The Effect of Female Executive Representation on ESG Investment Efficiency

Abstract

This study examines the impact of female executive representation on ESG investment efficiency within South Korea’s male-dominant corporate culture. It reveals that firms with higher female executive presence demonstrate enhanced ESG efficiency, particularly in growth stages where strategic management and resource allocation are crucial. Additionally, the research highlights that the effect varies across different corporate life cycle stages, underscoring the dynamic interplay between gender diversity and corporate governance practices. The findings advocate for more inclusive leadership as a catalyst for improved corporate sustainability and ethical standards, suggesting that gender diversity is not only a marker of social progress but also a strategic asset in the global push for sustainable development.

1. Introduction

Environmental, social, and governance (ESG) factors have become increasingly prominent in shaping corporate strategies and investment decisions. As ESG considerations gain traction among global investors, particularly major asset management firms like BlackRock, Vanguard, and State Street Global Advisors, corporate practices around diversity, notably gender diversity in senior management, have come under heightened scrutiny. These leading investors have emphasized board diversity, specifically targeted female representation and actively exercising voting rights against firms failing to demonstrate sufficient diversity [1].

The focus on gender diversity is not merely symbolic; empirical studies demonstrate substantial economic implications. Hilb (2016) underscores that greater gender diversity in corporate governance correlates with improved financial performance, enhanced corporate value, and better governance structures [2]. Similarly, McKinsey (2021) found that teams led by female managers typically display greater employee satisfaction and balanced decision making, suggesting that gender diversity can significantly enhance corporate competitiveness [3].

Despite these global trends, South Korea remains notably deficient in gender diversity within senior corporate roles, ranking lowest among OECD countries regarding female representation on executive committees and maintaining one of the highest gender wage gaps [4]. This environment, characterized by a deeply entrenched male-dominant corporate culture and persistent structural barriers, provides a unique context for examining the potential impact of female executives on ESG investment practices. For instance, according to a recent study by Kim et al. (2017), female executives in Korean firms significantly reduce discretionary accruals, demonstrating their ability to curb unethical accounting practices even in highly male-dominant environments [5]. This finding emphasizes the importance of internal gender dynamics and the potential influence of female executives in shaping corporate behavior toward greater transparency and accountability.

Building upon these insights, this paper investigates whether increased female executive representation affects ESG investment efficiency, defined as the optimal allocation of ESG resources—reducing excessive or insufficient ESG investments. ESG investment efficiency moves beyond simply increasing ESG expenditures and instead emphasizes the strategic and balanced distribution of ESG investments based on corporate needs and capabilities. Prior research suggests that female executives typically possess characteristics such as risk aversion, ethical sensitivity, and stronger stakeholder orientation, which may enable them to make more balanced investment decisions that optimize ESG spending [5].

This study proposes two primary hypotheses. First, it posits that firms with greater female executive representation will demonstrate improved ESG investment efficiency by reducing excessive ESG investments in firms previously overinvesting in ESG initiatives and increasing ESG investments in firms previously underinvesting. Second, it hypothesizes that the impact of female executive representation on ESG investment efficiency significantly varies according to the firm’s corporate life cycle stage, with potentially stronger effects observed during stages such as growth or maturity, when strategic alignment and resource allocation are critical.

The corporate life cycle context is critical because strategic priorities and resource availability vary substantially across different stages, influencing ESG investment decisions [6,7]. For example, growth-stage firms often require a strong ethical reputation and stable financial performance to attract stakeholders, whereas mature-stage firms may have different strategic priorities related to maintaining reputation and profitability.

To empirically test the hypotheses, this study analyzes a comprehensive panel dataset of South Korean listed firms over the 2015–2021 period, employing rigorous econometric techniques to ensure the reliability of the results. The findings consistently show that a greater presence of female executives is associated with improved ESG investment efficiency. Moreover, the effect of female executive representation on ESG investment efficiency varies significantly across different stages of the corporate life cycle, supporting the hypothesized contextual differences.

Robustness checks further strengthen the study’s findings. Specifically, when measuring female executive representation as the proportion of female executives relative to the total number of board members, the results remain consistent with the primary analysis, reinforcing the validity of the findings. Moreover, additional analyses dividing ESG into its sub-components—Environmental (E), Social (S), and Governance (G)—reveal that the positive effect of female executives on ESG investment efficiency is particularly pronounced within the Environmental and Social domains. These results are consistent with prior literature suggesting that female executives tend to exhibit greater ethical sensitivity and a stronger orientation toward stakeholder interests.

This study contributes significantly to the existing literature by clarifying the nuanced role of gender diversity in corporate governance, particularly highlighting its critical impact on ESG investment efficiency. Additionally, it offers practical and policy-oriented insights, underscoring the importance of gender diversity in senior management, especially in countries like South Korea, where cultural and structural barriers continue to limit female representation at the executive level. By illustrating the potential benefits of female executive representation in enhancing corporate sustainability through improved ESG practices, this research provides meaningful implications for policymakers, investors, and corporate leaders striving to foster more inclusive and strategically effective governance structures.

The organization of this study is structured as follows: Section 2 discusses prior research relevant to this study and formulates the hypotheses. Section 3 outlines the research model and describes the process of selecting the sample. Section 4 delivers the findings from the empirical analysis. Section 5 concludes by summarizing the key results of the research.

2. Prior Research and Hypotheses Development

2.1. Prior Research on Female Executive Representation

Research on female executive representation has significantly expanded recently, reflecting global trends and increased interest from both academia and industry. Numerous empirical studies highlight the critical role that gender diversity, particularly the presence of female executives, plays in corporate governance and financial decision-making processes. Studies consistently indicate that female executives often exhibit more conservative, ethical, and risk-averse characteristics compared to their male counterparts. For instance, Francis et al. (2015) demonstrate that U.S. firms transitioning to female CFOs tend to adopt more conservative accounting practices, primarily due to female executives’ heightened sensitivity towards litigation risks and reputational concerns [8]. Similarly, a study by Gul et al. (2011) underscores that boards with higher female representation experience enhanced earnings quality and improved transparency in financial disclosures, directly benefiting stakeholders through reduced informational asymmetry [9].

Female executives’ role in corporate ethical behavior and transparency has also gained substantial empirical support. Krishnan and Parsons (2008), analyzing Fortune 500 companies, found that increased gender diversity in senior management correlates positively with the quality of financial reporting [10]. This effect is largely attributed to the ethical vigilance that female executives bring to corporate governance, reducing aggressive and opportunistic financial practices. Additionally, Srinidhi et al. (2011) provide further evidence by documenting reduced earnings management in firms with gender-diverse boards, highlighting that female directors significantly enhance oversight functions related to accounting transparency [11].

Empirical evidence from non-U.S. contexts further reinforces these findings. In their analysis of Chinese firms, Cumming et al. (2015) found that female board members significantly reduce occurrences of securities fraud, attributing this effect to the ethical sensitivity and proactive governance approaches adopted by female directors [12]. Similar outcomes are evident in South Korean studies, despite the country’s notably male-dominant corporate culture. Kim et al. (2017) [5] illustrate that even in such environments, female executives effectively curb discretionary accruals, showcasing their vital role in mitigating unethical accounting practices and improving financial transparency.

Beyond ethical behavior and transparency, studies have also explored the broader impacts of female executive representation on corporate performance and strategic decision making. According to McKinsey (2021), teams led by female executives often demonstrate higher levels of employee satisfaction, balanced decision making, and, subsequently, improved corporate competitiveness [3]. Moreover, Hillman and Dalziel (2003) argue that increased board diversity, inclusive of gender diversity, significantly reduces external dependencies and corporate uncertainties, thereby positively influencing corporate reputation and value [13].

Kim and Song (2015) further reinforce the argument that firms with gender-diverse leadership experience better organizational culture, higher employee satisfaction, and greater employee engagement, directly translating to enhanced business performance [14]. Supporting this view, Campbell and Minguez-Vera (2007) demonstrate a positive relationship between board gender diversity and corporate financial performance, specifically measured through Tobin’s Q, in Spanish listed companies [15].

Recent studies further extend this understanding across varied institutional contexts. For example, board gender diversity has been shown to significantly moderate ESG disclosure effectiveness, leading to improved financial performance, especially when accompanied by sustainability committees [16]. In Southeast Asian contexts, female executives have been found to improve liquidity management and reduce excessive cash holdings, indicating their governance-enhancing role [17]. In small- and medium-sized firms, gender-diverse top management teams correlate with better financial outcomes, particularly in emerging markets [18]. These findings add contemporary, international validation to earlier results and reinforce the relevance of gender diversity in senior roles.

Despite the positive findings, cultural and structural barriers remain critical impediments to female representation in corporate leadership roles, particularly in South Korea. According to OECD (2023), South Korea ranks lowest among OECD countries regarding female executive representation, with persistent gender wage gaps further reflecting systemic inequalities [4]. Such an environment presents unique challenges but also valuable research opportunities for understanding the contextual implications of gender diversity.

2.2. Prior Research on ESG Investment Efficiency

Recent research highlights ESG (Environmental, Social, Governance) investment efficiency as a critical component of sustainable corporate governance. ESG investment efficiency refers to the optimal allocation of resources to ESG activities, balancing between excessive and insufficient investments to enhance corporate sustainability without compromising shareholder value. Prior studies consistently underline the complexity of evaluating ESG performance and the critical role played by corporate governance in achieving ESG investment efficiency.

A particularly relevant foundation for understanding ESG investment efficiency can be derived from the signaling theory perspective, as advanced in the literature on corporate accountability reporting. Although the terminology in earlier studies often centered on CSR (Corporate Social Responsibility), the underlying logic is directly applicable to ESG. According to Cho et al. (2015), accountability reporting operates as a strategic mechanism to influence stakeholder perception and establish organizational legitimacy [19]. They state that “corporate accountability reporting serves as a strategic tool for managing stakeholder perceptions and legitimizing corporate actions”. While their analysis is grounded in CSR disclosures, the same principle applies to ESG investment, particularly when such actions exceed regulatory mandates and are voluntarily adopted by firms.

By extending this logic, ESG investment can be interpreted as a signaling device through which firms demonstrate a commitment to ethical practices, long-term sustainability, and responsible governance. Firms that allocate resources efficiently to ESG initiatives—neither underinvesting nor engaging in symbolic overinvestment—can differentiate themselves in capital markets by conveying credibility and integrity. As noted in the accountability literature, this signaling effect contributes to reducing information asymmetry and enhancing trust among investors and other stakeholders [19]. Moreover, efficient ESG investment may signal managerial competence and sound internal governance. Firms with poorly governed ESG policies may overinvest to appease stakeholder pressure without meaningful outcomes, leading to agency concerns and resource misallocation. In contrast, companies that demonstrate alignment between ESG investment and firm-specific strategic goals may signal to the market a high level of internal coordination and accountability, thereby enhancing firm value.

Biddle and Hilary (2006) established that high-quality financial reporting reduces information asymmetry and enhances investment efficiency [20]. Extending this finding, Biddle et al. (2009) found that higher accounting quality increases investment efficiency by mitigating managerial tendencies to over- or under-invest [21]. Similarly, McNichols and Stubben (2008) confirmed that poor accounting practices, indicative of lower accounting quality, lead to significant over-investment issues, thereby emphasizing the role of transparent and reliable corporate reporting in ensuring ESG investment efficiency [22].

The recent literature also reinforces the governance–ESG efficiency linkage. For instance, gender-diverse boards have been associated with better utilization of intellectual capital and improved ESG reporting quality, particularly in SMEs and knowledge-driven industries [23,24]. Further, recent studies show that board diversity mitigates ESG-related controversies by enhancing oversight effectiveness [25], while also strengthening the firm’s ethical signaling, particularly under high reputational pressure [26]. In ASEAN countries, board diversity and sustainability committees jointly reduce ESG-related risk and enhance credibility with stakeholders [27].

The link between effective governance and ESG investment efficiency has also been strongly supported. According to Park and Kwon (2012), firms with active foreign investors exhibited enhanced investment efficiency due to improved monitoring functions [28]. Additionally, Yim et al. (2014) highlighted that firms with a high proportion of independent directors experience reduced over-investment, underscoring the essential role of corporate governance in resource allocation decisions [29]. Research by Kim (2025) specifically investigates the role of foreign investors in ESG investment efficiency in South Korea, suggesting that foreign investors significantly reduce overinvestment in ESG, particularly in transparent corporate environments [30]. This aligns with global trends, as highlighted by Chava (2014), who argues that improved ESG performance directly reduces the cost of capital, thereby enhancing firm value [31].

Other scholars have expressed caution regarding ESG investments. Bebchuk and Tallarita (2020) argue that ESG investments, if not effectively governed, can exacerbate agency problems due to unclear accountability standards, leading to inefficient resource allocation [32]. These concerns emphasize the importance of robust governance mechanisms to oversee ESG activities effectively.

The Korean corporate landscape provides additional insights. According to Kook and Kang (2011), ESG activities positively affect firm value primarily when corporate governance is robust, highlighting governance as a crucial mediator in realizing the full benefits of ESG investments [33]. Conversely, Choi and Jeong (2022) identified cases where poorly governed ESG investments led to increased managerial agency problems, undermining firm value and sustainability objectives [34].

Overall, the existing literature underscores the nuanced nature of ESG investment efficiency, highlighting the essential interplay between governance quality, transparency, and stakeholder engagement. This study further explores these dynamics, providing empirical evidence from the unique South Korean context and underscoring critical considerations for enhancing ESG investment efficiency.

2.3. Hypotheses Development

The existing literature suggests a meaningful link between corporate governance structures and ESG investment efficiency. Among the various governance attributes, the presence of female executives has been highlighted as a crucial determinant of ethical and balanced managerial behavior.

Female executives are often more risk-averse and stakeholder-oriented, characteristics that align well with the requirements of ESG investment decisions [35]. According to Risk Preference Theory, female leaders are less likely to engage in high-risk or symbolic ESG projects, thereby promoting investment discipline [36].

Top Echelon Theory further provides a conceptual basis for linking executive characteristics with firm outcomes. This theory posits that the strategic choices of an organization reflect the cognitive base and values of its top managers [37]. Female executives are empirically associated with ethical orientation and long-term focus, attributes that are especially important for embedding ESG considerations into firm-level decision-making processes [38].

Moreover, Stakeholder Theory offers another relevant perspective. This theory emphasizes that firms should consider the interests of various stakeholder groups beyond shareholders. Female executives have been shown to exhibit stronger concern for ethical responsibility, stakeholder legitimacy, and social impact, thereby enhancing ESG investment efficiency [39].

Female executives are often characterized by higher levels of ethical awareness, long-term orientation, and stakeholder sensitivity, which are conducive to improving ESG-related decision-making processes.

Kim (2025) provides empirical evidence from the South Korean market, showing that firms with strong monitoring from foreign investors exhibit improved ESG investment efficiency [30]. This improvement is primarily attributed to the mitigation of overinvestment through enhanced internal governance. By extension, a similar governance-enhancing effect may be expected from female executives, who tend to adopt cautious and responsible approaches to resource allocation. Their presence may act as an internal governance mechanism that functions similarly to the oversight provided by external investors.

Further theoretical support can be drawn from signaling theory, which emphasizes the strategic use of information to shape stakeholder perceptions. According to Lys et al. (2015), voluntary accountability reporting can function as a signaling tool, reducing information asymmetry and enhancing firm legitimacy [40]. When firms invest in ESG initiatives in a disciplined and strategic manner, these investments may signal managerial competence and ethical commitment to the market. Female executives, known for their transparent and long-term-oriented decision-making styles, are more likely to strengthen the credibility of ESG signals, increasing the market’s trust in such initiatives [35,38].

Recent works emphasize that gender diversity on corporate boards contributes differently depending on the firm’s lifecycle. In growth-stage firms, the effect is particularly pronounced. For example, firms with diverse executive teams exhibit more disciplined capital use and better stakeholder engagement [41]. Additionally, cross-country evidence suggests that gender-diverse boards enhance firm resilience to ESG controversies, particularly during early-stage growth [42].

In addition, Park and Kwon (2012) argue that monitoring mechanisms such as active foreign ownership improves ESG investment efficiency by aligning managerial actions with firm value [28]. In similar fashion, female executives may contribute to ESG investment efficiency by moderating managerial discretion and ensuring that ESG spending is strategically aligned with organizational goals. Given their role in enhancing financial reporting quality and internal controls, female executives are positioned to reduce both under- and over-investment in ESG activities.

Taken together, these insights suggest that female executive representation may enhance a firm’s capacity to allocate ESG resources efficiently, avoiding both symbolic ESG spending and insufficient engagement with sustainability objectives. Therefore, the first hypothesis of this study is developed as follows:

Hypothesis 1.

Firms with a greater number of female executives exhibit higher ESG investment efficiency.

Corporate behavior and decision-making processes are strongly influenced by the stage of the firm’s development. The corporate life cycle framework posits that firms evolve through various stages—typically birth, growth, maturity, revival, and decline—each characterized by distinct operational priorities, financial conditions, and strategic goals. During the growth stage, firms often seek to build legitimacy and stakeholder trust, investing in sustainable practices and transparency to support long-term development. In contrast, mature-stage firms tend to have more stable operations and accumulated resources, which can support ESG initiatives, but may also experience reduced motivation for proactive investment if current performance is already optimized [43,44].

Firms in the growth stage are under greater pressure to establish credibility in the market. According to Lins et al. (2017), stakeholder trust, which can be built through social and environmental engagement, is critical for performance during uncertain periods [45]. Young firms may therefore engage in ESG initiatives to bolster their reputations and reduce perceived risk. Moreover, growth-stage firms face higher financing constraints and must signal long-term value to attract external capital. From a signaling perspective, disciplined ESG investment during the growth stage may be perceived as an indicator of sound governance and forward-looking management [40].

In contrast, mature-stage firms may experience less external pressure to engage in ESG signaling due to established reputations and internal funding capabilities. While they may have the capacity to invest in ESG, the strategic incentive to do so efficiently could be weaker. Furthermore, as noted by Hribar and Yehuda (2007), the cost of capital tends to be lowest for mature firms, reducing the financial necessity to rely on ESG investment as a signaling tool [44].

Consequently, the effectiveness of female executive representation in enhancing ESG investment efficiency may depend on the firm’s life cycle stage. In growth-stage firms, where stakeholder trust and signaling are particularly important, the governance-enhancing role of female executives may be more strongly associated with ESG efficiency. In growth-stage firms, where stakeholder trust and signaling are particularly important, the governance-enhancing role of female executives may be more strongly associated with ESG efficiency [41,42]. In contrast, in mature-stage firms, the relationship may be weaker or more ambiguous due to already-established governance systems and reduced strategic pressure.

Therefore, the second hypothesis is presented as follows:

Hypothesis 2.

The positive relationship between female executive representation and ESG investment efficiency is more pronounced in firms in the growth stage compared to those in the mature stage.

3. Research Design

3.1. Research Model and Variable Measurements

To test the research hypotheses, this study constructs the following regression model [28,30].

FESG = β0 + β1 FEMALE i,t + β2 ABESGi,t + β3 FEMALE i,t × ABESGi,t +	(1)
β4 SIZEi,t + β5 MTBi,t + β6 ZSCOREi,t + β7 OCi,t + β8 TANi,t + β9 STDCFOi,t + β10 STDSALESi,t + β11 DIVi,t + β12 LEVi,t + β13 MEAN_Ki,t + β14 LOSSi,t + YR_Dummy + Ind_Dummy + εi,t

Equation (1) estimates the dependent variable FESG, which denotes the observed level of ESG investment in the subsequent period, and serves as a proxy for the firm’s realized ESG resource allocation decisions. This future-oriented ESG performance is influenced by a combination of current-period financial and non-financial characteristics, the firm’s managerial structure, its industry context, and asset utilization efficiency. These elements collectively shape the firm’s strategic capacity to allocate ESG resources effectively.

The key explanatory variable, FEMALE, represents the number of female executives in senior management. The FEMALE variable is transformed using the natural log function, ln (1 + x), where x denotes the count of female executives. This approach is applied to reduce skewness and to better approximate the normality assumption of regression residuals. ABESG is introduced as a moderating variable to capture the degree of abnormal ESG investment behavior, ranging from 0 (indicating a tendency to underinvest) to 1 (indicating a tendency to overinvest in ESG). This scale reflects the deviation of a firm’s ESG spending from what would be considered efficient, based on its characteristics.

To operationalize abnormal ESG investment (ABESG), this study adopts the residual-based approach introduced by Lys et al. (2015), where abnormal ESG is defined as the deviation in ESG expenditure that cannot be explained by firm fundamentals or financial indicators [40]. Specifically, the model regresses ESG investment on a comprehensive set of firm- and industry-level variables, including asset turnover, profit margins, cash holdings, operational cash flows, financial leverage, market-to-book ratios, advertising and R&D intensity, corporate governance quality, and firm size. The residuals from this estimation represent the unexplained, or abnormal, portion of ESG investment. This residual is used as the proxy for ABESG.

Standardized scores for both dimensions are averaged to yield a continuous ABESG score between 0 and 1, capturing relative tendencies toward over-or under-investment. A score close to 1 indicates a high likelihood of overinvestment, while a score near 0 suggests underinvestment. This method is consistent with the investment efficiency framework of Biddle et al. (2009), which emphasizes the alignment of investment decisions with positive net present value (NPV) opportunities in the absence of market frictions [21].

This study’s empirical design aligns with established approaches in the investment efficiency literature. Specifically, the observed ESG investment level (FESG) is treated as the dependent variable in the primary model, consistent with the methodology of Biddle et al. (2009), who use realized investment to assess the alignment between firm fundamentals and investment behavior. In addition, the residual-based abnormal ESG score (ABESG), constructed following Lys et al. (2015), captures deviations from expected ESG levels and serves as a moderator in the regression framework [21,40]. This dual-structured model enables the simultaneous analysis of actual ESG investment outcomes and the extent to which firms deviate from expected investment behavior based on fundamentals.

In this model, the coefficient β₁ estimates the relationship between the number of female executives and future ESG investment (FESG) under the condition that ABESG equals zero. This corresponds to firms that display a strong tendency toward underinvestment. The hypothesis posits that, in such firms, a greater presence of female executives will be associated with an increase in ESG investment, hence expecting β₁ to be positive. Meanwhile, β₃ captures how this relationship changes as ABESG increases, that is, as the firm shifts toward excessive ESG investment. Therefore, the combined term β₁ + β₃ indicates how female executive presence affects future ESG investment in firms that are already inclined to overinvest (ABESG = 1). In line with the hypothesis, this sum is expected to be negative, suggesting that in such firms, a higher number of female executives would contribute to reducing ESG spending to more efficient levels. To summarize, if both conditions—β₁ > 0 and β₁ + β₃ < 0—hold and are statistically significant at both extremes of ABESG, this implies that female executive presence contributes positively to ESG investment in firms prone to underinvestment, and negatively in firms prone to overinvestment. This dual effect highlights the role of female executives in adjusting ESG expenditures toward more optimal levels, consistent with the study’s definition of ESG investment efficiency.

This study incorporates several control variables to account for firm-specific characteristics that could influence ESG investment decisions. First, larger firms (SIZE), firms with greater growth opportunities (MTB), and those with stronger financial stability (ZSCORE) are generally better positioned to access external capital markets, making them more capable of pursuing ESG investments [21]. In addition, the operating cycle (OC) is included as it reflects the firm’s business activity efficiency, which may affect the timing and allocation of investment decisions [44]. Firms with more depreciable tangible assets (TAN) are likely to continue their investment behavior based on existing capital structures, in line with prior findings that current investment levels predict future investment [43]. Furthermore, firms exhibiting higher cash flow volatility (STDCFO) or higher sales volatility (STDSALES) may have stronger incentives to engage in ESG investments to manage risks or signal stability to stakeholders [16]. The dividend payment status (DIV) is also included as a control variable. Since firms that distribute dividends may face a trade-off between returning profits to shareholders and reinvesting in business activities, dividend-paying firms could exhibit different investment behaviors. However, as access to external funding can offset internal cash constraints, no specific directional expectation is imposed for this variable [46]. Financial leverage (LEV) and the average industry capital structure (MEAN_K) are controlled to account for differences in capital structure and financing conditions across industries [47]. Firms reporting net losses (LOSS) are expected to limit their ESG investments due to financial constraints, as documented by Al-Hadi et al. (2017) [7]. Finally, year fixed effects (YR_Dummy) and industry fixed effects (Ind_Dummy) are included to control for unobserved heterogeneity across time and sectors that may influence ESG investment patterns.

To test the second hypothesis, this study conducts subsample analyses using the same empirical model specified in Equation (1). Firm life cycle stages are identified following Oswald’s classification (2010), which uses research and development (R&D) intensity to distinguish between growth and steady states [48]. Specifically, a firm is considered to be in a steady state if the amount of capitalized R&D expenditure closely matches its amortization amount. If the discrepancy between these two values is below the sample median, the firm is coded as 1 (steady state), and 0 otherwise (growth state). Under this framework, if the presence of female executives enhances ESG investment efficiency, the estimated coefficients are expected to be more pronounced in the growth-stage subsample.

3.2. Sample

The sample data pertain to the 2015–2021 firm-years. The sample period begins in 2015, as that year marks the initial release of the updated ESG score. This study includes only those observations that meet the following criteria:

• Firms do not operate within the financial industry;
• Listed firms disclose sufficient financial information to compute the variables employed in the analysis;
• Firms exhibit positive equity values.

Using TS2000, a comprehensive database developed by the Korea Listed Companies Association, the study initially identifies all firms listed on the Korea Stock Exchange and KOSDAQ. TS2000 provides detailed firm-level data, including financial statements, executive profiles, and ownership structures as disclosed in annual reports. Firm-year observations lacking sufficient data to construct the variables used in the multivariate regression analysis are excluded from the sample. The final sample comprises 3401 firm-year observations.

Table 1. Sample selection process and distribution.

Panel A. Sample Distribution by Industry
Industry						Number of Firms	%
1. Agriculture/Forestry, Fishery, Mining						28	0.82
2. Food/Beverage, Tobacco						194	5.70
3. Textiles, Apparel, Footwear						134	3.94
4. Wood, Pulp/Paper, Printing						116	3.41
5. Petroleum Refining, Chemicals, Rubber/Plastics, Recyclables						761	22.38
6. Non-metallic Minerals						90	2.65
7. Primary Metals, Fabricated Metal Products						309	9.09
8. Machinery/Equipment, Computers, Electrical Machinery, Electronics, Medical/Precision, Autos/Transport Equipment						801	23.58
9. Furniture & Other Products						44	1.29
10. Utilities, Waste & Environmental Services						44	1.29
11. Construction						87	2.56
12. Wholesale/Retail Trade						321	9.44
13. Services						471	13.85
Total						3401	100%
Panel B. Sample Distribution by Industry
Industry Number		Number of Female Executives		Female Executives/Number of Industries (%)		Avg. ESG Score
1		11		39.29		11.73
2		57		29.38		18.42
3		37		27.61		13.14
4		10		8.62		17.27
5		210		27.60		18.45
6		15		16.67		15.54
7		30		9.71		18.78
8		107		13.34		20.88
9		5		11.36		14.47
10		14		31.82		25.14
11		4		4.60		22.04
12		54		16.82		16.97
13		107		22.72		20.06
Panel C. Sample Distribution by Year
Year	2015	2016	2017	2018	2019	2020	Total
Firms	550	551	554	570	585	591	3401

This table summarizes the sample selection process and the distribution of firms by industry and year.

presents the industry and year-wise distribution of the final sample. As shown in Panel A, the majority of firms are concentrated in manufacturing-related sectors, with Machinery/Equipment, Computers, Electrical Machinery, Electronics, Medical/Precision, and Autos/Transport Equipment (23.58%) and Petroleum Refining, Chemicals, Rubber/Plastics, and Recyclables (22.38%) comprising the largest shares. The Services sector also accounts for a notable portion of the sample (13.85%), while sectors such as Agriculture/Forestry, Fishery, Mining, and Furniture & Other Products represent relatively smaller groups.

Panel B further reports the number and proportion of female executives, as well as the average ESG score for each industry, revealing substantial inter-industry variation. The Petroleum/Chemicals sector records the highest number of female executives (n = 210), while the highest representation ratios are observed in Agriculture/Forestry (39.29), Utilities (31.82), and Food/Beverage (29.38). In terms of ESG performance, Utilities (25.14), Construction (22.04), and Machinery/Equipment sectors (20.88) display the strongest average scores. These trends suggest industry-specific dynamics between gender inclusion and sustainability performance.

Panel C indicates that the sample is evenly distributed across the observation period from 2015 to 2021, with the number of firms per year ranging from 550 to 591, ensuring the stability and representativeness of the panel data.

Although the dataset covers firm-years from 2015 through 2021, the regression analysis is limited to data up to 2020. This constraint results from the construction of the dependent variable, FESG, which is defined as a one-year-ahead measure (t + 1), thus requiring data from the following year for its computation.

4. Empirical Analysis Results

4.1. Descriptive Statistics and Correlation Analysis

The descriptive statistics for the variables used in this study are presented in

Table 2. Descriptive statistics and correlation matrix.

Variables	Mean	STD	MIN	Median	MAX
FESG	4.281	0.413	2.235	4.208	5.991
FEMALE	0.320	0.554	0.000	0.000	4.078
ABESG	0.019	0.262	−0.691	0.053	0.506
SIZE	26.930	1.467	24.279	26.646	31.098
MTB	1.594	1.843	0.268	1.012	13.092
ZSCORE	2.841	2.597	−1.446	2.248	30.173
OC	2.953	1.040	1.365	2.715	7.098
TAN	0.174	0.132	0.000	0.148	0.616
STDCFO	0.047	0.032	0.005	0.040	0.197
STDSALES	0.123	0.110	0.004	0.090	0.647
DIV	0.605	0.489	0.000	1.000	1.000
LEV	0.973	1.117	0.020	0.680	1.472
MEAN_K	0.178	0.177	0.169	0.114	0.737
LOSS	0.262	0.440	0.000	0.000	1.000

Notes: The sample consists of 3401 firm-year observations. Variable definitions are as follows: FESG refers to the predicted ESG score for firm i in year t + 1 and is calculated based on Equation (1). It represents the theoretical optimal level of ESG score for the subsequent year, derived from firm-specific and industry-specific characteristics observed at time t. This predicted score serves as a proxy for future ESG investment and is used to evaluate the economic drivers of ESG-related decision making. FEMALE is defined as the natural logarithm of one plus the number of female executives in firm i at time t; this transformation is used to reduce skewness in the distribution and to improve the normality of residuals in the regression models. ABESG is a ranked variable constructed by averaging decile rankings of a firm’s cash holdings and financial leverage. SIZE is the natural logarithm of total assets. MTB denotes the ratio of the market value of equity to the book value of equity. ZSCORE is a modified version of Altman’s Z-score, calculated as 3.3 (EBIT/total assets) + 1.0 (sales/total assets) + 1.4 (retained earnings/total assets) + 1.2 (working capital/total assets), following MacKie-Mason (1990) [49]. A higher Z-score implies lower bankruptcy risk. OC represents the operating cycle, defined as the log of receivables-to-sales plus inventory-to-COGS, multiplied by 360. TAN is the ratio of property, plant, and equipment to total assets. STDCFO refers to the standard deviation of operating cash flows, scaled by average total assets, over years t − 5 to t − 1. STDSALES is the standard deviation of sales, also scaled by average total assets, over the same time span. DIV is a dummy variable equal to one if the firm paid a dividend in the given year and zero otherwise. LEV is the ratio of total liabilities to total equity. MEAN_K denotes the average capital structure (long-term debt divided by the sum of long-term debt and market equity) within each industry. LOSS is a dummy variable that equals one if net income is negative, and zero otherwise.

. The dependent variable, FESG, representing the predicted ESG score for firm i in year t + 1, has a mean of 4.281 and a standard deviation of 0.413. The minimum and maximum values are 2.235 and 5.991, respectively, indicating considerable variation in expected ESG investment performance across firms. The main independent variable, FEMALE, which captures the natural logarithm of one plus the number of female executives in firm i at time t, shows a mean of 0.320 and a standard deviation of 0.554. The median is 0.000, and the maximum value reaches 4.078, reflecting that while many firms lack female representation in top management, a minority of firms have relatively high female executive counts. The variable ABESG, reflecting the degree of abnormal ESG investment, has a mean of 0.019 and a standard deviation of 0.262. The values range from −0.691 to 0.506, suggesting a wide dispersion in ESG investment tendencies, from underinvestment to overinvestment.

Regarding control variables, firm size (SIZE), measured as the natural logarithm of total assets, has a mean of 26.930, with values ranging from 24.279 to 31.098. The market-to-book ratio (MTB) averages 1.594, but with a high standard deviation of 1.843 and a maximum of 13.092, indicating that some firms exhibit substantial growth potential. The ZSCORE, used to capture financial stability, has a mean of 2.841 and ranges from −1.446 to 30.173, highlighting the inclusion of both financially distressed and highly stable firms. The average operating cycle (OC) is 2.953, with values ranging between 1.365 and 7.098, pointing to significant differences in operational efficiency across firms. TAN, representing the ratio of tangible assets to total assets, has a mean of 0.174. STDCFO and STDSALES, which capture the volatility of cash flows and sales, average 0.047 and 0.123, respectively, with STDSALES reaching a maximum of 0.647, implying high revenue instability in some firms. The dummy variable DIV, which indicates whether a firm paid a dividend, has a mean of 0.605, suggesting that around 60.5% of firms distributed dividends. LEV, the leverage ratio, averages 0.973, with notable dispersion (standard deviation of 1.117). MEAN_K, reflecting average capital structure in the industry, averages 0.178. Finally, the LOSS dummy variable shows a mean of 0.262, indicating that approximately 26.2% of firms reported net losses. These descriptive statistics offer a comprehensive overview of the distribution and characteristics of the key variables in the sample and provide the basis for the empirical analysis that follows.

Table 3. Pearson correlations.

	FESG	FEMALE	ABESG
FESG	1.000	0.291	0.001
		<0.0001	0.942
FEMALE		1.000	−0.052
			0.003
ABESG			1.000

Notes: All variables are defined in Table 2. Values such as “<0.0001” reflect SAS Enterprise Guide output (version 9.4), where extremely small p-values are displayed using the “<” symbol to indicate that the true p-value is below the stated threshold.

presents the Pearson correlation coefficients among the key variables in the study: FESG (predicted ESG score), FEMALE (the number of female executives in senior management), and ABESG (abnormal ESG investment tendency).

As shown in the table, FESG is positively and significantly correlated with FEMALE, with a coefficient of 0.291 (p < 0.0001). This indicates that firms with greater female executive representation tend to exhibit higher predicted ESG performance, providing initial descriptive support for the study’s first hypothesis. The direction and significance of this correlation are consistent with the view that gender diversity in upper management contributes to more effective ESG investment. In contrast, the correlation between FESG and ABESG is extremely weak (r = 0.001) and statistically insignificant (p = 0.942), suggesting no linear association between the predicted ESG investment and the firm’s deviation from optimal ESG spending levels, as measured by ABESG. This finding reinforces the need for interaction terms and conditional analysis in the regression framework, where the role of female executives may vary depending on whether firms tend to under- or over-invest in ESG. The correlation between FEMALE and ABESG is slightly negative and statistically significant (r = −0.052, p = 0.003), implying that firms with more female executives are marginally less likely to exhibit tendencies toward abnormal ESG investment. While the magnitude of the correlation is small, the statistical significance suggests that gender diversity may play a role in moderating inefficiencies in ESG-related decision making. Overall, the correlation matrix shows no evidence of multicollinearity among the key independent variables, and the observed relationships are in line with the theoretical expectations that female leadership is positively associated with ESG performance and may contribute to curbing ESG inefficiencies.

4.2. Test Results of Hypotheses

Table 4. The relationship between female executives and ESG investment efficiency.

Variables	Coeff.	t-Stat.
Intercept	−1.895 ***	−24.00
FEMALE	0.014 **	1.97
ABESG	0.067 ***	4.25
FEMALE × ABESG	−0.087 ***	−3.50
SIZE	0.228 ***	77.90
MTB	−0.002	−0.72
ZSCORE	0.001	0.74
OC	0.014 ***	3.42
TAN	0.111 ***	3.65
STDCFO	0.084	0.70
STDSALES	0.230 ***	6.68
DIV	0.067 ***	6.17
LEV	0.014 ***	3.34
MEAN_K	−0.032	−1.07
LOSS	−0.031 **	−2.71
Industry Dummy	Included
Year Dummy	Included
Adj. R2	0.77
F-stat.	374.28 ***
Observations	3401

Notes: Statistical significance is indicated as follows: *** p < 0.01, ** p < 0.05.

presents the results of the baseline regression examining the relationship between the presence of female executives and ESG investment efficiency, as specified in Equation (1). The dependent variable is FESG, which captures the predicted optimal level of ESG investment in year t + 1 based on current firm characteristics. Industry and year fixed effects are included to account for unobserved heterogeneity across sectors and time. The model explains a substantial proportion of the variation in ESG investment efficiency, with an adjusted R-squared of 0.77, and the F-statistic (374.28) confirms the overall significance of the regression at the 1% level.

The coefficient on FEMALE, which represents the natural logarithm of one plus the number of female executives in firm i at time t, is positive and statistically significant at the 5% level (β = 0.014, t = 1.97). This finding supports Hypothesis 1, indicating that greater female representation in upper management is associated with more efficient ESG investment, particularly for firms that previously exhibited underinvestment tendencies. This aligns with the argument that female executives contribute to governance quality and more balanced resource allocation.

This efficiency-enhancing role of female leadership is supported by recent studies. For instance, Alodat and Hao (2025) found that board gender diversity strengthens the link between ESG disclosure and firm performance by enhancing transparency and decision making [16]. Similarly, Ouni et al. (2022) showed that gender-diverse boards improve intellectual capital efficiency, which is vital for sustainable investments [17]. Moreover, Muhammad and Farooq (2025) demonstrated that female board members help mitigate ESG controversies through better oversight [18].

The coefficient on ABESG, a ranked measure capturing the degree of abnormal ESG investment, is also positive and highly significant (β = 0.067, t = 4.25), suggesting that firms with higher tendencies toward excessive ESG investment tend to allocate more resources to ESG in the subsequent period, independent of the gender composition of their executive team.

Crucially, the interaction term FEMALE × ABESG is negative and statistically significant at the 1% level (β = −0.087, t = −3.50). This finding supports the efficiency-based interpretation of ESG investment and indicates a moderating role of female executives. In firms predisposed to ESG overinvestment, the presence of more female executives leads to reduced ESG spending, suggesting a corrective governance effect. These findings corroborate earlier governance theories emphasizing that female leaders reduce managerial opportunism and enhance strategic alignment, particularly in sustainability contexts [23,24].

Recent empirical studies further reinforce this efficiency-oriented role of female leadership in ESG contexts. For example, Mensah and Onumah (2023) provide evidence that gender-diverse boards mitigate earnings management, indirectly contributing to more disciplined investment behavior [25]. Similarly, Nadeem et al. (2019) show that female board participation improves intellectual capital allocation efficiency, which is closely linked to responsible ESG investment [26]. In rapidly growing firms, Tran et al. (2022) report that gender-diverse top management teams enhance financial decision making and stakeholder responsiveness, reflecting a similar corrective governance effect as observed in this study [27].

Regarding the control variables, SIZE is positively and highly significantly associated with FESG (β = 0.228, t = 77.90), consistent with prior studies showing that larger firms are more capable and often more pressured to engage in ESG activities. OC, TAN, STDSALES, DIV, and LEV all show significant positive relationships with ESG investment efficiency, suggesting that firms with stronger operations, stable sales, and shareholder payouts are more efficient in ESG allocation.

Table 5. The relationship between female executives and ESG investment efficiency: the role of corporate life cycle.

Variables	A Steady State		A Growth State
	Coeff.	t-Stat.	Coeff.	t-Stat.
Intercept	−1.807 ***	−14.41	−1.983 ***	−19.30
FEMALE	0.000	−0.01	0.018 *	1.81
ABESG	0.036	1.46	0.087 ***	4.30
FEMALE × ABESG	0.016	0.47	−0.173 ***	−4.78
SIZE	0.229 ***	48.62	0.227 ***	60.44
MTB	−0.005	−1.83	0.002	0.70
ZSCORE	0.002	0.88	0.001	0.51
OC	0.006	1.09	0.025 ***	4.21
TAN	0.072	1.58	0.123 ***	3.03
STDCFO	0.161	0.94	0.066	0.39
STDSALES	0.109	2.14	0.304 ***	6.53
DIV	0.088 ***	5.20	0.051 ***	3.62
LEV	0.021 ***	3.02	0.008	1.60
MEAN_K	0.034	0.70	−0.031	−0.81
LOSS	−0.039 **	−2.10	−0.022	−1.51
Industry Dummy	Included		Included
Year Dummy	Included		Included
F-value	169.8 ***		213.63 ***
Adj. R2	0.77		0.77
Observations	1488		1913

Notes: Statistical significance is indicated as follows: *** p < 0.01, ** p < 0.05, * p < 0.10.

presents the regression results that explore the impact of female executives on ESG investment efficiency, segmented by corporate lifecycle stages—specifically comparing firms in a steady state versus those in a growth state. The adjusted R-squared for both models is 0.77, suggesting a robust explanatory power for the variables considered. The model fits are further corroborated by significant F-values, 169.8 in steady state and 213.63 in growth state, both significant at the 0.1% level.

In firms classified within a steady state, the regression results show no significant effect of FEMALE or ABESG on ESG efficiency. However, in firms in a growth state, the presence of female executives has a marginally positive effect (t = 1.81), and the interaction with ABESG is significantly negative (β = −0.173, t = −4.78). This result implies that female leadership helps curb excessive ESG investment, particularly in dynamic growth contexts where resource misallocation risks are higher.

These findings align with Tran et al. (2022), who showed that female leadership in high-growth firms strengthens financial outcomes by enforcing budgetary discipline [27]. Furthermore, Ab Aziz et al. (2025) found that board gender diversity reduces ESG-related controversies, especially during rapid expansion phases [41]. These results underscore that female executives serve as internal governance mechanisms that adapt ESG decisions to the firm’s strategic stage, enhancing overall investment efficiency.

These conclusions are further supported by recent empirical evidence. For instance, Puntaier et al. (2022) argue that board diversity is not merely symbolic but a strategic necessity in entrepreneurial and high-growth firms [42]. Their study shows that diverse boards make more disciplined investment decisions under uncertainty. In the ASEAN context, Abdelzaher and Abdelzaher (2019) found that post-crisis periods saw increased effectiveness of female directors, particularly in capital-intensive sectors requiring forward-looking governance [50]. Additionally, Mastella et al. (2021) demonstrate that board gender diversity in Brazilian firms is significantly associated with improved ESG and risk management outcomes in volatile industries—offering further support for lifecycle-contingent governance effects [51].

Control variables such as the operating cycle (OC) and sales volatility (STDSALES) show stronger effects in growth state firms, with significant coefficients of 0.025 (t-statistic = 4.21, p < 0.01) and 0.304 (t-statistic = 6.53, p < 0.01), respectively, indicating their critical roles in these dynamic settings. Dividends (DIV) and leverage (LEV) are also significant, with smaller yet impactful coefficients.

Collectively, these findings support Hypothesis 2, confirming that the positive effect of female executives on ESG investment efficiency is more pronounced in growth firms compared to steady-state firms. This reinforces the interpretation that female leadership not only enhances governance quality in general but also plays a particularly important role in dynamically evolving corporate contexts.

4.3. Additional Analyses

4.3.1. Alternative Proxy for Female Executives

In

Table 6. Alternative measures of female executive representation and their impact on ESG investment efficiency.

Panel A. H1
Variables	Coeff.		t-Stat.
Intercept	−1.513 ***		−15.12
FEMALE2	−0.095		−1.51
ABESG	0.185 **		15.36
FEMALE2 × ABESG	−0.108 ***		64.93
Controls	Included
Industry Dummy	Included
Year Dummy	Included
Adj. R2	0.71
F-stat.	280.64 ***
Observations	3401
Panel B. H2
Variables	Steady State		Growth State
	Coeff.	t-stat.	Coeff.	t-stat.
Intercept	−1.332 ***	−8.52	−2.058 ***	−20.52
FEMALE2	−0.036	−0.41	0.052	0.72
ABESG	0.190 ***	10.34	0.062 ***	3.14
FEMALE2 × ABESG	−0.095	−1.44	−0.628 **	−2.58
Controls	Included		Included
Industry Dummy	Included		Included
Year Dummy	Included		Included
F-value	126.37 ***		210.48 ***
Adj. R2	0.72		0.77
Observations	1488		1913

Notes: Statistical significance is indicated as follows: *** p < 0.01, ** p < 0.05. FEMALE2 measures the ratio of female executives to the total number of board members.

, the study explores the impact of an alternative measurement of female executive representation, denoted as FEMALE2, on ESG investment efficiency. This alternative proxy measures the ratio of female executives to the total number of board members, providing a refined perspective on the influence of gender diversity within corporate governance structures on ESG investment efficiency.

The regression results from Panel A reveal a low baseline level of ESG investment efficiency across the firms, as indicated by a significantly negative intercept of −1.513 (t-statistic = −15.12, p < 0.01). The coefficient for FEMALE2 is −0.095 (t-statistic = −1.51), suggesting that this alternative proxy does not significantly enhance ESG investment efficiency, while ABESG shows a significant positive effect (coefficient = 0.185, t-statistic = 15.36, p < 0.05), affirming that deviations from normal ESG investment behavior correlate with higher subsequent ESG scores. Notably, the interaction term FEMALE2 × ABESG is significantly negative (coefficient = −0.108, t-statistic = 64.93), indicating that an increased proportion of female executives can effectively moderate excessive ESG investments.

Further examination in Panel B assesses the role of the corporate lifecycle, comparing steady and growth states. In steady state firms, the negative influence of FEMALE2 is minimal (coefficient = −0.036, t-statistic = −0.41), while in growth state firms, a slightly positive but non-significant effect is observed (coefficient = 0.052, t-statistic = 0.72). The interaction term FEMALE2 × ABESG in growth state firms is significantly negative (coefficient = −0.628, t-statistic = −2.58, p < 0.05), suggesting that a proportional representation of female executives is particularly effective in reducing overinvestment in ESG initiatives in dynamically growing firms. This nuanced understanding supports the broader narrative that the impact of female executives on corporate behavior varies significantly depending on how female presence is quantified and the stage of the corporate lifecycle.

4.3.2. Impact of Female Executives on the Efficiency of Segmented ESG Investments (E, S, G)

Table 7. Impact of female executives on the efficiency of segmented ESG investments (E, S, G).

Variables	E		S		G
	Coeff.	t-Stat.	Coeff.	t-Stat.	Coeff.	t-Stat.
Intercept	−9.577 ***	−77.14	−4.719 ***	−40.48	1.015 ***	8.73
FEMALE	0.022 **	2.01	0.018 *	1.73	0.008	0.80
ABESG	0.247 **	2.24	0.131 *	1.75	0.002	0.39
FEMALE × ABESG	−0.104 *	−1.74	−0.085 *	−1.94	−0.007	−0.80
Controls	Included		Included		Included
Industry Dummy	Included		Included		Included
Year Dummy	Included		Included		Included
F-value	594.88 ***		281.80 ***		59.64 ***
Adj. R2	0.84		0.71		0.34
Observations	3401		3401		3401

Notes: Statistical significance is indicated as follows: *** p < 0.01, ** p < 0.05, * p < 0.10.

presents the empirical results exploring how female executive representation influences the efficiency of investments across the specific components of ESG: Environmental (E), Social (S), and Governance (G). The adjusted R-squared values and the significant F-values for each model underline the robust explanatory power and the robustness of these results across the ESG spectrum. The regression analysis highlights different dynamics in each area, reflecting the nuanced roles female executives play within these domains.

For the environmental component, a significantly negative intercept (−9.577, t-statistic = −77.14, p < 0.01) indicates a generally low baseline level of investment efficiency. Female executives, however, are found to positively influence environmental outcomes with a coefficient of 0.022 (t-statistic = 2.01, p < 0.05), suggesting that their presence can enhance environmental practices. The positive coefficient of 0.247 for abnormal ESG investment (ABESG) (t-statistic = 2.24, p < 0.05) indicates that deviations from typical investment behaviors correlate with better environmental efficiency. Nevertheless, the interaction of female presence and ABESG shows a mitigating effect on excessive investments (coefficient = −0.104, t-statistic = −1.74, p < 0.1).

In the social domain, the analysis reveals a negative intercept (−4.719, t-statistic = −40.48, p < 0.01), with female executives having a slightly positive but less pronounced effect on social investment efficiency (coefficient = 0.018, t-statistic = 1.73, p < 0.1). Similarly to the environmental component, ABESG positively impacts social efficiency (coefficient = 0.131, t-statistic = 1.75, p < 0.1), with female executives again playing a role in moderating excessive social investments (coefficient = −0.085, t-statistic = −1.94, p < 0.1).

Regarding the governance component, the analysis starts with a positive intercept (1.015, t-statistic = 8.73, p < 0.01), indicating higher baseline efficiency in governance practices. However, the presence of female executives does not significantly affect governance efficiency (coefficient = 0.008, t-statistic = 0.80), nor does the interaction with ABESG (coefficient = −0.007, t-statistic = −0.80), suggesting that governance practices may be less susceptible to influence from gender diversity on the board compared to environmental or social investments.

Overall, the findings demonstrate the variable impacts of female executives on different ESG components, with more significant effects observed in environmental and social areas than in governance. This comprehensive analysis underscores the importance of considering specific ESG components when assessing the impact of female executive representation on corporate sustainability practices.

4.3.3. Addressing Endogeneity Issues

Although the research design incorporates a lagged structure—where the key independent variables are measured at time t and ESG investment performance (FESG) is observed at t + 1—to mitigate reverse causality concerns, further steps were taken to address potential endogeneity issues, particularly selection bias.

To supplement the primary model, a Propensity Score Matching (PSM) analysis was conducted. Matching was performed based on firm size using nearest-neighbor matching with a caliper width of 3%, in accordance with the matching strictness recommended by Lawrence et al. (2017) for governance-related variables [52]. This approach was chosen to ensure that treated and control firms are similar in terms of observable characteristics that could jointly influence both female executive presence and ESG decisions.

After generating a matched dataset, the main regression model (Equation (1)) was re-estimated.

The estimation results in

Table 8. A Propensity Score Matching (PSM) analysis.

Panel A. H1
Variables	Coeff.		t-Stat.
Intercept	−1.824 ***		−27.25
FEMALE	−0.045 ***		8.49
ABESG	0.037 *		1.91
FEMALE × ABESG	−0.115 ***		−5.40
Controls	Included
Industry Dummy	Included
Year Dummy	Included
Adj. R2	0.89
F-stat.	891.29 ***
Observations	3072
Panel B. H2
Variables	Steady State		Growth State
	Coeff.	t-stat.	Coeff.	t-stat.
Intercept	−1.939 ***	−23.85	−1.718 ***	−12.92
FEMALE	0.050 ***	7.60	0.006	−0.64
ABESG	0.060 **	2.57	0.081 **	2.37
FEMALE × ABESG	−0.172 ***	−6.38	0.002	0.06
Controls	Included		Included
Industry Dummy	Included		Included
Year Dummy	Included		Included
F-value	727.11 ***		264.98 ***
Adj. R2	0.92		0.87
Observations	1959		1113

Notes: Statistical significance is indicated as follows: *** p < 0.01, ** p < 0.05, * p < 0.10.

show that although the coefficient on the FEMALE variable becomes statistically insignificant, the interaction term between FEMALE and ABESG remains in the expected direction and is statistically weak but consistent. These results suggest that the core findings are not an artifact of biased sampling but rather reflect structural relationships.

Taken together, the combination of (1) a lag-based model design, and (2) a tightly calibrated PSM approach collectively reinforce the causal interpretation of the main findings. The concern of selection bias, though legitimate, does not appear to undermine the validity of the observed effects. This additional analysis helps shift the focus of the paper back to its main contribution—understanding how female executive representation contributes to ESG investment efficiency.

4.3.4. Different Classification of Life Cycle

To address concerns about the unidimensional classification of the firm life cycle based solely on R&D intensity, this study incorporates an alternative classification method that uses a broader set of financial indicators, following the methodology outlined in Kim et al. (2021) and Hwang and Choi (2022) [53,54].

Specifically, five firm-level indicators were used: sales growth rate, asset growth rate, fixed asset ratio, operating cash flow ratio, and profitability (net income to total assets). For each firm-year, five-year median values were calculated to smooth year-to-year fluctuations. Each median value was then divided into quintiles by year and scored from 1 to 5. The sum of these scores—ranging from 5 to 25—was used to assign firms into one of five life cycle stages. To align with the design of the main analysis, this section focuses on three key stages only: growth (score ≤ 5), maturity (score 11–15), and decline (score ≥ 20), excluding intermediate groups.

The purpose of this analysis is to provide a robustness check for the main findings, rather than to retest or reinterpret Hypothesis 2, which is formally stated and tested in Section 4.2.

While the results largely corroborate those from the R&D-based classification, they also emphasize that the governance effect of female executives on ESG investment efficiency remains most pronounced in growth-stage firms.

The results of the alternative classification analysis are broadly consistent with the main findings. In growth-stage firms (n = 946), the interaction term between female executive representation and abnormal ESG investment is negative and marginally significant (β = −0.1064, p = 0.0528), indicating that female executives play a corrective role in limiting ESG overinvestment. By contrast, in mature-stage (n = 1313) and declining-stage (n = 594) firms, the coefficients for this interaction term are statistically insignificant and show mixed directions, suggesting that the governance effect of female leadership is more pronounced during earlier stages of development.

5. Conclusions

This research investigated the impact of female executive representation on ESG investment efficiency within the context of South Korea’s predominantly male-oriented corporate culture. The findings highlight the strategic importance of female executives not only in enhancing ESG investment efficiency but also in driving broader sustainability trends globally. ESG considerations are increasingly critical in modern corporate governance, where ethical standards and sustainable practices are becoming integral to corporate success and resilience. This study underscores how corporate governance, especially in cultures with deeply ingrained gender biases like South Korea, plays a pivotal role in either facilitating or hindering the effective integration of sustainability practices in business strategies. This research not only advances the understanding of these dynamics but also prompts a reevaluation of corporate governance frameworks to incorporate and emphasize sustainability and ethical considerations more robustly.

The empirical analysis substantiated two primary hypotheses. Firstly, it was demonstrated that firms with a greater representation of female executives tend to improve ESG investment efficiency, effectively balancing ESG investments by reducing excesses in firms that previously over-invested and elevating efforts in firms that under-invested. Secondly, the impact of female executives was found to vary significantly with the firm’s corporate life cycle stage. This variance underscores how strategic priorities and resource availability, which change markedly across different life cycle stages, influence ESG investment decisions. For instance, growth-stage firms, which require solid reputational and financial standings to attract stakeholders, benefit significantly from enhanced governance through female leadership. In contrast, mature firms, which may already have established reputations and resources, exhibit varied responses to female executive influence, suggesting different strategic needs or complacency in already optimized conditions. When measuring female executive representation as the proportion of female executives relative to the total number of board members, the results remain consistent with the primary analysis, reinforcing the validity of the findings. This consistency under different measures of female presence further strengthens the robustness of the study’s conclusions. Other robustness analyses, particularly those segmenting ESG into Environmental, Social, and Governance components, further revealed that the influence of female executives is more pronounced in the Environmental and Social domains. These findings align with the characteristics typically attributed to female leaders, such as ethical sensitivity and stakeholder engagement, which are crucial in navigating the complexities of sustainable practices.

The significance of gender diversity within the Korean context is reinforced by emerging legislative measures and a growing recognition among investors and corporate boards that diversity is not merely a metric of compliance but a catalyst for substantial competitive advantage. Recent guidelines from global investment giants underscore a decisive shift towards mandatory diversity quotas, reflecting a broader acceptance of diversity as a strategic asset. This study contributes to the broader discourse on corporate governance by highlighting the importance of female executive presence not just as a marker of gender equality but as a strategic lever in enhancing corporate ESG efficacy. It underscores the critical role of contextual and cultural factors in shaping the impact of gender diversity on corporate sustainability practices. By focusing on a Korean sample, this research adds valuable insights into the dynamics of gender diversity in non-Western contexts, where traditional roles and corporate practices may differ significantly from those in Western settings.

This study also provides several policy and managerial implications. First, regulators and corporate policymakers should consider expanding mandatory gender diversity quotas for executive positions—not merely at the board level—as a mechanism to improve ESG investment discipline and alignment with long-term sustainability goals. Given the demonstrated efficiency-enhancing effect of female executives, such policies may contribute to more effective allocation of ESG resources, particularly in growth-oriented firms where investment decisions are more volatile.

Second, institutional investors and ESG rating agencies should integrate executive gender diversity indicators into their ESG assessment frameworks. Female leadership appears to enhance ESG credibility and reduce symbolic or inefficient spending, making it a relevant factor for investment decision making.

Finally, firms themselves should recognize gender diversity not just as a compliance metric but as a strategic asset. Training and succession planning systems that promote capable women into decision-making roles can enhance organizational ethics, stakeholder engagement, and sustainable performance. These implications are grounded in Risk Preference Theory, Top Echelon Theory, and Stakeholder Theory, all of which suggest that gender-diverse leadership fosters greater governance quality and ESG accountability [35].

Moreover, ESG strategies should be tailored to the firm’s stage of development. In growth-stage firms, enhancing gender diversity at the executive level can serve as a governance lever to discipline ESG resource allocation and mitigate overinvestment risks. In contrast, mature or declining firms may benefit more from integrated ESG systems and long-term planning mechanisms, as the direct governance effect of female executives appears to be less pronounced in these stages. This time-sensitive approach enables firms to align ESG with their evolving strategic needs.

Despite its contributions, this study is not without limitations. The analysis is based on firms in South Korea, which may constrain the generalizability of the findings. However, this geographic focus is intentional and valuable, offering insights into ESG in a non-Western context with distinct cultural and regulatory features [24].

Second, the ESG data employed cover the period from 2015 to 2021. While this excludes the latest systemic developments such as COVID-19 and the ESG reforms in 2022, the time frame still captures key regulatory transitions and market evolution. The data were obtained from a commercial provider at significant cost, which limited extension beyond 2021 due to funding constraints. Nonetheless, future research is planned to incorporate more recent data, as financial resources allow.

Third, although the study lacks detailed role-specific information (e.g., CEO, CFO) on female executives, this reflects the best available data in Korea, where such distinctions are not commonly disclosed. The female executive data used in this study were manually collected and do not systematically differentiate hierarchical roles. Nonetheless, the empirical literature supports the relevance of general gender representation as a governance signal, especially in contexts with low baseline diversity [16,18,26].

These limitations are noted not to diminish the findings but to guide future extensions and emphasize the robustness of results within the current research scope.