Genetic Diversity and Corporate Environmental Performance

We study the effects of a firm’s board genetic diversity on corporate environmental performance. Using a multidimensional information set for 3,690 US firms during the period from 2005 to 2019, we find that, pursuant to the diversity theory, which posits that diversity improves the quality of management decisions, genetic diversity leads to improved environmental performance. We also find that genetic diversity improves carbon and governance performance, and ESG disclosure. Moreover, firms with relatively heightened carbon performance, or a more genetically diverse board are more profitable, and feature lower probability of default. However, as the board becomes more environmentally-savvy, the impact of further genetic diversity diminishes, as manifested in a negative interaction between diversity and carbon performance. Our results remain robust to difference-in-difference analysis, different model specifications, while also controlling for endogeneity. In terms of policy implications, results suggest that key to tackle climate challenges is to promote boards' genetic diversity.