Sustainable Corporate Governance in the Nordic Region: Does Board Diversity Matter?

Abstract

Over recent years, the Nordic region has been exposed to several regulatory changes regarding political and social concerns of sustainable corporate governance and diversity in decision-making positions. Special attention is drawn to how diversity attributes, such as gender balance, independence, and tenure, can enhance corporate governance practices and meet stakeholders’ demands. This thesis examines the impact of board diversity on sustainable corporate governance and ESG disclosure dimensions in the Nordic region. The study applies fixed-effect models with lagged board variables to a sample of 340 listed firms. Our findings highlight the importance of implementing corporate board diversity as it can increase ESG disclosure levels. The analysis finds that women on board and board independence significantly impact engagement in ESG, encouraging firms to increase transparency and accountability related to sustainable corporate governance. For companies, this also strengthens the necessity for legislative requirements to achieve corporate board diversity. On the contrary, the study finds no effect from board tenure and small significance from different industries on the overall ESG score. This study provides evidence to policymakers and regulators as a stimulus to continue promoting diversity across boards.