Board of directors characteristics: How they are related to ESG rankings and value of Russian companies

Abstract

Goal: the goal of this paper is to determine effects of board of directors characteristics on corporate value creation, taking into account ESG (Environmental, Social, Governance) principles.

Methodology: the methodological tool applied in this study is an econometric analysis of panel data for 48 Russian non-financial public companies with ESG score provided by Thomson Reuters Eikon in the period from 2015 to 2020.

Findings: we have found a non-linear impact of board size on ESG performance, and significant positive impact of board independence on both ESG performance and firm market value. We also find that higher board gender diversity leads to higher corporate ESG score and market value, while higher share of foreign directors does not affect significantly these indicators of performance of Russian companies. Board sustainability committee enhances both corporate ESG performance and market value, board strategy committee contributes to ESG score’s increase as well.

Originality and contribution of the authors: our study contributes to the development of academic literature devoted to corporate governance effects on firm’s performance on understudied market, in the context of growing demand for corporate sustainability. Application of our findings will allow to formulate the best practices of corporate governance for market value creation of Russian companies basing on ESG principles.