Search results

Agency theory postulates that research and development (R&D) investments are subject to managerial discretion and thus may not enhance firm value as expected. The inconclusive empirical findings in the literature is a testament of that. This paper aims to investigate the interplay between board gender diversity (i.e. women on boards) and value relevance of firms’ effort to innovate as indicated by firms’ R&D investments.

Through a sample of 1,626 US-listed firms from the period 2004 to 2019, the authors examine whether board gender diversity promotes or hampers value relevance of firms’ efforts to innovate. The authors use ordinary least squares as the baseline model and address potential endogeneity through instrumental variable two-stage least square, and selection bias through Heckman selection model. Finally, the authors use the financial crisis of 2008 as a natural experiment to investigate the effect of board gender diversity during the crisis period.

The results show that board gender diversity positively moderates the relation between R&D and firm value. In times of financial crisis, R&D does not destroy firm value in firms with gender diverse board. The results are robust to measurement error, endogeneity issue, particularly simultaneity and selection bias.

The findings in this study have several practical implications. Firms that invest heavily in R&D should be mindful of gender diversity in their board recruitment strategies to enhance innovation outputs and firm value. Current and potential investors (i.e. shareholders) should take into consideration board gender diversity in their investment decision-making processes as the results show that gender diverse boards promote more effective governance, which, in turn, leads to better alignment of R&D investments with shareholder value. Regulators aiming to improve corporate governance policies should encourage gender diversity on the boards. The results align with global initiatives such as the United Nations Sustainable Development Goals, particularly Goal 5 on gender equality. Policymakers may use the findings in this study to advocate for more gender diverse governance structures within corporations.

This study investigates the role gender diverse boards play in creating value from firms’ R&D activities.

The purpose of this study is to examine whether financial markets value a firm’s specific corporate environmental performance (CEP), i.e. its energy efficiency. This study also investigates the mechanism through which energy efficiency is associated with firm value.

For the empirical study, a sample of 324 US-listed non-financial firms during the period 2006–2019 was accessed from Thomson Reuters Refinitiv. Using baseline ordinary least squares regression models, this study first estimates the association between energy efficiency and firm value. It then tests the role of analyst coverage (the number of sell-side financial analysts following the firm) in ascertaining the value relevance of energy efficiency. To ensure the robustness of the results, alternative estimations including endogeneity and sample bias correctness tests were performed.

The study shows that energy efficiency is associated with firm value, and the role of analyst coverage as an external corporate governance mechanism is positive and significant on the value relevance of energy efficiency. Furthermore, this study documents that the relationship is shaped by sustainability-related internal and external risks, indicating that financial analysts’ role becomes more imperative when firms are subject to high scrutiny.

This study contributes to the literature by examining the intersections of energy efficiency, analyst coverage and firm value. It attempts to demonstrate how and why CEP and financial performance are linked. In the context of growing environmental concerns, the pressure of climate change and achievement of net-zero carbon emissions, this study provides valuable insights into the financial market wherein firms’ environmentally responsible behaviours are value-enhancing, and governance mechanisms are impactful. This study suggests that financial analysts can serve as an effective external corporate governance mechanism.