Accounting for change: board gender diversity, CSR strategies and financial distress

Purpose This study aims to pursue three primary objectives: first, to assess the impact of corporate social responsibility (CSR) strategies on financial distress (FD) among firms in the European Union (EU); second, to evaluate the direct effect of board gender diversity (BGD) on financial distress and third, to explore the moderating role of BGD in the relationship between CSR initiatives and financial distress. Design/methodology/approach Drawing on an unbalanced panel of 4,549 firm-year observations from 674 EU-listed firms spanning 2013–2023, the study uses system–GMM methodology to address endogeneity concerns and account for dynamic shifts in financial performance. Findings The findings indicate that greater CSR engagement initially leads to an increase in financial distress, primarily due to the substantial investment requirements of sustainability initiatives. However, this adverse effect is significantly alleviated in firms with higher board gender diversity. The positive and significant interaction between CSR and BGD underscores the pivotal role of diverse boards in strengthening financial governance and mitigating the short-term financial pressures associated with CSR activities. Originality/value This study presents the first empirical investigation into the interaction between CSR strategies, financial distress and board gender diversity within the EU context. It delivers practical guidance for executives and policymakers seeking to align sustainability initiatives with strong governance practices to enhance corporate financial resilience.