Women on boards, sustainability reporting and firm performance

Abstract

Purpose As pressures mount for women directors on corporate boards (WDOCBs) from different stakeholders, companies become more interested in finding out how WDOCBs impact sustainability disclosure. The purpose of this paper is to investigate the effect of gender-diverse boards on the association between sustainability reporting and shareholders’ welfare. Design/methodology/approach This paper examines the implications of women on board for firm-related factors, particularly environmental, social and governance (ESG) disclosure and firm performance. The firms studied are all listed in the Financial Times Stock Exchange 350 index between 2007 and 2012. Bloomberg social disclosure score is used and panel data through a regression model are applied. Findings The results reveal that the presence of WDOCBs favorably influences on firm’s risk and performance through promoting a firm’s investment in effectual social engagements and reporting on them. The desirable effect of WDOCB on the ESG-performance relationship leads to increased risk-adjusted and buy-and-hold abnormal returns and reduced firm risks, measured by both volatility of returns and systematic risk. Originality/value The research contributes to the literature on the relationship between women participation on corporate boards and firms’ good citizenship and enhanced shareholders’ welfare. The empirical findings contribute to providing statistical and economical validity to the UK Corporate Governance Code 2014 recommendation on the importance of board gender diversity for effective board functioning.

Disrupting the Status-Quo of Organisational Board Composition to Improve Sustainability Outcomes: Reviewing the Evidence

“…While the quantitative studies are able to provide macro-level trends, limitations include the inability to provide a rich interpretation of why these trends are apparent. For example, Arayssi et al [49] find that the participation of women on boards of directors positively influences ESG disclosure and speculate that "women directors seem to promote social agenda in the boardrooms . .…”

“…While not strictly a characteristic of a board member, several studies investigate the size of the board and a correlation to sustainability is generally found. For instance, Chams and Garcia-Blandon [44] find a statistically significant relationship, Kaymak and Bektas [48] find a positive relationship and Arayssi et al [49] find that the larger the board, the greater the sustainable performance of companies. Overall, the results of the studies when considered collectively demonstrate that a board of directors with a diverse make-up of people can have a significant impact on the sustainability performance of a company.…”

“…In all studies, gender diversity is defined in the binary of male/female. Standard means of calculating gender include the percentage or proportion of females on a board, or employing Blau's diversity index [23,24,32,37,40,42,43,[49][50][51]. Shoham et al [29] offer one of few studies to consider the implications of using binary language, in particular masculine language, in the recruitment of women to company boards.…”

“…Kaymak and Bektas [49] consider the relationship between corporate governance and CSR and use Transparency International data as a means of measuring CSR. While this does not measure social or environmental indicators directly, the researchers argue that "transparency and disclosure can be considered as a measure of CSR, as the latter is a fluid concept embracing activities that satisfy different interest groups" (p. 557).…”

“…While this does not measure social or environmental indicators directly, the researchers argue that "transparency and disclosure can be considered as a measure of CSR, as the latter is a fluid concept embracing activities that satisfy different interest groups" (p. 557). Arayssi et al [49] and Fernandez-Feijoo et al [26] use disclosures as a means of assessing sustainability performance and understand this within a CSR frame. Fernandez-Feijoo et al [26] use the KPMG International Survey of Corporate Social Responsibility Reporting data compiled on Global Fortune 250 and the 100 largest companies by revenue across 22 countries, which is used as the basis of their analysis about the effect of women on boards on sustainability reporting.…”