assets (ROA), Return on Equity (ROE)
Track
Finance
Session Number/Theme
Finance - Session I
Session Chair
Dr. Mujeeb
Start Date/Time
14-6-2025 9:00 AM
End Date/Time
14-6-2025 10:40 AM
Location
MCS 3 Ground Floor, AMAN CED Building
Recommended Citation
Shah, B. (2025). Bridging ESG and Financial Returns: The Strategic Role of Corporate Governance in Sustainable Business. IBA SBS 4th International Conference 2025. Retrieved from https://ir.iba.edu.pk/sbsic/2025/program/88
Bridging ESG and Financial Returns: The Strategic Role of Corporate Governance in Sustainable Business
MCS 3 Ground Floor, AMAN CED Building
Using data from S&P 500 corporations from 2016 to 2023, this study explores the strategic significance of corporate governance in linking Environmental, Social, and Governance (ESG) policies to corporate financial success. Using Structural Equation Modeling (SEM), it investigates how board features, especially size, gender diversity, and independence, mediate the link between ESG activities and financial performance, as evaluated by Return on Assets (ROA) and Return on Equity (ROE). The findings show that ESG performance has subtle effects: the Environmental pillar positively promotes board size, implying that significant sustainability concerns need broader knowledge, but strengthened governance procedures seem to favor smaller, more nimble boards. Gender-diverse boards show a substantial positive correlation with ROE, emphasizing the need for inclusive leadership. In contrast, higher board independence has a negative correlation with ROA, indicating potential trade-offs between supervision and short-term success. The report emphasizes the need for context-sensitive governance frameworks that may link ESG commitments with long-term financial benefit. Implications for corporate executives, investors, and politicians seeking to include responsible governance in business plans that benefit both people and the environment. Future study should look at these processes across many industries and institutional settings to help develop more flexible and sustainable governance structures.
