Exploring the Governance-ESG Nexus: Insights from Korea Across the COVID-19 Period

Environmental, social, and governance (ESG) factors have been the critical factors in corporate management and this trend has intensified focus on how corporate governance structure affects ESG performance. This study investigates whether corporate governance characteristics—large shareholder ownership, foreign ownership, managerial ownership, board independence, and female board representation —are associated with ESG scores in Korean context. This study gains particular importance in the Korean context, where concentrated ownership, chaebol governance, and the upcoming mandatory sustainability reporting requirement for all KOSPI-listed firms by 2026 create a unique institutional environment for examining the governance–ESG nexus. Our findings reveal that governance mechanisms significantly shape ESG performance outcomes. Higher ownership by controlling shareholders is associated with lower ESG outcomes across all dimensions except governance, and managerial ownership exhibits mixed effects, showing a negative association with environmental performance but a positive association with governance performance. In addition, foreign ownership is positively related to governance scores, whereas the proportion of outside directors shows an opposite pattern, displaying a negative association with governance performance. The female director ratio does not show a statistically significant effect on any ESG dimension. Overall, governance characteristics demonstrate heterogeneous effects across ESG dimensions rather than uniform improvements. The analysis also reveals that ESG engagement significantly increased during the COVID-19 period, suggesting that external shocks can serve as catalysts for enhanced ESG efforts across firms. This research is particularly timely and important given Korea’s impending mandatory sustainability reporting requirement for KOSPI-listed firms, and it provides novel evidence on how governance structures influence ESG performance within this evolving regulatory environment.