Gender Diversity's Mediating Effect on ESG Score and Financial Performance in UK

This dissertation explores the mediating effect of gender diversity on ESG score and financial performance in UK. It discusses the research methodology, literature review, data analysis, and estimation model. The study finds a significant relation between return on asset and board diversity, and a direct impact of return on assets over board diversity and ESG score.

Does gender diversity have a mediating effect on how ESG score influences financial
performance: Evidence from UK.
user

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Abstract
It discusses research methodology and its all elements such as research strategy, approaches, data
collection and analysis. It helps out researcher in collecting information as per the requirement of
research study and accomplishing goals as well. Further the data analysis also outlines that there
is a significant relation being present in the return on asset and the diversity of the board being
present. This is proven because the significance value is less than the standard. Also the another
set 3 the alternate hypothesis is proven correct that is there is a dependency being present in the
ESG and the diversity of the boards in better and effective manner. Further, there is an
alternative hypothesis accepted in which Return of Assets has a direct impact over the Board
Structure/Board Diversity, ESG score.

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Acknowledgement

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Table of Contents
Abstract……………………………………………………………………………………………1
Acknowledgement………………………………………………………………………………...2
Chapter One….……………………………………………………………………………………3
Chapter 1.........................................................................................................................................5
1.1 Introduction:.........................................................................................................................5
1.2 Research background:............................................................................................................6
1.4 Literature Gap........................................................................................................................7
Chapter 2.......................................................................................................................................10
2. Literature Review......................................................................................................................10
2.1 Overview of ESG Score.......................................................................................................10
2.2 Influence of ESG Score on Financial Performance.............................................................12
2.3 Impact of Gender Diversity on ESG Score and Financial Performance.............................14
2.4 Influence of Gender Diversity on ESG Score in the UK.....................................................15
2.5 Influence of Gender Diversity on Financial Performance in the UK..................................16
2.6 Theoretical Framework........................................................................................................18
Chapter 3.......................................................................................................................................20
3.0 Data and Methodology............................................................................................................21

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3.1 Data Sources:.......................................................................................................................21
3.3 Model specification:............................................................................................................25
...................................................................................................................................................26
Chapter 4.......................................................................................................................................26
4.0 Portfolio formation, model estimation and analysis............................................................27
4.1 Regression model, estimation and analysis of results:........................................................27
Chapter 5.......................................................................................................................................42
6.0 References...............................................................................................................................45

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Chapter 1
Introduction

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1.1 Introduction:
This chapter is about investigation on the study of FTSE 100 company in the UK where it will
address the topic on gender diversity and if it has a mediating effect on how ESG Score
influences the firm performance. It explains the background of the research study, the objective
behind taking this study and the aim of it. It also addresses the statement of hypothesis of the
study.
1.2 Research background:
ESG plays an important role in present business world. ESG stands for Environmental, Social
and Governance. These three components have become major factors in measuring the
sustainability of an investment in the firm. ESG analysis helps to estimate an organization’s
current and future prospect in regards to their service to the society and also its aim in adopting
ESG friendly operations in their business practices. The companies these days have been
focusing on giving importance to environmental, social, and governance (ESG) issues as these
factors have a growing importance among the shareholders and various stakeholders.
The ESG rating mechanism helps an organization to measure its exposure to long-term risks in
the context of environmental, social and governance factors. The long-term risks that are
calculated using the ESG rating system comprise of the problems related to the board
independence, energy efficiency and the employees safety (Balasubramanian, 2019).
Along with the ESG score, gender diversity too plays an important role in the firm. Gender
diversity is a term to express the equality of men and women for fair rights and representation of
the people. It has become an important part due to the growing importance of female members in
the board of directors. Every business organization should take the initiative to include both men
and women on the board. The reason being, they both have different perception and insights for

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the same situation in the context of problem-solving. This evaluation of different viewpoints
helps to improve the business performance.
A study by Arayssi, Dah and Jizi (2016) highlighted that diverse teams perform more efficiently
than gender biased teams as women on board brings new ideas and helps to solve complex
problems. Though gender diversity may or may not directly impact the firm's financial
performance. But, there is a major debate regarding whether gender diversity influences the
company's Environmental, Social and Governance (ESG) scores in the UK.
There are previous studies in abundant that addressed the topic on ESG and its effect on firm
performance. The study available affirms that most of them were researched on all the
companies in the UK and also for a considerable length of time. But, since the data of ESG score
and gender diversity were not available for all the companies so it was excluded from the sample
size. This resulted in an inadequacy of result.
The estimation model in previous research included few explanatory variables. The previous
research used mostly the return on assets along with market capitalisation. But, inclusion of more
variables will make the research more robust and explanatory to affirm on the findings.
1.3 Research objective:
The objective behind taking up this study is due to the increasing importance of ESG reporting
and gender diversity in recent years. Also, the ESG Reporting is going to be mandatory in
coming years where all the companies would be inclined to present their ESG Reports along with
their Annual Reports. These ESG reports would be an essential tool in decision making process
for both shareholders and stakeholders as they are interested to know more about the companies
contribution to the environment, society and governance factors. Also, the inclusion of women
on board further enhances the decision making process and this will add value to the firms. At
present, only the public listed firms in the UK have to mandatorily furnish the ESG Report with
the Annual Report.
There is a lack of previous academic research on gender diversity and its mediating effect on
ESG Score and firm performance. Having looked at the existing literature in this area, none of
the previous studies have addressed the topic on gender diversity and the role it plays in the non-
financial performance of the firm. So, this study fills this gap in literature.

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Again, this study also contributes to the firm as well as to the investors. The performance of the
firm can be enhanced due to ESG reporting and the investors will have confidence in the firm as
the firms are contributing to the environment, society and governance factors. The ESG reporting
adds value in the investors' eyes while taking decisions on investments. According to Cornell and
Damodaran (2020), ESG adds value to the firm in five different ways: uplifting the productivity
of the employees, reducing the interventions of regulations and legal practices, reducing the cost,
top-line growth, and optimizing investments and assets.
1.4 Literature Gap
The research study on ESG reporting, gender diversity and firm performance have been done by
varied scholars. But, they have not been able to come up with a compelling outcome. Research
on meta-analysis reflects that the reason for differed results is due to the application of
sustainability performance units in an uneven manner (Horvathova, 2010).
Furthermore, underpinning the previous literary evidence, it can be seen that, post-
implementation of the IR, ESG rating has developed for the firms. Apart from this, Albitar et al.
(2019) demonstrated that sustainability reporting and performance have some relation; however,
the degree of association and how it is influenced in case of the presence of ESG score of the
firms is still under debate. Moreover, a limited study displays whether gender diversity mediates
how ESG score influences financial performance: evidence from the UK. So, the future study
will be a pivotal research work that will explain the FTSE 100 companies for its impact of
gender diversity and ESG Score in case of firm performance.
1.5 Research question/hypothesis:
Does gender diversity have a mediating effect on how ESG score influences financial
performance: Evidence from UK.
1.6 Plan of study:
The report is further divided into following chapters:

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Chapter Two: Literature Review
This chapter discusses the work of previous scholars and sheds light on previous empirical
studies on the ESG scores and the influence of the ESG score on the financial performance of
different organizations. It also highlights previous studies on gender diversity and its effect on
ESG scores and financial performance. Furthermore, the chapter discusses the objective behind
the research of previous scholars, methodology undertaken, estimation model used to derive the
results and the conclusion on their work. It also critically analyse the findings of scholars made
during their research study.
Chapter Three: Data and Methodology
This chapter discusses the data that has been used in the research and the techniques the research
has used to analyse the data and their outcome.
Chapter Four: Estimation model and analysis
This chapter highlights the estimation model that has been used to derive the result from the data
that has been discussed in chapter three and it analyses the outcome derived from regression. It
also discusses the results by comparing it to previous scholar works to highlight the differences
and similarities on the outcome.
Chapter Five: Conclusion
After performing the analysis, chapter five would present the conclusion on the basis of the result
that has been obtained in this study. This chapter also discusses the limitations of this research
work and the scope of future research.

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Chapter 2
Literature Review

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2. Literature Review
2.1 Overview of ESG Score
An ESG Score is a tool to measure an organization’s long-term exposure to environmental,
social, and governance risks. A study by Drempetic, Klein and Zwergel (2019) mentioned that
the ESG score helps to determine the organization’s performance in three primary parameters:
environmental, social, and governance. A general EGS score of 50 means the company is
relatively average and an ESG score of 70 or higher means above average with its peer group.
The ESG ratings focuses on identifying ESG risks and key issues in a company and its impact on
the firm. The ESG scores are perception-based and are calculated based on how a company is
perceived to be performing ahead. The ESG score helps in assessing and analyzing the
performance of internal and corporate activities in regards to the social, environmental and
governance factors (Mihaiu, et al. 2021). The ESG scores are evaluated by third party EGS data
providers such as “Bloomberg ESG Data Service, Dow Jones Sustainability Index (DJSI),
Corporate Knights Global 100; Institutional Shareholder Services (ISS) etc.” The results of ESG
score may vary among different providers as there is no assessment and measurement basis.
As per Escrig-Olmedo, et al. (2019), ESG ratings are structured in such a way that it can evaluate
the company’s exposure to long term risks in the context of environmental and industrial aspects
as well as social and governance risks. The MSCI ESG Ratings are calculated by implementing a
rule-based methodology. It is calculated on the basis of scores on a scale from AAA to CCC
depending on the exposure of the risks of the company in comparison to the competitors
operating in the same market (Folqué, Escrig‐Olmedo and Corzo Santamaría, 2021). The Smart
ESG Methodology has focused on removing biases and implementing different quantitative

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ranking systems, which is crucial for developing past evidence and future views (Park and Jang,
2021).
Figure 1: ESG Scores of Leading Global Firms by Provider Level in 2021
(Source: Statista Research Department, 2021)
Zumente and Lace (2021) have identified that the investors have shown interest in the investment
of their funds as per the ESG score of the companies. Therefore, the process has provided
opportunities for the mutual funds and several brokerage firms to deliver Exchange Traded
Funds (ETFs) and different financial products and services as per the ESG score of the
companies. The investment by investors by looking into the different ESG parameters has also
been known as the sustainable investing system (Diez-Cañamero et al., 2020).
2.2 Influence of ESG Score on Financial Performance
The ESG score focuses on the development of environmental, social and corporate governance
systems. This development has positively influenced the financial performance of the
organizations. In total, approximately 58% of the organizations stated a positive relationship

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between their ESG score and the financial performance between 2016 and 2020 (Whelan et al.,
2015). According to Grim, and Berkowitz (2020), due to the positive effect of the ESG score, the
management are making rational and responsible decisions that substantially lead to the
improvement of their financial performance.
Figure 2: Influence of ESG Score on Financial Performance for Different Organisations
(Source: Whelan et al., 2015)
Again, a study by Dorfleitner et al. (2018), stated that the maintenance of proper values in the
ESG parameters have provided sustainability in the environmental, social, and corporate
governance activities. This has ultimately helped in the development of accurate scores in
different operational parameters such as Return on Equity (ROE), Return on Asset (ROA) and
stock price system.
Kotsantonis et al. (2019) in his study stated that the ESG score helps the organization to enhance
their financial performance and sustain for a long period of time. This was further confirmed by
the senior management officials in the corporates, who opined that the investment in
environmental sustainability does not impact the financial performance of the organisations in
the short-term period. However, it positively influenced in the long-term period (Khan et al.
2016).
Atz et al. (2019) in his study highlighted that the decarbonization strategies have helped the
companies in the achievement of positive financial performance due to the reduction of carbon
emissions in their production units as the emissions are detrimental to the environment. The
climate change process will transform the economies and market standards in the future with the

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help of changing regulatory principles and consumption patterns, especially due to advanced
consumer behavior and technological enhancement.
2.3 Impact of Gender Diversity on ESG Score and Financial Performance
The extent of diversity in a company also affects ESG. Being diverse helps companies because
individuals with varied experiences, talents, and knowledge bring various views into
consideration. A research study by Elmagrhi et al. (2018) highlighted that belief, attitude and
cognitive functioning are hardly distributed randomly among individuals, but they differ
systematically with certain demographic variables, including gender, race and age. For instance,
greater diversity can help the business better understand the market in a diverse market. Firms
can represent various stakeholders in an increasingly diversified market to develop a deeper
understanding of the needs of different stakeholder groups and improve their knowledge of the
marketplace. As stated by Elmagrhi et al. (2018), there have been cases where firms are seen to
respond to stakeholder demands more effectively in their ESG initiatives by providing them with
better answers. The presence of various viewpoints improves creativity and innovation. The
different points of view give the corporations more possibilities for a resolution that is superior
to the status quo. Firms that embrace diversity can offer higher-quality solutions to the problems.
Having a diverse group with varied experiences allows them to look at issues from various
viewpoints and have a broader discussion about potential outcomes and ramifications of each
involving ESG campaigns. Businesses can evaluate ESG options that meet stakeholder demands
more comprehensively with many viewpoints. In turn, this calls for the board of directors to
initiate working together with the CEO, CFO, and other stakeholders to achieve consistency in
communication and implementation of their ESG strategy.
As rightly identified in the article by Abdelfattah et al. (2021), exposure to diversification
enables boards to represent shareholders better, nurture the appreciation of "intangibles" such as
life issues or work, and contribute to employers' recruitment or retainment of top executive
women and minorities.
However, on the other hand, a less diverse board might create problems in thinking critically and
innovation. Diversification within the board may help avoid hasty decisions as it provides fresh
viewpoints into the debate. This will help in enhancing its corporate governance and financial

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performance by solving complex problems with innovative thoughts and ideas. In the words of
Albitar et al. (2019), diversity in board composition can facilitate communication across diverse
internal and external groups because it allows for a broader dialogue that considers many
viewpoints.
2.4 Influence of Gender Diversity on ESG Score in the UK
ESG is a mere tool that attempted to engage or establish relationships with stakeholders by
improvising the firm's environmental, social, and ethical standards of operations. In the words of
Terjesen et al. (2009), such decisions bear a high probability of eventually leading to the
improvisation of corporate performance.
Given the need for ESG on the success level of firms, scholars seemed to put a great deal of
effort to identify factors influencing decisions about ESG. Public companies seem to be facing a
lot of investor pressure regarding improving diversity among their directors rank thus
underscoring a greater awareness of the need to address ESG issues. One of the key indicators in
relation to board diversity involves gender diversity.
A study by Albitar, et al. (2019) shed light on the role of Integrated Reporting and gender
diversity. In his study, it has been observed that Integrated Reporting (IR) plays an important
role with regard to the relationship between Firm Performance (FP) and that of Environmental,
Social, and Governance Disclosure (ESGD). In this regard, IR firms show a trend to achieve
better FP compared to non-IR counterparts. This, as a result, highlights the fact that stakeholders
have implemented efforts in relation to encouraging the voluntary engagement of the firms in IR
within the UK. As IR practices are more developed in the UK than other European countries,
women may be more frequently hired for board positions at IR firms. This result implies that
companies with good FP have a higher percentage of female directors within their boards.
On the contrary, a study by Arayssi et al. (2016), reveal no significant relationship between
ESGD and ROE, thus implying that this variable was not substantial enough to influence
shareholder returns. In his study, it can be observed that the relationship between ESGD and
ROE is not strong, and organizations with a high percentage of female directors on boards may
not necessarily generate more shareholder returns as compared with their counterparts. The

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reports show that larger companies have a higher ratio of women in top management positions
and those serving on boards. In the words of Zumente and Lace (2021), this implies that ESGD
has been widely concerned by most large UK companies that are actively promoting gender
diversity at all levels within the firm. Moreover, FP shows a significant negative relationship
with Global Industry Classification Standard (GICS) sectors such as materials, telecoms, energy,
and utilities.
As rightly pointed out by Albitar et al. (2019), gender diversity is also evident in environmental
factors of a company's financial performance, where results show that ESGD has a negative
relationship with GICS sectors such as energy materials, telecoms, and utilities. However,
studies have shown mixed results regarding this issue, so there is no definite evidence that shows
the effect of different corporate governance types on a firm's environmental performance.
A recent survey by KPMG stated that 93% of the respondents believe that the importance of
sustainable development issues will increase over time (Elmagrhi et al., 2018). It can be further
stated that the market environment has been affected by governance practices concerning ESGD
where sustainable development issues are becoming increasingly important to companies. Thus,
this may lead to better environmental performances of firms.
Much of the early literature was written from the point of view that there is also a significant
relationship between ROE and GICS sectors such as utilities and energy. This implies that poor
performance on ESGD in these regions are more likely to effect shareholder's returns. This
further supports the importance given to sustainable development issues in today's competitive
business world where people want only the best products and services from companies.
2.5 Influence of Gender Diversity on Financial Performance in the UK
Gender diversity has been a hot topic in the general media for some years now, with an
increasing focus on the role of women at all levels of organizations. In 2003, a research
identified a so-called "gender-diversity bonus", which was later made more specific as a "gender-
balanced management approach" and defined as the potential effect of gender-diversity on
financial outperformance (Horvathova, 2010). In fact, many top global companies have
recognized the benefits of this approach, and some have even started to prioritize it in their

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business strategy by setting specific diversity targets. There is currently some debate among
academicians about whether a "gender-diversity" effect actually exists.
For instance, in 2017, the British government released the Hampton Alexander report, which
provides a recommendation that FTSE100 firms are to have around 33% female leadership team
members by 2020 (Branco and Rodrigues, 2016). Other countries, such as Iceland, Germany,
Spain, Norway, France, Kenya, Belgium, Italy, and Finland have implemented statutory quotas
mandating corporations to hire around 30 to 40 percent women within the respective corporate
boards
If it is the case that such trends are on the rise, then it would seem reasonable to hypothesize that
the financial impact of ESG practices is measurable as well as tangible. In this regard, the gender
quota shown in research resulted in an increase of inexperienced female directors, which has had
a detrimental impact on company’s financial performance. On the other hand, the UK has taken a
more voluntary approach to gender equality than the quota-based one. The idea behind the
voluntary method is to promote substantial changes in corporate culture from within rather than
forcing it upon organizations, which might result only in increasing the number of women in
boardrooms.

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Figure 3: Examination of female representation among FTSE 100 companies
(Source: Branco and Rodrigues, 2016)
Despite the voluntary approach of the UK, the proportion of women within the company boards
is increasing. From the above figure, it can be seen that upon examination of female
representation among FTSE 100 companies, the proportion has risen steadily from 14% in 2005
to 27% in 2016. The proportion has been the highest level in the previous 10 years before
dropping to 25% in 2016 (Branco and Rodrigues, 2016). The above data suggests a shift towards
the involvement of women within UK boardrooms. However, the analysis reveals that a rise in
company financial performance has not accompanied such an increment. In the UK, there is a
robust body of literature that looks at how gender diversity contributes to corporate success. In
terms of board-level representation of women, the research divides into two streams: those who
look at female representation as a determinant of financial performance and those who
investigate female board representation as a determinant of firm social performance.
The UK government recognizes the various benefits that gender diversity brings to UK
organizations, especially in making better use of the talent pool of the whole population, which is
increasingly female. As cited by Brahma et al. (2021), a 2016 review on women in leadership
reports economic benefits associated with an increased ratio of women on boards. In this regard,
the government has set voluntary targets for UK organizations to achieve by 2017 through its
Women on Boards program, launched in February 2011. The aspiration is that women should
make up 25% of the membership of FTSE 100 boards by 2016, rising to 33% by 2020 (Campbell
and Minguez-Vera, 2018). Since 2011, there seems to be an increment in a number of females
within board representation across UK companies, with more than 523 women appointed to join
the boards of FTSE 350 companies between September 2010 and January 2016. Currently, the
UK has a higher number of women on boards than many countries. Research from Credit Suisse
in 2014 shows that the UK ranks fifth out of 43 countries for its percentage of female board
members which is 17% compared to 12% globally and second only to Norway for its female
board-membership growth rate since 2009.

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2.6 Theoretical Framework
The stakeholder theory and agency theory have been widely used to understand the relationship
between a diversified board, the ESG score and firm performance. A study by Branco and
Rodrigues (2016) supports the stakeholder theory and argues that a company's success depends
on how effectively it maintains its relationships with its society, responding to their concerns and
obligations, and respecting their values. The stakeholders, in this regard, include creditors,
customers, shareholders, suppliers, society and the government at large.
Sewpersad, (2019) opined that diversity is an important aspect that instils innovation and boost
togetherness among the workforce. Gender diversity is the S in the ESG. Gender equality is a
crucial aspect involved in the social category of ESG. An organization with an inclusive
approach and a diversified gender based workforce, perform more effectively and has productive
decision making competency (Cletus et al. 2018). Furthermore, the theory that can be stated to
elaborate and resolve problems between the principles and their corresponding agents is the
agency theory (Khoreva, and Wechtler, 2020).
Figure 4: Stakeholder Theory
(Source: Branco and Rodrigues, 2016)

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With reference to the above figure, it can be said that the theory calls for company leaders to take
into regard or comprehend constituencies that are likely to show an impact upon their operations.
In this paper, stakeholder's theory will be used, as it provides the perspective of capitalism. The
theory will also help to establish the interrelationship between the business and its corresponding
stakeholders such as the suppliers, the investors, the workforce, and the community as a whole
(Branco and Rodrigues, 2016).
Chapter 3
Data And Methodology

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3.0 Data and Methodology
3.1 Data Sources:
There are two types of research method namely qualitative and quantitative. Qualitative
method of research covers the theoretical concepts and aspect in the whole study while the
quantitative research covers the facts, figures and numerical data regarding the research topic in
the study. This study has selected quantitative research.
Data sources is the section of data methodology which states the sources from where the
data has been collected (Basias and Pollalis, 2018). There are basically two type of data sources
namely primary and secondary sources from where the researcher able to collect the data on the
research topic with the purpose of achieving aim and objectives in successful manner. Primary
source is the type of data sources under which scholar collect the data from participants using the
survey, interview method. While on the other hand, under secondary source, scholar collect the
data from books, journal, websites, articles, business news, magazines etc.
In the present study on the analysis of gender diversity effect on ESG score, the scholar
has been using only secondary sources to collect wide data or information. Under secondary
source, the scholar has been used various books, journals, articles, business news as well as
magazines published after year 2017. Also, the quantitative data has been collected from
secondary sources such as data stream from 2018 to 2021. This is done in order to ensure the
viability as well as reliability of the given secondary data used in the present study.

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3.2 Discussion of variables:
There are three types of variable in the regression analysis namely dependent, independent and
control variables. The dependent, independent and control variables used by the scholar for the
purpose of present quantitative research are as follows:
Dependent Variable: Dependent variables are the variables which changes as per the result of the
independent variable manipulations. The scholar has selected two dependent variables for the
purpose of regression analysis which are as follows:
Return on Assets: The return on assets is the dependent variable which depend on the broad
diversity and ESG score. The return on assets is a financial ratio which indicate the profitability
performance of the company in comparison to its total assets (Plonsky, 2021).
Return on Equity: This is also a dependent variable taken by the scholar in the present study to
identify the its impact over the broad diversity and ESG score of FTSE 100 company. The return
on equity is also one of the financial matrix which indicate the capability of company to generate
profit or return from its equity capital. This is a dependent variable for the present study.
The reason behind the selection of return on assets and return on equity as a dependent
variable is that it is best for analyzing the financial performance of the company.
Independent Variable: Independent variables stand alone and does not changes as per the change
in any of the other variable that scholar used to measure relationship. The selected independent
variable for the present study is as follows:
ESG Score: The ESG score is a measurement unit which is usually used to measure the company
exposure to long term environmental, social as well as governmental risk. This is basically
overlooked during the traditional financial analysis. This is an independent variable for the
current study which is cause while the dependent is effect in a research study.
Board diversity: This is another independent variable which stand alone and do not change with
the change in the return on assets and return on equity of the FTSE 100 company. The board

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diversity is the concept which aim to build a broad spectrum of demographic attributes and
characteristics in the boardroom. The gender diversity is the common measure to promote the
heterogeneity in the board of directors. In simple term, the board gender diversity is one of the
significant aspects of the corporate governance which indicate the presence of female directors
on the board of director of the company. Thus, the scholar has considered this as an independent
variable (Salami, Abubakar and Tanrivermiş, 2022).
The reason behind the selection of ESG and broad diversity as an independent variable in
the present study because it is related to the selected research topic. The aim of this study is to
analyses the effect of board diversity on the ESG score influencing financial performance.
Control variable: On the other side, control variable is the variable that stand constant and
limited in the research study. This are the variable that does not have significant impact over the
regression analysis but should consider. The control variables are as follows:
Market capitalization: The market capitalization of the company indicates the value of the
company traded on the stock market. It is identified on the basis of total number of outstanding
shares by the share price.
Debt to Equity: This is one of the control variable which indicate the ratio between the debt to
equity capital of the company. This ratio basically indicates the proportion of company debt
capital and its equity capital.
Sector code: The sector code is a five digital classifications which is also consider as a control
variable in the present study by the scholar (Salami, Abubakar and Tanrivermiş, 2022).
Growth: The growth is also one of the control variable taken by the scholar for the purpose of
regression analysis. The variable indicates the growth of the company in the term of financial as
well as non-financial performance.
The reason behind the selection of market cap, debt to equity, sector code and growth as a
control variable is that this variable affect the performance of the company not directly but
indirectly.

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3.3 Model specification:
In order to analyze the collected primary data, the regression model and descriptive statistical
model has been used by the scholar using Excel software. With the help of descriptive statistics,
the quality characteristics of dataset has been identified such as mean, mode, median, standard
deviation, variance etc. On the same side, with the use of regression model, the scholar will
analysis that whether there is a statistical relationship exist between the dependent and
independent variable or not (Provenzano and Baggio, 2019). For this hypothesis has been set by
the scholar under different set which are as follows:
Set1 (i):
H0 There is no significant association between the return on assets and board structure, EGC
score.
H1 There is a significant association between the return on assets and board structure, EGC
score.
Set1 (ii):
H0: There is no difference between the mean value of return on equity and ESG Score, Board
diversity.
H1: There is a difference between the mean value of return on equity and ESG Score, Board
diversity.
Set 2:
H0- There is not any relation being present between return on asset and the board diversity.
H1- There is a significant relationship being present within the return on asset and the diversity
within board.
Set3:
H0- There is not any dependency of ESG on the board diversity of the company.
H1- There is dependency of the ESG on the board diversity of the company.
Regression Equation: Set1 (i)
Dependent: Return on assets and Independent: ESG Score, broad diversity

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ŷ = 11.525 + (-0.305) ESG Score + 0.535 Board structure and board diversity
Set1 (ii)
Dependent: Return on assets and Independent Board diversity, ESG Score
ŷ = 28.721 + (-0.947) ESG Score + 1.793 Board structure and board diversity
Set 2 (i)
Dependent: Return on assets and Independent Board diversity
y = -4.400 + 0.385 Board diversity
Set2 (ii)
Dependent: Return on equity and Independent Board diversity
Y = -20.819 + 1.325 Board diversity
Set 3 (i)
Dependent: ESG score and Board diversity
ŷ = 52.293 + 0.493 Board diversity

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Chapter 4
Model Estimation and Analysis
4.0 Portfolio formation, model estimation and analysis
4.1 Regression model, estimation and analysis of results:
H0: There is no significant association between the return on assets and board structure, EGC
score.
H1: There is a significant association between the return on assets and board structure, EGC
score.
Model Summaryc
Model R R Adjusted R Std. Error of Change Statistics

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Square Square the Estimate R Square
Change
F
Change
df1 df2 Sig. F
Change
1 .294a .086 .082 19.25371 .086 18.788 2 397 .000
2 .759b .575 .566 13.24256 .489 64.174 7 390 .000
a. Predictors: (Constant), Board Structure/Board Diversity, ESG score
b. Predictors: (Constant), Board Structure/Board Diversity, ESG score, TOTAL DEBT % COMMON EQUITY, 2020,
Sector code, 2019, MARKET CAPITALIZATION, 2018, Growth
c. Dependent Variable: RETURN ON ASSETS
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1
Regression 13929.463 2 6964.732 18.788 .000b
Residual 147169.974 397 370.705
Total 161099.437 399
2
Regression 92706.953 9 10300.773 58.739 .000c
Residual 68392.485 390 175.365
Total 161099.437 399
a. Dependent Variable: RETURN ON ASSETS
b. Predictors: (Constant), Board Structure/Board Diversity, ESG score
c. Predictors: (Constant), Board Structure/Board Diversity, ESG score, TOTAL DEBT %
COMMON EQUITY, 2020, Sector code, 2019, MARKET CAPITALIZATION, 2018, Growth
Coefficientsa
Model Unstandardized
Coefficients
Standardized
Coefficients
t Sig. 95.0% Confidence
Interval for B
B Std.
Error
Beta Lower
Bound
Upper
Bound
1
(Constant) 11.525 4.899 2.353 .019 1.895 21.156
ESG score -.305 .062 -.244 -4.885 .000 -.427 -.182
Board
Structure/Board
Diversity
.535 .108 .247 4.937 .000 .322 .748
2 (Constant) 9.192 3.652 2.517 .012 2.012 16.373
ESG score -.128 .047 -.103 -2.746 .006 -.220 -.036

29
Board
Structure/Board
Diversity
.257 .080 .118 3.208 .001 .099 .414
MARKET
CAPITALIZATION
6.051E-
009 .000 .010 .267 .790 .000 .000
TOTAL DEBT %
COMMON
EQUITY
-.047 .003 -.950 -
16.504 .000 -.052 -.041
Sector code .032 .025 .043 1.260 .208 -.018 .082
Growth .610 .029 1.220 20.770 .000 .552 .668
2018 .821 1.968 .018 .417 .677 -3.049 4.691
2019 -1.356 1.943 -.029 -.698 .486 -5.176 2.465
2020 .723 1.896 .016 .381 .703 -3.005 4.451
a. Dependent Variable: RETURN ON ASSETS
Set 1- ii
Null hypothesis: There is no difference between the mean value of return on equity and ESG
Score, Board diversity.
Alternative hypothesis: There is a difference between the mean value of return on equity and
ESG Score, Board diversity.

30
Model Summaryc
Model R R
Square
Adjusted
R Square
Std. Error
of the
Estimate
Change Statistics
R Square
Change
F
Change
df1 df2 Sig. F
Change
1 .243a .059 .055 76.37340 .059 12.502 2 397 .000
2 .838b .701 .695 43.40959 .642 119.837 7 390 .000
a. Predictors: (Constant), Board Structure/Board Diversity, ESG score
b. Predictors: (Constant), Board Structure/Board Diversity, ESG score, TOTAL DEBT %
COMMON EQUITY, 2020, Sector code, 2019, MARKET CAPITALIZATION, 2018, Growth
c. Dependent Variable: RETURN ON EQUITY
ANOVAa
Model Sum of
Squares
df Mean
Square
F Sig.
1
Regression 145849.355 2 72924.677 12.502 .000b
Residual 2315659.645 397 5832.896
Total 2461509.000 399
2
Regression 1726595.755 9 191843.973 101.807 .000c
Residual 734913.245 390 1884.393
Total 2461509.000 399
a. Dependent Variable: RETURN ON EQUITY
b. Predictors: (Constant), Board Structure/Board Diversity, ESG score
c. Predictors: (Constant), Board Structure/Board Diversity, ESG score, TOTAL
DEBT % COMMON EQUITY, 2020, Sector code, 2019, MARKET
CAPITALIZATION, 2018, Growth
Coefficientsa
Model Unstandardized
Coefficients
Standardized
Coefficients
t Sig. 95.0% Confidence
Interval for B
B Std.
Error
Beta Lower
Bound
Upper
Bound
1 (Constant) 28.721 19.432 1.478 .140 -9.481 66.923
ESG score -.947 .247 -.194 -3.831 .000 -1.433 -.461

31
Board
Structure/Board
Diversity
1.793 .430 .212 4.169 .000 .947 2.638
2
(Constant) 11.103 11.973 .927 .354 -12.436 34.642
ESG score -.145 .153 -.030 -.947 .344 -.447 .156
Board
Structure/Board
Diversity
.638 .262 .075 2.435 .015 .123 1.154
MARKET
CAPITALIZATION
5.346E-
008 .000 .022 .719 .472 .000 .000
TOTAL DEBT %
COMMON
EQUITY
-.161 .009 -.838 -
17.369 .000 -.179 -.143
Sector code .141 .083 .049 1.707 .089 -.021 .304
Growth 2.607 .096 1.334 27.074 .000 2.417 2.796
2018 -6.603 6.453 -.036 -1.023 .307 -19.289 6.084
2019 -6.630 6.370 -.037 -1.041 .299 -19.154 5.894
2020 2.142 6.216 .012 .345 .731 -10.079 14.364
a. Dependent Variable: RETURN ON EQUITY
Interpretation: From the set 1-i of the above table, it has been identified that there is an
alternative hypothesis is accepted over null because the value of p is lower than 0.05 and that is
why, it can be stated that the value of ESG score and Board diversity have direct impact over the
return on assets. Further, the summary output table also entails that there is a weak association
between the variable and this in turn shows that when the ESG score and Board structure
fluctuate there will be only 29% association (as per the R value of 1 model represent) identified
over the Return on assets. Further, the value of R under 2nd model summary reflected that there is
75% association between the dependent and control variables. However, the R square value
reflected that there are only 8% changes identified over the dependent value and this in turn
shows that there will be very minute changes has identified over the same. That is why, it can be
stated that due to control variable there is no change identified within the dependent value, the
values might be fluctuate and this in turn shows that there is a relationship between the return on
assets and Board structure and ESG score.

32
Overall, through the inferential test, it has been identified that there is a need to use ESG
score that improve the financial performance. Whelan and et.al., (2021) explained that ESG
score mainly focus upon the environmental, social and corporate governance system which
definitely affect the financial performance and it is also somehow linked with return on assets.
That is why, alternative hypothesis has accepted over the other which in turn reflected that if the
company maintaining the proper value within ESG scores that it is will beneficial for the form to
generate a better result. Also, it has been identified that there is a need to focus upon the ESG
score and this in turn assist to generate a better outcome because return on assets is indicated
financial ratio which determine how profitable the company is in order to create a better
outcome.
In addition to this, the survey from KPMG stated that the importance of sustainable
development issue will be increases within a time and this always affected the government
practices through which company affected adversely. This in turn help to improve the results and
create a better outcome for the company’s performance. For example, if the company with high
ESG rating can experience higher in the stock returns and this in turn increases the number of
investors who actually cares for the ESG factors. This in turn create a better outcome and also
improve the performance of a company in positive manner. Hence, it can be stated that with the
help of ESG where company’s environmental, social and governance practice actually assist the
firm to measure the financial performance and when the social responsible investing involves
choosing the investment which is based upon the specific ethical criteria so that the aim of the
company can be met within a business performance. Hence, it can be stated that ESG integration
is considered as a strategy which in turn perform the better outcome and also improve the
performance of the company by focusing upon the different causes.
That is why, it has been analysed where output shows that there will be weak association
between the independent and dependent variable which in turn reflected that there is a need to
improve the outcome. Giese and et.al., (2019) also critically evaluated that as return on the
financial performance will be increases when the company have high ESG scores and this shows
that company is able to perform high as compared to their competitor and that is why, it is acting
more sustainably. Also, it has been identified that with the change in the overall performance the
chances of fluctuating return on asset will be decreases when the company have poor ESG score.
That is why, it can be stated that there is a direct association between the variable because it

33
causes a direct impact over the business performance in order to change in the performance. The
alternative hypothesis is also entails that when the company is investing upon the sustainability
dominate then it might be found the negative association between the variable. Ashwin Kumar
and et.al., (2016) also explained that decarbonization strategies also assist the company to attain
the positive financial performance because it assists to create a positive impact over the
environment. That is why, there is a need to focus upon board structure and ESG score that
always have a direct impact over the return on assets.
Set 2- 1
H0- There is not any relation being present between return on asset and the board diversity.
H1- There is a significant relationship being present within the return on asset and the diversity
within board.
Model Summaryc
Model R R
Square
Adjusted
R Square
Std. Error
of the
Estimate
Change Statistics
R Square
Change
F
Change
df1 df2 Sig. F
Change
1 .178a .032 .029 19.79902 .032 12.967 1 398 .000
2 .753b .567 .558 13.35289 .536 69.146 7 391 .000
a. Predictors: (Constant), Board Structure/Board Diversity
b. Predictors: (Constant), Board Structure/Board Diversity, TOTAL DEBT % COMMON
EQUITY, 2020, MARKET CAPITALIZATION, Sector code, 2019, 2018, Growth
c. Dependent Variable: RETURN ON ASSETS
ANOVAa
Model Sum of
Squares
df Mean
Square
F Sig.
1
Regression 5082.971 1 5082.971 12.967 .000b
Residual 156016.467 398 392.001
Total 161099.437 399
2
Regression 91384.282 8 11423.035 64.067 .000c
Residual 69715.156 391 178.300
Total 161099.437 399
a. Dependent Variable: RETURN ON ASSETS
b. Predictors: (Constant), Board Structure/Board Diversity

34
c. Predictors: (Constant), Board Structure/Board Diversity, TOTAL DEBT %
COMMON EQUITY, 2020, MARKET CAPITALIZATION, Sector code,
2019, 2018, Growth
Coefficientsa
Model Unstandardized
Coefficients
Standardized
Coefficients
t Sig. 95.0% Confidence
Interval for B
B Std.
Error
Beta Lower
Bound
Upper
Bound
1
(Constant) -4.400 3.760 -1.170 .243 -11.792 2.992
Board
Structure/Board
Diversity
.385 .107 .178 3.601 .000 .175 .595
2
(Constant) 2.668 2.797 .954 .341 -2.832 8.168
Board
Structure/Board
Diversity
.200 .078 .092 2.567 .011 .047 .353
MARKET
CAPITALIZATION
-
1.475E-
008
.000 -.023 -.684 .494 .000 .000
TOTAL DEBT %
COMMON
EQUITY
-.047 .003 -.967 -
16.756 .000 -.053 -.042
Sector code .036 .025 .049 1.420 .156 -.014 .086
Growth .623 .029 1.247 21.342 .000 .566 .681
2018 .489 1.981 .011 .247 .805 -3.406 4.384
2019 -1.660 1.956 -.036 -.849 .397 -5.506 2.186
2020 .693 1.912 .015 .362 .717 -3.067 4.452
a. Dependent Variable: RETURN ON ASSETS
With the help of the regression analysis output it is clear that the null hypothesis is being
reject and the alternate is being selected. This is pertaining to the fact that the significance value
is 0.00 which is less than the standard of 0.05. Hence, with this it can be implied that there is a
relation being present between both the variables that is board diversity and the return on asset.

35
This is pertaining to the fact that return on asset is dependent over the board diversity and
statistically it is also proven. This is proved with the help of the fact that the return on asset is
dependent over the board diversity. This is because when the board diversity will not be good
then this will be affecting the return which asset is earning. Also, the R value is 17 % (according
to 1 model) which indicates that the correlation between both these variables is low but they are
correlated to one another. Thus, this implies that the return on asset and board diversity is relate
to one another. In addition to this, the R square is 3.2 % (according to 1 model) and this implies
that any change in the independent variable will be leading a change of 3.2 % in the dependent
variable as well.
Moreover, with the help of the second model it is clear that the correlation that is R is 75
% which implies that both the variables are highly correlated to one another. Along with this R
square is 56.7 % and this indicates that when there will be change in any independent variable
then it will be causing a change of 56.7 % in the dependent variable as well. also the significance
value as per model 2 is 0.00 which implies that alternate hypothesis is proven correct and null is
being rejected. Further by the evaluation of the coefficient table it is clear that on the individual
basis the model 1 proves correct. In the model 2, the board structure, total debt and growth are
the factor which can affect the return on asset and not the other.
In support of this Jin, (2022) states that board of directors is a matter of concern for the
company and its performance. this is because of the reason that when the board of directors will
be active and be taking good decision then the investment will be done in better manner. Hence,
for this, it is necessary that board of directors must be active and be taking good decision to
invest. This is very necessary for the reason that when the directors will be taking proper
decision then this will be improving the return for the company as well. this is necessary for
improving the efficiency of the business and will be increasing the capability of the business in
better and effective manner. When the return on asset will be increasing then it can be implied
that the board of directors are working in better and effective manner. This is necessary for the
reason that in case the board of directors will not be good then the working efficiency of the
assets will be affecting the working of the directors and company to a great extent.
On the other hand, Giese and et.al., (2019) stated that when the board will not be efficient
enough then it will be affecting the return of the company. this is because of the reason that when
the board will not be working in efficient manner then this will be affecting the decision taken by

36
the board. Hence, ultimately it will be affecting the working efficiency of the company and also
the returns being earned by the company. Thus for improving the efficiency of the business it is
necessary to have good and efficient board members so that they can take proper decision and
work in direction of the betterment of the company.
Set 2- ii
H0- There is not any relation being present between return on equity and the board diversity.
H1- There is a significant relationship being present within the return on equity and the diversity
within board.
Model Summaryc
Model R R
Square
Adjusted
R Square
Std. Error
of the
Estimate
Change Statistics
R Square
Change
F
Change
df1 df2 Sig. F
Change
1 .156a .024 .022 77.67453 .024 9.985 1 398 .002
2 .837b .701 .695 43.40383 .676 126.233 7 391 .000
a. Predictors: (Constant), Board Structure/Board Diversity
b. Predictors: (Constant), Board Structure/Board Diversity, TOTAL DEBT % COMMON
EQUITY, 2020, MARKET CAPITALIZATION, Sector code, 2019, 2018, Growth
c. Dependent Variable: RETURN ON EQUITY
ANOVAa
Model Sum of
Squares
df Mean
Square
F Sig.
1
Regression 60242.370 1 60242.370 9.985 .002b
Residual 2401266.630 398 6033.333
Total 2461509.000 399
2
Regression 1724907.024 8 215613.378 114.451 .000c
Residual 736601.976 391 1883.893
Total 2461509.000 399
a. Dependent Variable: RETURN ON EQUITY
b. Predictors: (Constant), Board Structure/Board Diversity
c. Predictors: (Constant), Board Structure/Board Diversity, TOTAL DEBT %
COMMON EQUITY, 2020, MARKET CAPITALIZATION, Sector code,
2019, 2018, Growth

37
Coefficientsa
Model Unstandardized
Coefficients
Standardized
Coefficients
t Sig. 95.0% Confidence
Interval for B
B Std.
Error
Beta Lower
Bound
Upper
Bound
1
(Constant) -20.819 14.752 -1.411 .159 -49.820 8.182
Board
Structure/Board
Diversity
1.325 .419 .156 3.160 .002 .501 2.150
2
(Constant) 3.731 9.093 .410 .682 -14.145 21.608
Board
Structure/Board
Diversity
.574 .253 .068 2.268 .024 .077 1.072
MARKET
CAPITALIZATION
2.996E-
008 .000 .012 .428 .669 .000 .000
TOTAL DEBT %
COMMON
EQUITY
-.162 .009 -.843 -
17.574 .000 -.180 -.144
Sector code .146 .083 .051 1.769 .078 -.016 .309
Growth 2.622 .095 1.342 27.614 .000 2.435 2.808
2018 -6.978 6.440 -.039 -1.084 .279 -19.638 5.683
2019 -6.974 6.359 -.038 -1.097 .273 -19.476 5.527
2020 2.108 6.215 .012 .339 .735 -10.111 14.327
a. Dependent Variable: RETURN ON EQUITY
Set 3
H0- There is not any dependency of ESG on the board diversity of the company.
H1- There is dependency of the ESG on the board diversity of the company.
Model Summaryc
Model R R Adjusted Std. Error Change Statistics

38
Square R Square of the
Estimate
R Square
Change
F
Change
df1 df2 Sig. F
Change
1 .284a .080 .078 15.48120 .080 34.839 1 398 .000
2 .477b .227 .212 14.31783 .147 10.615 7 391 .000
a. Predictors: (Constant), Board Structure/Board Diversity
b. Predictors: (Constant), Board Structure/Board Diversity, TOTAL DEBT % COMMON
EQUITY, 2020, MARKET CAPITALIZATION, Sector code, 2019, 2018, Growth
c. Dependent Variable: ESG score
ANOVAa
Model Sum of
Squares
df Mean
Square
F Sig.
1
Regression 8349.851 1 8349.851 34.839 .000b
Residual 95387.659 398 239.667
Total 103737.510 399
2
Regression 23582.422 8 2947.803 14.380 .000c
Residual 80155.088 391 205.000
Total 103737.510 399
a. Dependent Variable: ESG score
b. Predictors: (Constant), Board Structure/Board Diversity
c. Predictors: (Constant), Board Structure/Board Diversity, TOTAL DEBT %
COMMON EQUITY, 2020, MARKET CAPITALIZATION, Sector code,
2019, 2018, Growth
Coefficientsa
Model Unstandardized
Coefficients
Standardized
Coefficients
t Sig. 95.0% Confidence
Interval for B
B Std.
Error
Beta Lower
Bound
Upper
Bound
1
(Constant) 52.293 2.940 17.786 .000 46.513 58.073
Board
Structure/Board
Diversity
.493 .084 .284 5.902 .000 .329 .658
2 (Constant) 50.789 2.999 16.933 .000 44.892 56.686

39
Board
Structure/Board
Diversity
.440 .084 .253 5.264 .000 .276 .604
MARKET
CAPITALIZATION
1.619E-
007 .000 .320 7.008 .000 .000 .000
TOTAL DEBT %
COMMON
EQUITY
.006 .003 .164 2.130 .034 .000 .012
Sector code -.033 .027 -.056 -1.215 .225 -.087 .020
Growth -.104 .031 -.259 -3.312 .001 -.165 -.042
2018 2.582 2.124 .069 1.215 .225 -1.595 6.758
2019 2.372 2.098 .064 1.131 .259 -1.752 6.496
2020 .236 2.050 .006 .115 .909 -3.795 4.267
a. Dependent Variable: ESG score
By the evaluation of regression analysis output it is evident that alternate hypothesis is
being accepted and null is rejected. This is pertaining to the fact that the significance value is less
than the standard that is 0.05. Hence, with this it can be stated that the alternate hypothesis is
being accepted and there is a dependency being present in ESG over the board diversity as well.
along with this R was 28 % (on the basis of model 1) and this implies that there is a moderate
correlation being present in both the variables. Along with this R square is 8.1 % and this
indicates the fact that any change in the independent variable will be causing a change of 8.1 %
in the dependent variable as well. This is because of the reason that when there will be any
change in the independent variable then it will cause a change in the dependent variable as well.
thus, with this it is clear that the ESG is dependent over the board diversity as well. This is
pertaining to the fact that in case the board of directors will not be working in diverse manner
then the ESG score of the company will be affected. Along with this the model 2, stated that R is
47 % and R square is 22 %. Thus, this implies that any change in independent variable will be
causing a change of dependent variable. Moreover, the coefficient table outlines the fact that on
individual factor basis the model 1 relate to the hypothesis. But in model to the variable market
capitalization, total debt, board structure and growth are the variables which are related to the
hypothesis and can affect the ESG score. On the other hand, the remaining of the variables do
not create any impact over the working of ESG score.

40
Hence, in the work of Whelan and et.al., (2021) stated that this it is necessary that the
working of the company is better in case board of directors will be working in better manner.
Hence, for this it is necessary that the use of good skills is being undertaken by board of directors
such that the ESG score of the company will be increasing. This is pertaining to the fact that with
help of the good result the company will be increasing the efficiency and the working will also
be increasing and ultimately the ESG score will be increasing. Hence, with this it can be implied
that the ESG score is very necessary to be maintained by the company as it outlines the working
capability of the company and how well they are working in direction to save the environment.
This is pertaining to the fact that when the working of the directors will not be good then this
will be affecting the efficiency of the business to a great extent. this is necessary for the reason
that when the working will be good then it will be increasing the efficiency of the business.
From the output is has been found that the ESG depends on the decision of the board of
directors. Kim and Li, (2021) supported this by saying environmental factors of the organizations
in the market are not directly the impacts of the directors but the ways in which the business
deals with these factors are the decisions of the board of directors. Di Tommaso and Thornton,
(2020) also argued how the social consideration are important for affecting the output of the
ESG. It was found that the people & relations that they possess about the customer’s satisfaction
is considered to be the key factor that bring the data protection and privacy into place. The role
of board of directors are also very important for the ways in which they are affecting the society.
Hence, it can be explained from the study of Jin, (2022) that the role of board of directors impact
the customer’s satisfaction provided by the company and also the disruption of the privacy.
Outcome are able to manage the practices that impact the ways in which the governance of an
organization is dependent on the boards composition. It can be said that this involves the factors
that bring both key consideration and operational effective that is important for the better
governance of an organization. Naffa and Fain, (2022) supported that board is responsible for
influencing the decisions which are considered to affect the governance strategies in an
organization. Hence, the focus of the organization is always on the development of governance
experiences in the business. Board of directors are made up of the shareholders that have great
role to pay in an organization hence, they are said to be the responsible for the major changes
that takes place in ESG ratings.

41
In the views of Whelan and et.al., (2021) it is clear that ESG score affect the financial
performance of FTSE 100 companies to a great extent. This is pertaining to the fact that when
the companies will be working properly on ESG then it will be improving the efficiency of the
company and with good board diversity with the above all calculation and output it is clear that
ultimate research question that is there is an impact being created by the ESG score on the
financial performance of the companies to a great extent. whether be it different variables like
the return on asset, return on equity, board structure, market capitalization and other all affect the
ESG score to a great extent. Hence, for this it is necessary for the companies that they manage
and improve the ESG score such that the working of the company and the financial position is
being improved in better and effective manner.
Descriptive Statistics
RET
URN
ON
ASSE
TS
RET
URN
ON
EQUI
TY
ESG
Scor
e
Board
Structure/B
oard
Diversity
MARKET
CAPITALIZA
TION
TOTA
L
DEBT
%
COMM
ON
EQUIT
Y
Mean
8.663
23
24.15
32
69.04
09 34.0033 21217518.24
133.26
68
Standar
d Error
1.003
93
3.927
48
0.807
02 0.46461 1591521.643
20.476
45
Median 5.865 13.85
72.57
5 33.33 8877292.5 68.735
Mode 1 12 78 33.33 #N/A 3
Standar
d
Deviati
on
20.07
86
78.54
96
16.14
03 9.2922 31830432.86
409.52
91
Sample
Varianc
e
403.1
5
6170.
04
260.5
09 86.345 1.01318E+15
167714
.1
Kurtosi
s
90.76
39
101.5
68
0.173
06 -0.0019 13.46777753
253.55
29
Skewne
ss
8.546
13
8.897
7
-
0.782
8 0.14788 3.362406514
14.701
64
Range 272.6 1330. 78.03 57.58 225431994 7842.7

42
8 91 8
Minimu
m -19.59
-
252.8
4 17.03 9.09 1025442 -434.08
Maxim
um
253.0
9
1078.
07 95.06 66.67 226457436 7408.7
Sum
3465.
29
9661.
29
2761
6.4 13601.3 8487007297
53306.
72
Count 400 400 400 400 400 400
Largest(
1)
253.0
9
1078.
07 95.06 66.67 226457436 7408.7
Smalles
t(1) -19.59
-
252.8
4 17.03 9.09 1025442 -434.08
Return on Assets shows the total return of the FTSE companies has made from the
overall assets used. The descriptive statics indicate that the mean ROA is 8.66 which is good for
the market. The minimum and the maximum ROA also shows how the range of flexibility in the
change in the ROA. Wong and et.al., (2021) explained how the return on assets can vary in an
organization which is facing issues with ESG. Hence, it found that the ESG is affected from the
changes in the return of assets of the FTSE companies.
Return on Equity is income made by the FTSE companies from its equity investment
which has been recognized as having 13.85 as median which is a good number indicating better
performance from the FTSE companies. The standard deviation of shows the deviation that was
there for ROE over its mean which is 24.15. The total range of ROE also explains how
fluctuating ROE can be for an FTSE companies as explained by Khan, (2019) about the ways in
which gender influences the performance of ESG in a market. This is the return on the equity
that provides the ESG the sustainability that is required for the management.
ESG score denotes the exposure of the FTSE companies on long term environmental,
social, and governance risks. Madhavan, Sobczyk and Ang, (2021) explains that the ideal ESG
score needs to be higher that 70 as it denotes less risk in terms of ESG. For these FTSE
companies the ESG is 69.40 which is less than ideal but very close to growth. Hence, it can be
said that through this experience the focus of the FTSE companies is towards the ways in which

43
they can gather importance. ESG score is the key factor that influences the results of the FTSE
companies and actions which are taken by board of directors.
Board diversity of FTSE companies has been considered to be the factor that has been
able to influence the ways in which they are able to gather experiences in both all the ESG
factors. The sum of the total board diversity is indicating the overall the diversity that is present
in the board room of the FTSE companies. As per the views of Gibson Brandon, Krueger and
Schmidt, (2021) board diversity is very important for these FTSE companies for the achievement
of the results. The level of diversity provided by the board of directors has to be said as the major
influence towards the ways in which the ESG factors are influenced in the FTSE companies.
Market capitalization refers to the ways in which the total value of the company shares
the stock for the calculation of the stock which is with the total number of outstanding shares.
Junius and et.al., (2020) explained how the market capitalization needs to be high for the
business to achieve better results. The marketing capitalization of this organization is very
highlights the factors ways in which it has been able to gain sustainable success. Creation of
marketing capitalization is considered to be the factor that affects the society and environment
hence, requires effective decisions from board of directors.
Total debt % common equity variance indicates 167714.1 which explain the changes that
has taken place in these FTSE companies total liabilities towards their shareholder’s equity.
Chen and Yang, (2020) explains that it needs to be lower for indicating a lower risk level. The
difference in its range shows that the market is diverse and has both risk and risk free areas. The
debt to equity shows the impacts the policies of the board of directors are having the on the
government aspect of ESG.
Correlation
Correlations
RETU
RN ON
ASSET
S
RETU
RN ON
EQUIT
Y
ESG
scor
e
Board
Structure/Bo
ard
Diversity
MARKET
CAPITALIZAT
ION
TOTAL
DEBT %
COMM
ON
EQUITY
RETURN ON
ASSETS
Pearson
Correlati
on
1 .842** -.17
4**
.178** -.068 .043

44
Sig. (2-
tailed)
.000 .000 .000 .177 .394
N 400 400 400 400 400 400
RETURN ON
EQUITY
Pearson
Correlati
on
.842** 1 -.13
4**
.156** -.041 .243**
Sig. (2-
tailed)
.000 .007 .002 .411 .000
N 400 400 400 400 400 400
ESG score Pearson
Correlati
on
-.174** -.134** 1 .284** .366** -.047
Sig. (2-
tailed)
.000 .007 .000 .000 .354
N 400 400 400 400 400 400
Board
Structure/Board
Diversity
Pearson
Correlati
on
.178** .156** .284
**
1 .112* .011
Sig. (2-
tailed)
.000 .002 .000 .025 .822
N 400 400 400 400 400 400
MARKET
CAPITALIZAT
ION
Pearson
Correlati
on
-.068 -.041 .366
**
.112* 1 -.006
Sig. (2-
tailed)
.177 .411 .000 .025 .907
N 400 400 400 400 400 400
TOTAL DEBT
% COMMON
EQUITY
Pearson
Correlati
on
.043 .243** -.04
7
.011 -.006 1
Sig. (2-
tailed)
.394 .000 .354 .822 .907
N 400 400 400 400 400 400
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
With the help of the above correlation matrix it is clear that ESG score is negatively
correlated to return on asset and return on equity. This is particularly because of the reason that

45
when the return will be reducing then the ESG score will also be affected in negative manner.
Along with this the correlation outlines that the working of the ESG score is not dependent over
the return on asset and return on equity. This is very essential for the reason that when the
working of the company will not be proper then this will be affecting the efficiency of the
business and ultimately it will be affecting the ESG score as well. this negative correlation
highlights the fact that when there is any change in the return on equity or the return on asset
then this will be affecting the efficiency of the business and ESG score in negative terms.
In support of this Chen and Yang, (2020) stated that having a better ESG score is not at
all dependent on the return which the company is earning. This is pertaining to the fact that ESG
score is being dependent on the working which company and its strategies with regards to
environment, social and governance. In case the company is in loss but then also they are
providing for these three elements and making strategies with regards to this then it will be
improving the efficiency of the business to a great extent. hence, the profitability and the return
does not define the ESG score and this will be affecting the score and will be improving it.

46
Chapter 5
Conclusion and Limitations
5.0 Conclusion and limitation

47
5.1 Conclusion:
From this research it can be concluded that the companies in UK does get affected for
their gender diversity due to the influences of ESG scores of the firm’s performance. This
research has been able to address the statement of hypothesis of the study. The role of ESG in the
business has been considered to be very important as it stands for Environmental, Social and
Governance. For this research the major components that are able to measure the sustainability
of the investments in the firms. ESG has also been able to estimate the organization’s current
failure. The prospect in regards to the services that are essential for the companies that are
essential for the development of the ESG friendly operations in the business operations. In this
research the ways in which the shareholders and their importance towards the research have been
taken place is analyzed for this study. From this research it was found that ESG score is
negatively correlated to return on asset and return on equity. This was also developed that it
found that the ESG is affected from the changes in the return of assets of the FTSE companies.
From this study the increasing importance of ESG towards reporting the gender diversity
in the recent years has been analyzed. It is also considered to be very effective for the ways in
which the contribution to the environment works for the society and governance factors. These
are also considered to be the key role of the organizational tool that is able to helped the business
create a decision making process for the ways in which it would need to address its stakeholders.
Focus of the study is to contribute towards the decision making of the investors. The
performance of the firm is also said to be influenced by the ways in which it helps in the
contributing towards the factors that are essential for the organizations to gather the information
required. ESG has been able to add some value to the ways in which the firm is able to provide
different ways of uplifting the productivity of the employees in the reduction of interventions of
regulations and legal practices, reducing the cost, top-line growth and optimizations of
investments and assets.
This research is able to perform the analysis of the influence of ESG score over the
financial performance of the UK companies. In the research the it has been found that 58% of the
financial performance between the ESG score and the financial performance between 2016 and
2020 has been influenced due to the positive effect of the 2016 and 2020 (Mende and Scott,
2021). This is also considered to be the positive effect of the ESG score that is able to influence
the management in making a rational and responsible decisions. For the analyzation of the

48
performance the different operational parameters such as Return on Equity (ROE), Return on
Asset (ROA) and stock price system has been taken under consideration. This is also said to be
the decarbonization of the strategies that has helped the companies in the achievement of the
positive financial performance. Due to the reduction of the financial performance the reduction
of the carbon emission in the production units has been found to be the key factor that has
influenced the practices.
ESG is considered to be the tool which is considered to be the factor that is essential for
the ways in which the businesses to gather the information that is required (Ingeborgrud and
et.al., 2020). The given need for the ESG is also considered to be the factor level of firms that is
able to achieve the seems to get the greatness in the deal for the effort which is able to shed the
light towards the ways in which it can achieve the results required for making judgements
according the ways in which the integrated reporting of the relationships between the firm
performance and environment, social and governance disclosure.

49
5.2 Limitations and future scope of research
In this research for the performance of the UK companies affects due to ESG is
considered to be the key factor that is able to influence the ways in which is essential for making
adjustments for the limitations that are essential. For this research the limitations were regard the
topic as it was very complicated and it was hard for the research to frame the aims and objectives
as there were multiple variables. Time money and cost that was incurred during this research
were also the factor that influences the outcome of this research (Ingeborgrud and et.al., 2020).
The selection of the appropriate tool for quantitative research was also the reason for
analyzation. For this research the SPSS tool was used for the quantitative research to prove the
hypothesis of the situation. It was found that there was other tool which could have provided the
research better outcomes. However, the development of this outcome has also been the key
factor that is able influence the factors that influences the practices.
The scope of this research has been considered to be the factor that is essential for the
ways in which it is able to develop the growth of the organization that is considered to be the key
factor towards the growth. This research shows how the diversity in the gender at UK companies
affecting the performance. For this research the use of ESG has been a very effective tool for
gathering the information that is required for the achievement of results that are considered to be
very effective in the nature of development (Brown, 2022). Being able to gather this information
is going to help the other researchers, investors towards making decisions that are very effective
for their purpose of investments. The boundaries to which this research is going to perform is
related to the ESG and how it is affecting the majority of the performance in the UK companies.

50
This study has been able to contribute to the firm as well as the investors for the performance of
the how it can help in enhancing the ways in which the due to the ESG for reporting the ways in
which the investors are able to affect the growth of the factors that are contributing the towards
the success of the factors.

51
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