Increasing female participation on boards: Effects on sustainability reporting
This study explores the relationship between board gender diversity and sustainability reporting using data from 2,116 banks over a ten-year period. Results indicate that having 22–50% female board members positively affects ESG disclosure, but beyond 50%, negative effects appear. It suggests that banks should mandate quotas to promote sustainable disclosure.
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OVERVIEW
This study examines the impact of board gender diversity on environmental, social and governance (ESG) reporting of 2,116 publicly-listed banks over a 10-year time frame from 2007 to 2016. The authors found that when female board members account for 22–50% of the board, it has a positive significant effect on the level of ESG disclosure. However, the study also indicates that at levels above 50%, female board participation has negative returns to the scale of ESG disclosure. This negative effect could be due to the underrepresentation of male directors. This study recommends the imposition of quotas on female board participation to foster sustainability reporting.
This study explores the importance of sustainability reporting and its relationship to gender diversity in the board of banks. Since the global financial crisis, companies are expected to raise awareness of tangible and intangible factors affecting their long-term performance. The authors note that ESG disclosure generates positive externalities enhancing corporate value, to the advantage of all stakeholders, including shareholders, labour market, corporate partners, customers and society at large.
Previous studies have found a positive correlation between ESG factors and performance, specifically in terms of ESG disclosure’s effect on firm value. Other research has investigated the drivers of ESG disclosure across sectors. Gender diversity hypothesised to affect corporate governance and performance, link to ESG disclosure and reporting practice.
The authors found that a large number of banks in Central America have higher levels of gender diversity, whereas banks in Europe have higher levels of environmental and social disclosure. In contrast, Australia ranks highest in governance disclosure.
Results partially corroborate the effect of gender diversity on corporate governance disclosure. ESG disclosure positively affects a company’s sustainability reporting when female board members account for 22–50% of the board. When the representation of female directors is above 50%, negative returns to scale manifest on ESG disclosure. The authors conclude that regulators should mandate gender diversity on bank boards to facilitate sustainable growth of the level of ESG reporting by banks.
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