Does Context Matter? ESG-Contingent Effects of Board Cultural Diversity on Corporate Capital Investments

Abstract

This study investigates how board cultural diversity and the moderating role of ESG performance affect corporate capital investment activity, proxied by the net investment ratio, in European listed non-financial companies from 2014 to 2023. It explores these dynamics considering institutional differences across Anglo-Saxon, continental, and Nordic countries. Leveraging a unique balanced panel dataset comprising 5620 firm-year observations, it employs two-way fixed effects panel regressions and uses system GMM estimations to address endogeneity concerns. The results indicate that ESG significantly attenuates the positive relationship between board cultural diversity and capital investment activity. Comparative analysis reveals that the strength and direction of these effects are contingent on institutional context. This study contributes to the corporate governance literature with empirical insights into how board cultural diversity and ESG performance jointly shape corporate investment behavior. It also advances the upper echelons, resource dependence, stakeholder, and institutional theories and provides policymakers with holistic guidance.