ESG Performance–Stock Price Volatility Nexus: The Moderating Effect of Board Cultural Diversity in G20 Markets

Abstract

This paper investigates the relationship between ESG performance and stock price volatility (SPV) in G20 countries, with a focus on the moderating influence of board cultural diversity (BCD) in this association. Using a comprehensive sample of 117,449 firm‐year observations from companies listed in G20 markets between 2005 and 2021, our analysis provides robust empirical evidence of a negative association between ESG performance and SPV. Furthermore, the findings indicate that BCD strengthens this negative link by serving as a mitigating factor, assisting firms in better managing ESG‐related risks and opportunities, resulting in higher sustainability performance and lower SPV. Our results contribute to existing literature by integrating legitimacy, resource‐based, and agency theories to explain how ESG practices, complemented by board diversity, contribute to corporate stability. This study extends the understanding of how governance structures, specifically board diversity, can influence the ESG performance nexus in global markets. Our study has implications for policymakers and investors, highlighting the strategic importance of ESG practices and diverse governance structures in promoting corporate resilience and market confidence. Encouraging the adoption of robust ESG reporting standards and fostering board diversity may enhance corporate stability and investor trust.