Do ESG Leaders Achieve Higher Firm Financial Performance? The Influence of Women Directors and Controversial Industries

ABSTRACT Given the growing pressure on companies to achieve high ESG performance while minimising ESG controversies, this study investigates how ESG performance and ESG controversies jointly affect firm financial performance (measured as ROA and ROE), considering the effect of the presence of women directors and of operating in controversial versus non‐controversial industries. Using random‐effects panel regression and heterogeneity analyses of 2696 US companies over the period 2013–2023, we find that the joint effect of high ESG performance and few ESG controversies (i.e., being an ESG leader) does not significantly affect firm financial performance. For ESG leaders, the presence of women directors may be associated with a negative effect on firm financial performance, except in the case of ROE in non‐controversial industries. This study advances previous literature by redefining the concept of ‘ESG leader’, examining the role of women directors and type of industry and considering alternative measures of firm financial performance.