Independent Board Members and Financial Performance: ESG Mediation in Taiwan

Abstract

This study investigates the relationship between independent board members and corporate financial performance in Taiwan, emphasizing the mediating role of environmental, social, and governance (ESG) factors. Using panel data regression analysis on data from the Thomson Reuters Eikon database from 2009 to 2021, the study examines 173 Taiwanese companies reporting ESG information. Results indicate a positive correlation between independent directors and financial performance, with ESG factors significantly mediating this relationship. The findings suggest that board diversity and ESG considerations are crucial for enhancing corporate governance and financial results. The study highlights the importance of regulatory and market pressures in driving companies to integrate ESG considerations into their strategies. It encourages policymakers and businesses to promote board independence and robust ESG practices to achieve sustainable development and improved financial outcomes. The research fills a gap by empirically investigating the intermediary role of ESG between board independence and financial performance, contributing valuable insights for enhancing corporate governance and stakeholder engagement.