Do Board Characteristics Promote Corporate Social Responsibility? An Empirical Analysis for European Companies

Abstract

In recent years, businesses have faced increasing pressure from consumers, investors, and regulators to prioritize sustainability, ethics, and transparency. Consequently, Corporate Social Responsibility (CSR) is growing and companies are integrating CSR into their core strategies to enhance long-term value and align with societal expectations. Board characteristics significantly influence CSR outcomes. With boards that actively support and oversee CSR initiatives, sustainable practices would be supported. Hence, studying the relationship between board composition and CSR is very useful. The purpose of this paper is to check whether board characteristics affect CSR for European firms. To achieve this goal, we used a large sample of 1376 listed companies located in 23 European countries from 2014 to 2023. The System Generalized Method of Moment (SGMM) was performed as an econometric approach. Overall, the empirical results show that board-related variables, such as board size, duality, independent investors, gender diversity, culture diversity, and board-specific skills significantly influence ESG performance. In contrast, variables that reflect firm specifics such as firm size and profitability do not have a significant impact on CSR performance.

1. Introduction

Corporate social responsibility has become a major strategic issue in an economic context requiring greater transparency and sustainability. Companies are assessed not only on their financial performance but also on their environmental, social, and ethical commitments (Rozalina & Ellitan, 2023). In this context, corporate governance, and, in particular, the board of directors plays a key role in guiding CSR strategies, thus influencing the company’s relations with its stakeholders and society as a whole. Board characteristics such as size, independence, diversity, financial expertise, and the integration of ESG criteria into decision-making can have a significant impact on a company’s CSR commitment (Di Guida et al., 2022; Endrikat et al., 2020; Osemeke et al., 2020).

The relationship between board characteristics and CSR in Europe is grounded in several key theoretical frameworks that explain how governance structures influence ethical and sustainable business practices. Agency theory (Jensen & Meckling, 1976) is central to this discourse, asserting that the board of directors acts as an intermediary between shareholders (principals) and management (agents), to mitigate self-serving behavior. In this context, diverse and independent boards are seen as more effective monitors, enhancing CSR outcomes by aligning corporate actions with broader stakeholder interests. Stakeholder theory (Freeman, 1984) further deepens this understanding by emphasizing the board’s role in balancing the interests of various groups beyond shareholders, such as employees, communities, and the environment. Boards with members from diverse professional and cultural backgrounds, or those with a higher proportion of women, tend to be more attuned to stakeholder concerns, which often translate into stronger CSR commitments.

A complementary lens is provided by resource dependence theory (Dowling & Pfeffer, 1975), which highlights how board members bring valuable knowledge, legitimacy, and access to external resources, can facilitate CSR initiatives. In Europe, where regulatory environments and social norms strongly support sustainability, board interlocks and external affiliations can enhance a firm’s responsiveness to CSR expectations. Legitimacy theory (Dowling & Pfeffer, 1975) also plays a vital role, particularly in the European context where companies face strong social and institutional pressures to operate responsibly. Boards may proactively engage in CSR as a strategy to maintain social approval and legitimacy.

Empirically, the impact of board characteristics on CSR performance varies according to institutional and cultural contexts. For example, in European countries subject to strict regulatory standards, boards’ characteristics tend to integrate ESG practices more systematically in environments with less regulatory pressure. CSR commitment may be motivated more by image and reputation concerns than by a genuine desire for sustainable transformation (Beji et al., 2020).

Indeed, CSR disclosure is influenced by several board characteristics, which play a key role in corporate governance and organizational transparency. Among these characteristics, the duality of the CEO is recognized as a key determinant. According to Rashid (2010), concentrating the functions of the CEO and Chairman in the same person compromises independent board oversight, which can reduce the quality and scope of CSR disclosures. On the other hand, separating these roles promotes more balanced governance and improves transparency. Board Gender Diversity (BGD) is often associated with more inclusive and ethical governance. Adams and Ferreira (2009) have shown that women directors are more inclined to promote ESG initiatives, as they pay particular attention to stakeholder concerns and principles of social responsibility. Similarly, Board Culture Diversity (BCD) may significantly influence CSR communication. Indeed, culturally diverse boards bring a variety of perspectives, which promotes a better understanding of stakeholder expectations and greater sensitivity to social and environmental issues (Harjoto & Jo, 2011).

Board Size (BS) can increase the diversity of skills and expertise, thus improving oversight capacity and ESG decision-making. However, excessive board size can also lead to inefficiencies in communication and coordination, making the relationship between BS and ESG disclosure non-linear (Cheng & Courtenay, 2006). Board independence (IND) plays a fundamental role in the quality of ESG information disseminated. According to Frias-Aceituno et al. (2013), a board with a high number of independent directors is more likely to exercise effective oversight and encourage CSR transparency. In addition, board-specific skills (BSS) such as the financial expertise of board members also influence ESG disclosure. A greater presence of directors with financial expertise improves the board’s ability to analyze financial risks related to environmental and social issues and promotes more rigorous reporting practices (García-Sánchez & Martínez-Ferrero, 2018).

The debate on the influence of board characteristics on CSR remains controversial, with divergent empirical results. On the one hand, some studies show a positive effect, highlighting that gender diversity (Qian et al., 2024), director independence (Islam et al., 2023), and board size (Cucari et al., 2018) strengthen CSR commitment by enhancing oversight and stakeholder consideration. Conversely, other research suggests a negative or insignificant effect; highlighting that an overly diverse board can slow decision-making and generate internal conflicts (Rao & Tilt, 2016a). These contrasting results show that the effect of the board of directors on CSR depends on the organizational and institutional context.

Based on the inconclusive results discussed above, the central question to be answered in this paper is the following: do board characteristics promote the CSR performance of European firms? This article aims to analyze this relationship by exploring the mechanisms through which board composition can enhance the CSR performance of European firms. To do this, we used a large sample of 1376 listed companies located in 23 European countries from 2014 to 2023, and we performed the SGMM technique as an econometric approach.

The European context could be an appropriate case study for this paper for several reasons. First, strict regulations in Europe impose CSR transparency obligations, notably through the Corporate Sustainability Reporting Directive (CSRD). Second, societal and institutional pressures push companies to integrate CSR into their strategy due to high expectations from investors and regulators. Third, the structured and rigorous European environment provides a suitable research framework, offering a unique opportunity to analyze the relationship between governance and CSR commitment.

European institutional factors significantly influence the link between corporate boards and CSR (Jackson & Apostolakou, 2010). One of the primary institutional drivers in Europe is the Corporate Sustainability Reporting Directive (CSRD), which requires large and listed companies to report extensive sustainability and social impact data. This mandate requires boards to play a more proactive and accountable role in CSR governance. It also incorporates sustainability into strategic decision-making rather than treating it as a side issue. The CSRD’s legal requirements strengthen board-level accountability for ESG outcomes, thereby aligning CSR and fiduciary duties. In addition to regulatory mandates, European cultural norms help to strengthen the board-CSR interaction (Rojot, 2017). Many European countries have social market economies that value stakeholder capitalism over shareholder dominance. This viewpoint urges boards to consider the interests of a wider range of stakeholders. Furthermore, established procedures such as co-determination in countries like Germany, where employee representatives sit on boards, increase board sensitivity to social and labor issues, thereby integrating CSR into fundamental governance structures.

In contrast to regions like the U.S., where shareholder value maximization often dominates board priorities, European boards operate under stronger normative and legal pressures to pursue long-term sustainability and social responsibility. This results in a board-CSR relationship that is more deeply embedded and operationalized in Europe, influenced by both binding regulations like the CSRD and prevailing cultural expectations around ethical corporate behavior.

This paper can extend the literature on corporate governance of corporate social responsibility and adds several contributions. To the best of the authors’ knowledge, few studies investigated the relationship between board characteristics and CSR for European firms (Bolourian et al., 2023; Remo-Diez et al., 2025). Second, this paper enriches the existing literature by examining the role of directors not only in terms of their profile but also in their level of involvement in CSR decisions. Third, it sheds light on the mechanisms through which governance that integrates stakeholders and ESG risks can enhance corporate sustainability and resilience. Fourth, contrary to most of the prior studies that investigated separately the effect of board characteristics on CSR performance, this study follows this strategy and checks the results using an index of board characteristics. Finally, this work offers valuable insights for both researchers and practitioners seeking to enhance the impact of corporate governance on environmental, social, and ethical issues.

The paper is structured as follows: Section 2 reviews the literature and formulates the hypotheses. Section 3 outlines the sample and describes the empirical methodology. Empirical results are discussed in Section 4. Robustness checks are conducted in Section 5. Finally, Section 6 concludes and addresses some policy recommendations.

2. Literature Review and Hypotheses Development

The relationship between board characteristics and commitment to corporate social responsibility is attracting growing interest in academic research. Beyond structural factors, such as board size or independence, other characteristics, such as gender and cultural diversity dynamics, play a key role in how companies integrate CSR into their business model. For example, the cultural diversity of the board, which includes the variety of academic backgrounds, sector experience, and cultural perspectives of directors, encourages a more holistic and innovative approach to CSR. Indeed, L. T. M. Nguyen and Nguyen (2023) examined the complex interdependent relationships among popular board characteristics and their impact on ESG disclosure. The authors perform the fuzzy set qualitative comparative approach (fsQCA) with a sample of S&P 500 firms from 2013 to 2022. The empirical findings offer insights into the complementary and substitution effects among the board characteristics and the core characteristics that promote ESG disclosure. Rao and Tilt (2016a) emphasized the significance of studies linking gender diversity to CSR decision-making processes, which are uncommon in the existing literature. It also emphasizes the significance of using more qualitative approaches and conducting longitudinal studies to better understand the diversity-CSR relationship. In this section, we review the literature on how board characteristics may affect CSR performance.

2.1. Board Size and CSR

The academic literature highlights a contrasting relationship between board size and CSR performance. The high number of directors on the board can also reinforce the adoption of sustainable practices due to a better understanding of environmental and social risks (Velte, 2021). In addition, a larger board size can promote better oversight and increased access to diverse skills, which could improve CSR engagement (Post et al., 2011). It can encourage a diversity of opinions and better monitoring of responsible practices, while a smaller board can enable faster, more efficient decision-making (Jensen, 1993). However, excessive board size can lead to inefficiencies, dilution of responsibilities, and slower decision-making, thus limiting the positive impact on CSR (Chang et al., 2023).

According to the agency theory of Jensen and Meckling (1976), a large board may suffer from coordination problems and dilution of responsibility, which could reduce its effectiveness in promoting CSR initiatives. Conversely, the resource-dependency theory of Dowling and Pfeffer (1975) suggests that a larger board brings resources and skills that can reinforce CSR commitments. However, the link between board size and CSR performance remains a subject of debate in the empirical literature, with contrasting results depending on the contexts and methodologies adopted.

Empirically several prior studies have been focused on the relationship between board size and CSR. For example, Dang et al. (2021) examine the impact of board size on CSR disclosure in the United States. Their study covers 3245 companies listed on the S&P 500 index between 2004 and 2015 and uses the generalized method of moments. The results reveal a significant influence of board size on CSR. For the European context, Beji et al. (2020) examined the relationship between board size and CSR performance. They analyzed data from 120 French-listed companies for a period from 2003 to 2016 and applied the Generalized Method of Moments. The results show that board size is positively related to all areas of CSR.

For the Asian context, Abu Qa’dan and Suwaidan (2018) studied the impact of board size on CSR disclosure in 153 listed Jordanian companies between 2013 and 2015. Their panel data regression analysis shows a positive and significant relationship between these variables. For the same context, Naseem et al. (2017) demonstrated a significant relationship between board size and corporate social responsibility disclosure in Pakistan. Furthermore, Shahab and Ye (2018) show that board size significantly influences CSR disclosure in listed Chinese companies between 2008 and 2015.

The African context was initiated by Isa and Muhammad (2015), who found a positive association in Nigeria using regression analysis. Similarly, Adib and Zhang (2019) analyze the impact of board size on corporate social performance (CSP) in South Africa. Their study, based on 800 companies listed in 15 countries between 2012 and 2016, uses data from the “Vigeo Eiris” ESG index and the ordinary least squares (OLS) method. The results show a significant relationship between board size and corporate social responsibility (CSR). In contrast, Yahaya and Apochi (2021) observed no significant effect of this variable on CSR in their study of Nigerian companies. These discrepancies show that the impact of board size can vary according to context and the methodology adopted.

To summarize, the relationship between board size and CSR performance is complex, with mixed findings in research. Larger boards can bring diverse perspectives and expertise, potentially improving CSR outcomes. However, if boards become too large, decision-making may become inefficient and fragmented, hindering effective CSR strategies. Ultimately, the optimal board size for fostering strong CSR performance likely depends on factors like board composition and governance quality.

Based on the argument of a positive relationship between board size and CSR, the following hypothesis was developed.

H1: 

Large boards enhance CSR performance.

2.2. Board Independence and CSR

CSR has emerged as a major issue, integrating environmental, social and ethical concerns into organizational strategy (Carroll, 1991). An independent board of directors, by integrating these concerns into its strategic decisions, can encourage a more responsible and sustainable approach (Donaldson & Preston, 1995).

The agency theory indicates that managers if not sufficiently supervised, may prioritize their interests to the detriment of shareholders and stakeholders (Jensen & Meckling, 1976). In addition, the stakeholder theory emphasizes the importance of managing the expectations of different stakeholders in a balanced way (Freeman, 1984).

Several empirical studies have demonstrated a positive relationship between board independence and corporate social responsibility. Several prior studies confirm that the presence of independent directors promotes CSR disclosure and reporting (Shahbag et al., 2020; D. T. Nguyen et al., 2021; Bansal et al., 2018). Similar results have been obtained in Spain (Fernández-Gago et al., 2018) and China (Wang & Yang, 2025). Other studies support this trend (Brammer & Pavelin, 2008; Khan et al., 2013). For the Asian context, Cao (2022) focused on the effectiveness of board independence on CSR. He performed the ordinary least squares method on a sample of 400 Chinese-listed companies. The results showed a significant relationship between the impact of board independence and CSR.

Furthermore, the author used a sample of 600 listed companies, covering the period from 2010 to 2014. The Generalized Method of Moments was applied for the econometric analysis. The results revealed a significant and positive relationship between board independence and CSR. However, D. T. Nguyen et al. (2021) found no significant effect in Vietnam, suggesting that this relationship may vary according to context.

Board independence is often linked to enhanced CSR performance, as independent directors can bring objectivity and accountability to decision-making, prioritizing long-term social responsibility. However, excessive reliance on independent directors might lead to a disconnect from the firm’s operations and stakeholders, reducing practical CSR engagement. Effective CSR requires a balance, where independent oversight complements the active involvement of insiders. Thus, the relationship is contingent on the overall governance structure and board dynamics.

Based on previous studies showing a positive relationship between board independence and corporate social responsibility (CSR), the following hypothesis was developed.

H2: 

Greater board independence improves CSR performance.

2.3. Board Gender Diversity and CSR

Gender diversity on boards of directors is a growing issue in corporate governance and CSR. In the context of heightened awareness of equality and sustainability, several research studies show that the presence of women in these strategic bodies fosters better governance practices, greater transparency, and a stronger commitment to CSR (Terjesen et al., 2016).

Prior studies also show that the presence of women on boards of directors has a positive and significant impact on CSR. For example, Al Fadli et al. (2019) and Issa and Fang (2019) have shown that this female representation promotes better CSR disclosure in Jordanian companies and those in the Gulf Arab States. Pucheta-Martínez et al. (2019) confirmed this trend on an international scale, analyzing a large sample of companies. Beji et al. (2020) have shown that the presence of women on boards improves governance and the protection of human rights in French companies. These studies therefore underline the key role of women directors in improving CSR practices. For the same context, using estimates from a dynamic panel model using the Generalized Method of Moments on a sample of 104 French listed companies from the SBF 120 index for the period 2001 to 2010, Bidi (2020) examined the effect of female representation on CSR. The results proved that the presence of at least one woman on the board positively affects CSR reporting.

Far from the simple female presence on the board of directors, more recently, Al Amosh (2024) investigated the relationship between the marital status of board members and ESG disclosure. The author used a sample of 81 nonfinancial companies listed on the Amman stoke exchange from 2012 to 2021. The main findings of this study indicate that there is a positive relationship between married board members. Conversely, the results did not indicate a relationship between single board members and ESG disclosure.

International studies overwhelmingly show a positive relationship between gender diversity on boards and corporate social responsibility. Several research studies, conducted in the UK (Kachouri et al., 2020), the USA (Hyun et al., 2016), and Indonesia (Shauki, 2011), indicate that the presence of women improves CSR performance. Similar work (Bernardi & Threadgill, 2011) confirms this favorable impact. However, a study in Malaysia (Ahmad et al., 2018) qualifies these results by suggesting that gender and educational diversity do not necessarily guarantee increased CSR commitment.

Generally, board gender diversity has been associated with improved CSR performance, as diverse perspectives can lead to more inclusive and responsible decision-making. Women on boards may prioritize social and environmental concerns, fostering better CSR initiatives. However, the impact of gender diversity depends on the overall board culture and commitment to CSR, rather than simply the presence of women. Thus, while diversity is a valuable factor, its effect is influenced by the broader governance environment.

Based on the empirical studies previously reviewed on the relationship between the presence of women on boards of directors and corporate social responsibility, we can formulate the following hypothesis.

H3: 

Increased female representation on the board is positively associated with improved CSR performance.

2.4. CEO-Chair Duality and CSR

CEO duality is another important board characteristic that has been widely discussed in the literature. Duality can be defined as the same person holding both the CEO and board positions. This demonstrates the concentration of managerial power within a company. According to the agency theory, these two positions must be held by different people to ensure the independence and effectiveness of the board (Firth et al., 2007). Consequently, duality can affect board governance on sustainable practices, including CSR practices.

Furthermore, studies on CEO duality and corporate social responsibility show mixed results. For example, Muange and Kiptoo (2020) found a significant negative effect of CEO duality on CSR in Kenya. Similarly, Afzalur et al. (2020) reveal a negative relationship between CEO power and CSR disclosure in Bangladesh. In contrast, Adib and Zhang (2019) find no significant effect of CEO duality on corporate social performance in South Africa.

To summarize, CEO duality can negatively impact CSR performance by concentrating power and limiting board independence, reducing accountability in decision-making. However, in some cases, CEO duality can lead to more cohesive leadership and clearer strategic direction, potentially benefiting CSR initiatives. The relationship is context-dependent, as strong ethical leadership and a focus on long-term value can mitigate the risks associated with CEO duality. Ultimately, the governance structure and CEO’s commitment to CSR are key factors.

Based on the empirical studies reviewed concerning the relationship between CEO duality and corporate social responsibility (CSR), we can formulate the following hypothesis.

H4: 

CEO-chair duality is negatively associated with CSR performance.

2.5. Cultural Diversity and CSR

In an increasingly globalized world, cultural diversity on boards of directors plays an essential role in corporate governance. It influences not only strategic decision-making but also corporate social responsibility. By contributing varied perspectives, cultural diversity fosters a better understanding of stakeholders’ expectations and strengthens commitment to sustainable and ethical practices (Cucari et al., 2018); the researchers examined diversity in terms of nationality and considered it as cultural diversity.

Several studies have shown that the multicultural composition of boards of directors improves CSR performance, notably by facilitating the adoption of environmental, social, and governance policies. For example, the study of Frijns et al. (2016) explores the impact of cultural diversity on boards of directors on corporate social responsibility. Analyzing 286 S&P 500 companies over the period 2010–2020 using data from the Eikon database, the authors employ panel data regression models and dynamic GMM. Their results show that, overall, CSR and sustainable development are more advanced in the USA than in Australia. Martínez-Ferrero et al. (2020) analyzed the impact of cultural diversity on boards of directors on corporate sustainability performance, considering the mediating role of a CSR committee. Their study, involving 702 annual observations from 2012 to 2018 in several Latin American countries, reveals that this diversity strengthens companies’ commitment to sustainability, improving their social and environmental performance. Indeed, Aliani et al. (2024) analyzed a sample of 2988 companies in G7 countries over the period from 2015 to 2022. The empirical results show that cultural diversity on the board of directors makes a significant contribution to CSR.

Cultural diversity on the board can enhance CSR performance by bringing varied perspectives and a deeper understanding of global social issues, leading to more inclusive and innovative CSR strategies. However, cultural differences can also create challenges in communication and decision-making, potentially hindering the efficient implementation of CSR initiatives. The positive impact of cultural diversity on CSR is most evident when there is strong organizational support for inclusivity and collaboration. Ultimately, the effectiveness of cultural diversity in CSR depends on the organization’s ability to leverage diverse perspectives strategically.

Based on the results of prior empirical studies of the relationship between cultural diversity on the board and corporate social responsibility, we can formulate the following hypothesis.

H5: 

Higher cultural diversity on the board enhances CSR performance.

2.6. Financial Expertise and CSR

Corporate social responsibility has become a central issue for companies seeking to reconcile economic performance with social and environmental commitment. The role of the board of directors is crucial in providing strategic direction and overseeing CSR initiatives. Among the skills present on the board, financial expertise occupies a special place, influencing decisions on the allocation of resources and the management of risks linked to corporate social responsibility. In this vein, Li et al. (2022) investigated the impact of executives’ financial experience on corporate social responsibility practices. Analyzing a sample of 847 listed companies in China over the period 2009–2018 using ordinary least squares (OLS) regression, they found that companies led by executives with financial expertise show better CSR performance.

Prior, research highlights the influence of directors’ financial expertise and level of education on corporate social responsibility. For example, Naheed et al. (2021) and Sun and Rakhman (2013) show that financial experts, whether board members or CFO, favor CSR initiatives. Beji et al. (2020) and Karabašević et al. (2016) reveal that the educational level and diversity of directors’ backgrounds have a positive impact on companies’ CSR performance. Similarly, Dhaliwal et al. (2011) have shown that the presence of financial experts on the board is associated with greater transparency and disclosure of extra-financial information. In addition, Arora and Dharwadkar (2011) have highlighted the role of financial skills in the adoption of responsible strategies that balance financial performance and societal commitment. These studies thus confirm that executive skills and training play a key role in companies’ CSR commitment. On the one hand, directors with strong financial skills can encourage better management of the resources allocated to sustainability initiatives, ensuring their effectiveness and profitability (Mishra & Suar, 2010). On the other hand, short-term profitability can lead to a minimization of CSR investments, perceived as costs rather than strategic opportunities (Haque & Ntim, 2018).

Financial expertise on the board can enhance CSR performance by ensuring that CSR initiatives are financially sustainable and aligned with long-term shareholder value. However, an overemphasis on financial expertise may lead to a narrow focus on profit maximization, sidelining broader social and environmental concerns. A balanced board with both financial and non-financial expertise is crucial for integrating CSR into the company’s strategy. Ultimately, the effectiveness of financial expertise in CSR depends on how it is coupled with a commitment to responsible business practices.

With reference to the findings of prior empirical studies considered above, we can put forward the following hypothesis.

H6: 

Board members with financial expertise are positively associated with enhanced CRS performance.

3. Sample, Variable Selection, and Econometric Design

3.1. The Sample

To examine the effect of board characteristics on corporate social responsibility, we used a sample of 1405 companies located in 23 European countries. This initial sample was reduced to 1376 companies only, due to the discontinuity and unavailability of some data relating to gender diversity, culture diversity, and board-specific skills. The whole sample was observed over the period 2014–2023.

The data used in this study were collected from Refinitiv’s Eikon database, which is comprehensive on over 72,000 listed companies worldwide. It covers various aspects such as gender and cultural diversity of boards, financial expertise of board members, company size, CEO duality, as well as ESG scores and company fundamentals. The data were collected for listed companies between 2014 and 2023, providing an in-depth analysis of these companies’ ESG performance.

Table 1. Distribution of companies per country.

Countries	N	%	Countries	N	%
Austria	46	3.34	Italy	45	3.27
Belgium	76	5.52	Luxembourg	34	2.47
Cyprus	39	2.83	Malta	30	2.18
Czech Republic	50	3.63	Netherlands	61	4.43
Denmark	63	4.58	Norway	74	5.38
Finland	62	4.51	Poland	66	4.80
France	61	4.43	Portugal	60	4.36
Germany	74	5.38	Spain	77	5.60
Greece	30	2.18	Sweden	96	6.98
Hungary	40	2.91	Switzerland	87	6.32
Iceland	36	2.62	United Kingdom	98	7.12
Ireland	71	5.16
Total companies (Whole sample): 1376

presents the distribution of the sample per country.

3.2. Variable Selection

3.2.1. Corporate Social Responsibility: Dependent Variable

To measure corporate social responsibility, we used in this study the Environmental, Social, and Governance (ESG) pillar score. It measures sustainability performance based on information disclosed by companies (Buallay, 2019). The ESG score is a global indicator that assesses a company’s performance in terms of sustainability and social responsibility. It ranges from 0 to 100, where a higher score reflects a better integration of the ESG criteria into the company’s management.

The adoption of a global ESG score rather than rating each pillar separately aims to provide a simplified and comparable measure of corporate sustainability. This approach facilitates investor analysis and reflects the interdependence of the environmental, social, and governance dimensions. However, it may obscure disparities between pillars and reduce transparency regarding a company’s true performance in each area (Berg et al., 2022).

While ESG pillar scores are widely used to assess CSR performance, their application comes with several important limitations. First, these scores often lack transparency, as they are based on proprietary methodologies from different rating agencies, each using varied criteria and weighting systems. This makes it difficult to understand how scores are calculated or to compare ratings across providers. Additionally, ESG scores tend to aggregate diverse dimensions: environmental, social, and governance into broad categories, which can obscure critical nuances (Berg et al., 2022). For instance, a firm may excel in environmental practices but perform poorly on social issues, yet a high overall ESG score might mask these imbalances. Another significant limitation is that ESG scores are typically backward-looking and heavily reliant on disclosed information. This introduces a bias in favor of companies with strong reporting practices rather than those with truly impactful CSR initiatives. Furthermore, these scores often lack sensitivity to industry or regional context, which can result in unfair comparisons between firms operating under vastly different conditions. Therefore, while useful, ESG Pillar Scores should be interpreted cautiously and supplemented with qualitative and context-specific assessments.

3.2.2. Board Characteristics: Main Explanatory Variable

Among the independent variables, the board’s cultural diversity (BCD) and gender diversity (BGD) are considered major levers for improving governance and transparency, the former measured by the percentage of members from different cultural backgrounds and the latter by the proportion of women on the board (Ben-Amar et al., 2017). In addition, the issue of CEO duality (DUAL), a binary variable indicating whether the chairman of the board is also the CEO, and the independent board structure (IND), are crucial to guaranteeing separation of powers and limiting conflicts of interest (Birindelli et al., 2019). Board Size (BS), defined by the total number of directors, also plays a key role in board effectiveness and oversight of strategic decisions (Rao & Tilt, 2016a). In addition, directors’ specific skills (BSS), assessed by the percentage of members with financial expertise, are often associated with better decision-making in terms of corporate responsibility and sustainable performance (Zaid et al., 2019).

As a robustness check, we built an index of board characteristics (BC_index) by integrating six key dimensions: board size (BS), director independence (IND), gender diversity (BGD), member financial expertise (BSS), CEO duality (DUAL), and cultural diversity (BCD). While board structure and independence influence oversight and transparency (Cucari et al., 2018), diversity and expertise improve the quality of strategic decisions (Pucheta-Martínez & Gallego-Álvarez, 2020). CEO duality can affect the balance of power (Krause et al., 2014), while cultural diversity promotes a more global vision and better risk management (García-Meca et al., 2015). These characteristics play a central role in corporate governance and performance.

Table 2. Summary of indicators used to build the board of directors’ characteristics index.

Dimension	Indicator	Description	Adjustment	Weight
Diversity	Gender diversity	% women on the board of directors	Standardized value	0.20
Diversity	Cultural diversity	% of members from cultural minorities or foreign countries	Standardized value	0.15
Expertise	Financial expertise	% of members with financial training	Standardized value	0.20
Governance	CEO duality	1 if the CEO is also Chairman of the Board, 0 otherwise	Standardized value	0.1
Independence	Proportion of independent members	% of independent board members	Standardized value	0.2
Structure	Board size	Total number of Board members	Standardized value	0.15

summarizes key indicators used in the construction of the BC_index.

Having selected the relevant indicators for assessing board characteristics, the second step aims to calculate their normalized value. To do this, it was necessary to determine the minimum and maximum values for each indicator. To ensure a homogeneous comparison between indicators, we applied normalization. In the literature, two main standardization methods are used: statistical standardization and empirical standardization. Statistical normalization adjusts indicators to a common scale with a mean of zero and a standard deviation of one, thus avoiding distortions due to differences in mean between indicators. It is based on the following formula:

$${BC}_{i,t}={\displaystyle \frac{{BC}_{i,t}-\mu \left({BC}_{i,t}\right)}{\sigma \left({BC}_{i,t}\right)}},$$

(1)

where BC_i,t represents the standardized value of the board characteristics BC in period t, and μ (BC_i,t) and σ (BC_i,t) are the mean and standard deviation of this indicator, respectively. This method ensures that the indicator values fall within a normalized range. Empirical normalization, on the other hand, assumes that an index value of 1 (maximum) reflects a high level of board characteristics, while a value close to 0 (minimum) indicates weaker characteristics.

$$Normalized value={\displaystyle \frac{BC-Min\left(BC\right)}{Max\left(BC\right)-Min\left(BC\right)}},$$

(2)

where BC is the current value of the board characteristic, and Min (BC) and Max (BC) are, respectively, the minimum and maximum values observed for this indicator of board characteristic. This normalization makes it possible to compare indices with different units or scales. To calculate a composite board index, we use the following formula:

$$Board\text{\_}index={\displaystyle \frac{1}{n}}{\sum }_{i=1}^{n}NormalizedValues.$$

(3)

3.2.3. Control Variables

Two control variables are included to account for how a company’s size and profitability affect its ESG score. These are company size (SIZE), which is measured using the natural logarithm of all its assets, and return on assets (ROA), which is proxied by the logarithm of the difference between the assets’ market value and their book value (Buallay, 2019). Analyzing these factors, we can examine their impact on companies’ ESG performance.

Table 3. Description of variables and measurement.

Variable	Description	Measurement
Dependent variable
ESG	Environmental, Social, and Governance	The ESG score is a global score based on self-reported information in the environmental, social and corporate governance pillars.
Independent variables
BCD	Board culture diversity	Percentage of board members from different cultural backgrounds
BGD	Board gender diversity	Percentage of women on the board of directors
BS	Size of board of directors	Total number of board members
DUAL	CEO duality	Dummy variable that takes on the value 1 if the chairman of the board of directors of the company is simultaneously the CEO or 0 otherwise
IND	Board independence	Dummy variable that takes on the value 1 if the chairman of the board of directors of the company is simultaneously the CEO or 0 otherwise
BSS	Board specific skills	The percentage of board members with financial experience
BC_index	Index of board characteristics	See Section 3.2.2
Control variables
SIZE	Size of company	Natural logarithm of total assets
ROA	Return on assets	Natural logarithm of the ratio between the market value and the balance sheet value of assets

presents all variables’ definitions and measurements.

3.3. Empirical Method

The empirical methodology used in this study is based on the system GMM (SGMM) model, which effectively addresses endogeneity, a key concern in corporate finance that can bias econometric estimates. Developed by Blundell and Bond (1998), SGMM mitigates this issue by using internal instruments, providing more robust and reliable results compared to ordinary least squares (OLS) and fixed- or random-effects models, which are often affected by omitted variable bias and measurement errors (Teixeira & Queirós, 2016).

Moreover, biases related to missing variables and measurement inaccuracies are common in traditional estimation methods, further reinforcing the need for SGMM. This approach has been widely applied in finance and banking research, particularly in analyzing the determinants of bank performance (Arellano & Bover, 1995; Flannery & Hankins, 2013) and capital structure (Wintoki et al., 2012). By effectively minimizing endogeneity-related distortions, SGMM enhances the accuracy and consistency of empirical findings, making it a preferred method for panel data analysis in corporate finance.

In this study, the empirical strategy examines the relationship between board characteristics and corporate social responsibility. The econometric model to be tested is as follows:

$$\begin{array}{c}{ESG}_{i,t}={\beta }_0+{\beta }_1{ESG}_{i,t-1}+{\beta }_2{BS}_{i,t}+{\beta }_3{DUAL}_{i,t}+{\beta }_4{IND}_{i,t}+{\beta }_5{BGD}_{i,t}+{\beta }_6{BCD}_{i,t}+{\beta }_7{BSS}_{i,t}+{\beta }_8{SIZE}_{i,t} +\\ {\beta }_9{ROA}_{i,t} + {\epsilon }_{i,t}\end{array}$$

(4)

4. Empirical Result

4.1. Descriptive Statistics and Correlation Matrix

Table 4. Summary statistics.

Variable	Obs	Mean	Std. Dev.	Min	Max
ESG	13.76	58.265	18.265	0.626	95.766
BS	13.76	9.934	3.684	3.000	30.000
DUAL	13.76	0.139	0.346	0.000	1.000
IND	13.76	60.599	21.700	3.333	100.000
BGD	12.86	30.982	11.919	4.167	100.000
BCD	12.86	31.811	24.206	4.348	100.000
BSS	12.86	39.381	20.020	3.571	90.000
SIZE	13.76	20.084	5.494	8.006	27.132
ROA	13.76	4.544	14.125	−346.069	236.782

presents descriptive statistics for several variables from a sample of 1376 European companies, highlighting their CSR performance, board characteristics, and specific company attributes. Statistics indicate that the average ESG score for European companies is 58.265, with a significant dispersion (standard deviation of 18.265). Scores range from 0.626 to 95.766, indicating that some companies perform well in ESG terms, while others are very weak. However, it remains below the requirements of countries with the highest quotas, such as Finland, France, and Germany. However, in countries such as Poland, Sweden, Malta, and Cyprus, the overall ESG score does not reach 50.

For board characteristics, summary statistics indicate that board size has an average of almost 10 members, a standard deviation of 3.684, and variability between minimum and maximum numbers ranging from 3 to 30 members. This highlights significant disparities in the composition of European company boards. The CEO duality function is low, with an average of 0.139, indicating that only 13.9% of companies adopt this practice.

The average value of independent Board members is 60.599%, with a standard deviation of 21.700, and minimum and maximum values ranging from 3.333% to 100%, reflecting the wide disparity in board independence. Concerning the percentage of women on the board of directors, the average level is 30.982%, with a standard deviation of 11.919. Minimum and maximum values range from 4.167% to 100%, indicating significant differences in female representation between the companies analyzed. Cultural diversity is 31.811% on average, with a standard deviation of 24.206. This implies that, on average, around a third of board members come from culturally diverse backgrounds. Nonetheless, the high standard deviation testifies to great diversity among companies. Values for cultural diversity vary widely, from a low of 4.348% to a high of 100%. The financial expertise of board members is 39.381% on average, with a standard deviation of 20.020, and values ranging from 3.571% to 90%, suggesting that some companies place more importance on specialized skills than others.

Concerning firm specifics, we note that there is a wide range of sizes among the companies in our sample, with a mean of 20.084 and a standard deviation of 5.494. Levels fluctuate between 8.006 and 27.132, highlighting significant disparities in the dimensions of the companies studied. Finally, the variability of ROA (return on assets) is high, with an average of 4.544% and a standard deviation of 14.125, with values ranging from −346.069% to 236.782%. This reflects significant differences in the financial results of European companies.

Table 5. Pearson correlation coefficient results.

	BS	DUAL	IND	DGD	BCD	BSS	SIZE	ROA
BS	1.0000
DUAL	0.1531 *	1.0000
	0.0000
IND	−0.2944 *	−0.1640 *	1.0000
	0.0000	0.0000
BGD	−0.0264 *	0.0584 *	0.0968 *	1.0000
	0.0175	0.0000	0.0000
BCD	−0.2514 *	−0.0093	0.2262 *	−0.0921 *	1.0000
	0.0000	0.5224	0.0000	0.0000
BSS	−0.2448 *	−0.0263 *	−0.0063	−0.1267 *	0.1280 *	1.0000
	0.0000	0.0176	0.5776	0.0000	0.0000
SIZE	0.5216 *	0.1692 *	0.0236 *	0.0295 *	0.0247	−0.1089 *	1.0000
	0.0000	0.0000	0.0329	0.0079	0.0900	0.0000
ROA	−0.0753 *	0.0193 *	−0.0005	0.0065	0.0135	0.0640 *	0.0612 *	1.0000
	0.0000	0.0298	0.9662	0.5598	0.3555	0.0000	0.0000

*, indicates the level of significance at 5%.

presents the analysis of multicollinearity between independent variables, using Pearson correlation (PC), which measures the strength and direction of the linear relationship between two variables. PC is widely used for its simplicity and ease of interpretation. According to Table 5, all correlations between the independent variables are very low, suggesting that there is no problem of multicollinearity in the data. We conclude that the independent variables are not strongly correlated with each other, validating the absence of multicollinearity in this study.

4.2. Discussion of the Empirical Findings

In this sub-section, we present and discuss the empirical results for the whole sample. More specifically, we will interpret the results from the empirical strategy, which evaluates the impact of board characteristics on ESG scores. The empirical findings of the SGMM technique are given in

Table 6. Empirical results of the effect of board characteristics on CSR.

ESG	Coef.	Std. Err.	z	p > z
ESG (−1)	0.275	0.019	14.720	0.000 ***
BS	1.554	0.115	13.470	0.000 ***
DUAL	−2.207	0.854	−2.580	0.010 ***
IND	0.214	0.018	11.910	0.000 ***
BGD	0.390	0.027	14.540	0.000 ***
BCD	0.060	0.020	3.070	0.002 ***
BSS	0.077	0.020	3.900	0.000 ***
SIZE	0.028	0.018	1.570	0.115
ROA	0.016	0.021	0.750	0.452
Cons	0.060	0.708	0.080	0.933
AR(1)		−2.099
Prob		0.058
AR(2)		−0.653
Prob		0.513
Sargan test		34.862
Prob		0.980
Obs		13,760

***, indicates the level of significance at 1%.

.

Results in Table 6 indicate that the Sargan diagnostic and serial correlation tests do not reject the null hypothesis of over-identification and lack of auto-correlation. Arellano and Bond and Sargan p-values tests exceed 5%. The Sargan test exposes a statistic of 34.862 with a probability of 0.980, indicating that the instruments used are exogenous and valid and the model is over-identified. The AR (1) test shows a p-value of 0.058, indicating a slight first-order autocorrelation of the residuals, although this is not significant in the SGMM model and does not affect the correct specification of the model. The AR (2) test gives a statistic of −0.653 with a probability of 0.513, suggesting the absence of second-order serial autocorrelation in first-differenced errors, reinforcing the validity of lagged instruments.

From the findings in Table 6, we note a significant and positive lagged ESG coefficient of 0.275. This implies that the previous period’s CSR performance has a significant and positive impact on the current year’s CSR performance. Indeed, a one-unit increase in ESG compared to the previous period is associated with a 0.275-unit increase in the current ESG. Consequently, an improvement in ESG scores from one year to the next plays a positive role in the ongoing improvement of CSR performance. This implies that sustainable actions and methods implemented during one period have a lasting effect on future ESG.

Furthermore, the positive coefficient for board size suggests that a one-unit increase in BS is associated with a 1.554 unit increase in CSR performance. This indicates that increasing board size has a positive effect on ESG performance. In other words, a larger board can offer a greater diversity of perspectives and expertise, encouraging more balanced decision-making and better management of environmental, social, and governance aspects. Furthermore, a broader board composition promotes better stakeholder representation, which can strengthen the legitimacy of ESG commitments and enhance the company’s reputation (Harjoto & Jo, 2011). This result is in line with studies by Adib and Zhang (2019), Beji et al. (2020), Dang et al. (2021), and Yahaya and Apochi (2021). Based on this result, the first hypothesis (H1) is accepted.

The independence of board members shows a positive and significant correlation with ESG performance, with a coefficient of 0.214. A one-unit increase in the level of independence of board members leads to a 0.214 unit increase in CSR performance. Boards with more independent members tend to have higher ESG performance. Furthermore, their critical role in governance oversight and transparency enhances the credibility of the company’s ESG commitments, reducing reputational risks and increasing investor confidence (Rao & Tilt, 2016b). This result is similar to the work of Cao (2022) and D. T. Nguyen et al. (2021). Based on this finding, we can accept the second hypothesis (H2).

The results also show that CSR performance is strongly influenced by women’s participation on the board of directors. Specifically, a one-unit increase in the presence of women on the board is associated with a 0.060-unit increase in CSR performance. This underlines the fact that gender diversity on the board can significantly improve governance and CSR practices, providing diverse perspectives and enhancing the quality of decision-making. The presence of women on the board also fosters greater sensitivity to social and environmental issues, leading to more responsible and inclusive strategies (Amorelli & García-Sánchez, 2020). This result converges with studies by Al Fadli et al. (2019), Issa and Fang (2019). Indeed, based on this result, we accept the third hypothesis (H3).

The relationship between companies’ CSR performance measured by the ESG score and CEO duality is indicated by a coefficient of −2.207. This suggests that the DUAL variable has a significant negative effect on ESG performance. In other words, CEO duality appears to significantly reduce CSR performance, indicating a negative impact on environmental, social, and governance standards. This result can be explained by the fact that a CEO who simultaneously serves as the board chair concentrates too much power, limiting the board’s independence and effectiveness in overseeing ESG initiatives (Amorelli & García-Sánchez, 2020). Similar research has been conducted by Muange and Kiptoo (2020), Beji et al. (2020), and Afzalur et al. (2020). Hence, we accept the fourth hypothesis (H4) is confirmed.

As for cultural diversity, the coefficient for this variable is 0.060, revealing a significant positive effect on CSR performance. This coefficient suggests that cultural diversity, although its influence is relatively weak, positively and significantly contributes to the improvement of ESG performance. Moreover, greater cultural diversity can enhance sensitivity to global social and environmental issues, improving ESG strategy and the company’s reputation in international markets (Upadhyay & Zeng, 2014). This finding corroborates the studies conducted by Martínez-Ferrero et al. (2020), Frijns et al. (2016) and Aliani et al. (2024). Based on this result, the fifth hypothesis (H5) is accepted.

The positive and significant impact of financial expertise on the boards of European companies is confirmed by a positive coefficient of 0.077. This implies that higher levels of expertise in these areas are associated with a slight but significant improvement in CSR performance. In other words, board members’ expertise in finance has a beneficial effect on governance practices and CSR performance. Furthermore, boards with advanced financial competencies are more likely to adopt rigorous ESG disclosure policies, enhancing transparency and reducing information asymmetry between the company and its stakeholders (Jizi, 2017). This result is consistent with previous work by Karabašević et al. (2016), Naheed et al. (2021), and Li et al. (2022). Based on this finding, the sixth hypothesis (H6) is accepted.

Concerning firm specifics, the company size has a coefficient of 0.028, indicating a positive and not significant impact on CSR performance. Similarly, ROA has a positive but insignificant impact on CSR performance, with a coefficient of 0.016 and a p-value of 0.452.

5. Robustness Check: The Use of an Index of Board Characteristics (BC_Index)

As a robustness check, following Ahamed and Mallick (2019) and Sarma (2008), we conducted a robustness test. Board characteristics are measured using a board characteristics index. The empirical results are presented in

Table 7. The impact of the board characteristics index on ESG.

ESG	Coef.	Std. Err.	z	p > z
ESG (−1)	0.176	0.009	19.080	0.000 ***
BC_index	1.630	0.091	17.920	0.000 ***
SIZE	0.226	0.036	6.200	0.000 ***
ROA	−0.001	0.007	−0.130	0.895
Cons	−0.705	0.749	−0.940	0.347
AR(1)		0.207
Prob		0.745
AR(2)		0.497
Prob		0.517
Sargan test		25.667
Prob		0.924
Obs		13,760

***, indicates the level of significance at 1%.

. Findings in this table show that the p-values of the Sargan test and the serial correlation (AR2) test were greater than 5%. Consequently, we did not reject the null hypothesis of correct specification.

The findings in Table 7 indicate that the results are robust using board characteristics indicators separately or an index of board characteristics. We found that the coefficient of the BC_index is positively and significantly associated with CSR performance. This implies that overall board characteristics significantly improve the level of CSR performance for European firms. This positive relationship indicates that well-structured boards, incorporating diversity, independence, and financial expertise, promote better governance and more responsible CSR practices. This result aligns with Frias-Aceituno et al. (2013), who show that board composition and expertise positively influence transparency in CSR reporting. Additionally, Rao and Tilt (2016a) confirm that diverse boards are associated with a significant improvement in corporate CSR performance.

For the effect of firm specifics, results indicate no significant changes compared to the findings displayed in Table 6. We found that firm size and firm profitability do not exert any significant effect on CSR performance. Board characteristics are the main drivers for better CSR performance.

6. Conclusions and Policy Recommendations

The purpose of this paper was to check whether board characteristics promote the CSR performance of European firms. To do this, we used a sample of 1376 companies belonging to 23 European countries over the period 2014–2023 and performed the SGMM as an empirical approach. Empirical findings show that board characteristic plays a crucial role in improving companies’ environmental, social, and governance commitments. Firstly, board size has a direct influence on CSR performance. A moderately sized board promotes better coordination and more effective decision-making on CSR issues, while an overly large board can slow down the adoption of sustainable strategies. Secondly, gender diversity on the board is positively correlated with better ESG risk management and greater sensitivity to social and environmental concerns. Similarly, cultural diversity enriches decision-making by bringing different perspectives to CSR strategies. Additionally, the independence of board members promotes better oversight of CSR commitments and limits conflicts of interest, thereby enhancing corporate transparency and credibility. Finally, the financial expertise of board members is a major asset in effectively integrating CSR criteria into strategic decisions, ensuring a balance between economic performance and social responsibility. Nevertheless, the duality of the CEO hinders the independence of the board and reduces the effectiveness of ESG policies. We also found that firm specifics like firm size and firm profitability do not exert any significant effect on CSR performance.

Board characteristics that enhance CSR performance may directly influence a firm’s ability to comply with CSRD’s enhanced disclosure requirements and align with the EU Taxonomy’s criteria for environmentally sustainable activities. By embedding our analysis within these regulatory contexts, we can better demonstrate how corporate governance contributes not only to the advancement of SDGs but also to firms’ strategic positioning under evolving EU sustainability legislation.

These results could have substantial policy recommendations for policymakers and managers. First, these findings underline the importance of strong, balanced corporate governance in improving CSR performance. European companies must therefore favor a diverse and independent board composition to ensure better integration of environmental, social and governance issues into their long-term strategy. For example, boards should establish dedicated ESG committees chaired by directors with proven sustainability expertise to ensure oversight is both specialized and accountable. Firms could also adopt formal board evaluation mechanisms that assess directors’ engagement with ESG issues and tie board-level incentives to long-term sustainability metrics, in line with the EU’s evolving regulatory expectations (e.g., CSRD). Additionally, companies should integrate cross-cultural ESG training for directors to enhance the quality of strategic discussions in culturally diverse boards. These measures go beyond structural changes and focus on capability-building and accountability, offering a more nuanced and implementable approach to strengthening CSR governance. Second, financial incentives should be introduced to encourage companies to enhance their CSR performance. Governments could implement tax benefits, green bonds, or subsidies to support businesses investing in sustainable initiatives. Empirical evidence suggests that economic incentives accelerate the adoption of responsible business practices by reducing initial costs and promoting long-term sustainability strategies. Third, it is crucial to strengthen CSR-related training and awareness within companies. Implementing training programs for executives and employees can improve their ability to integrate sustainability into strategic decision-making.

Although the results of this paper are interesting, this study has some limitations. First, it highlights a relationship between board characteristics and CSR performance, without proving direct causality. It was also limited to European firms and does not take into the variability of CSR ratings, and the influence of other factors such as corporate culture. Furthermore, the quantitative approach does not allow for in-depth analysis of internal board dynamics, suggesting the need for complementary qualitative studies.

As future research, cross-national comparative research could investigate how differences in legal systems, ESG regulations, or governance models across European countries shape the board–CSR relationship. Longitudinal or case-based studies could offer deeper insight into how board dynamics and CSR priorities evolve over time, especially during periods of crisis or leadership change. Additionally, future research could explore how informal board networks, social capital, and decision-making processes influence the adoption and effectiveness of CSR initiatives areas that remain underexplored in the existing literature.