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ESG performance and market value: the moderating role of employee board representation

Author

Listed:
  • Mehdi Nekhili

    (GAINS - ARGUMANS - Atelier De Recherche En Gestion De L'université Du Mans - GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université)

  • Amal Boukadhaba

    (GAINS - ARGUMANS - Atelier De Recherche En Gestion De L'université Du Mans - GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université)

  • Haithem Nagati

    (EM - EMLyon Business School)

  • Tawhid Chtioui

    (EM - EMLyon Business School)

Abstract

In this paper, we examine the extent to which the appointment of employees to the board of directors influences market perceptions of environmental, social and governance (ESG) performance. Using a sample of French firms listed on the SBF 120 index from 2007 to 2017, we find that investors react positively to ESG performance but negatively to the presence of employees on the board. Importantly, our results document a negative relationship between ESG performance and market value for firms with employee directors on the board. A more fine-grained examination of ESG pillars shows that when employees are appointed to the board, neither social nor environmental and governance performance are financially rewarded by market participants. Our findings suggest the potential existence of a major conflict of interest between employees and shareholders stemming from the presence of employees on the board. We suggest that, when employees are appointed to the board, high ESG performance may indicate a possible alliance between managers and employees that counterbalances the dominance of shareholders on the board.

Suggested Citation

  • Mehdi Nekhili & Amal Boukadhaba & Haithem Nagati & Tawhid Chtioui, 2019. "ESG performance and market value: the moderating role of employee board representation," Post-Print hal-02380465, HAL.
    • Handle: RePEc:hal:journl:hal-02380465
    DOI: 10.1080/09585192.2019.1629989
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    Citations

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    Cited by:

    1. Hua Tang, 2022. "The Effect of ESG Performance on Corporate Innovation in China: The Mediating Role of Financial Constraints and Agency Cost," Sustainability, MDPI, vol. 14(7), pages 1-21, March.
    2. Sonia Boukattaya & Zyed Achour & Zeineb Hlioui, 2021. "Corporate Social Responsibility and Corporate Financial Performance: An Empirical Literature Review," Post-Print hal-03472433, HAL.
    3. Guangyou Zhou & Lian Liu & Sumei Luo, 2022. "Sustainable development, ESG performance and company market value: Mediating effect of financial performance," Business Strategy and the Environment, Wiley Blackwell, vol. 31(7), pages 3371-3387, November.
    4. Riccardo Santamaria & Francesco Paolone & Nicola Cucari & Luca Dezi, 2021. "Non‐financial strategy disclosure and environmental, social and governance score: Insight from a configurational approach," Business Strategy and the Environment, Wiley Blackwell, vol. 30(4), pages 1993-2007, May.
    5. Mehdi Nekhili & Amal Boukadhaba & Haithem Nagati, 2021. "The ESG–financial performance relationship: Does the type of employee board representation matter?," Corporate Governance: An International Review, Wiley Blackwell, vol. 29(2), pages 134-161, March.
    6. Raja Abid, 2023. "Corporate social (ir)responsibility towards employees and financial performance: using time to solve the chicken-egg problem," Review of Managerial Science, Springer, vol. 17(2), pages 635-659, February.

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