Unveiling the Myth: A Causal Reassessment of Gender Diversity's Impact on Corporate Environmental Performance

Abstract

This study reassesses the impact of gender diversity in corporate boards on firms’ environmental performance, using a panel of 4,950 firm-year observation from Standard and Poor’s (S&P) 500 companies from 2010 to 2020. Using traditional econometric techniques such as Ordinary Least Squares (OLS) and Instrumental Variables (IV), we initially find strong evidence suggesting that appointing women to corporate boards enhances environmental performance. These results remain robust across different instruments, control variables, and fixed effects specifications. However, when employing a more rigorous causal identification strategy through Staggered and Honest Difference-in-Differences (DID) methodologies, we find no significant evidence supporting a causal relationship. Instead, our findings reveal that firms tend to adopt greener practices before appointing women directors, suggesting that corporate sustainability strategies and board gender diversity evolve concurrently rather than in a causally linked manner. Our results call for a reevaluation of the existing evidence on gender diversity and environmental performance and highlight the need for more robust causal methodologies in examining corporate governance and sustainability dynamics.