When Diversity Meets Family Owners: ESG Performance in European Publicly Listed Firms

Abstract

This study investigates how the interaction between board diversity and family as owners shapes firms' ESG performance. Prior research has established that board diversity fosters more informed, ethical, and stakeholder-oriented decision-making, thereby enhancing corporate legitimacy and responsiveness to diverse stakeholder expectations. Building upon this foundation, the present study advances the literature by incorporating the role of family ownership and involvement into this relationship. Drawing on Functionalist Theory and the socioemotional wealth (SEW) perspective, we conceptualize the family as a normative and institutional actor that embeds long-term orientation, intergenerational responsibility, and prosocial values into corporate governance structures and decision-making processes. Using a panel dataset of 1199 publicly listed European firms over a 10-year period, we confirm prior literature and find that greater board diversity is consistently associated with improved ESG performance. While family business status alone does not directly affect ESG performance, it significantly enhances the positive impact of board diversity, positioning families as institutional enablers. Furthermore, succession planning shows a positive relationship with ESG performance, indicating that structured intergenerational transitions promote ethical consistency and reinforce long-term strategic commitment. In general, our results show that family involvement in the ownership can make the link between diversity and sustainability stronger.