Critical Mass of Female Directors Boosts Corporate Sustainability Disclosure

Strategic Insights -

Emerging market firms with two-tier boards systems may benefit from having a critical mass of female directors on their boards of directors, according to a recent study published in Corporate Governance: The International Journal of Business in Society. The research, led by Doddy Setiawan and Desi Zulvina of Universitas Sebelas Maret, analyzed 456 firm-year firms listed on the Indonesia Stock Exchange from 2017 to 2022. The study found that a proportion of female directors between 20% and 40% had a positive impact on corporate sustainability disclosure, while a balance proportion of female directors on the board had an even stronger positive impact.

Key Takeaways:

  • The proportion of female directors on the board had a positive effect on corporate sustainability disclosure in emerging market firms with two-tier boards systems.
  • The mass of female directors with at least 20% but less than 40% had a positive relationship with corporate sustainability disclosure.
  • The mass of female directors with a balance proportion on the board had a stronger positive impact on corporate sustainability disclosure.
  • The research suggested that companies should facilitate the involvement of women on the board of directors to promote pro-sustainability disclosure initiatives.
  • The study's findings did not indicate a significant impact between the mass of female directors and corporate sustainability disclosure with less than 20% proportion of female directors.
  • The researchers emphasized the importance of examining the ratio of female directors to enhance corporate sustainability disclosure.
  • The study's originality and value lie in its contribution to the limited literature on the dynamic nature of the relationship between the proportion of female directors and corporate sustainability disclosure, and its mitigation of the endogeneity bias.

Statistics:

  • 456 firm-year firms listed on the Indonesia Stock Exchange were analyzed in the study from 2017 to 2022.
  • The study used a static panel data model and dynamic panel data model based on generalized method of moments.
  • The mass of female directors on the board had a positive impact on corporate sustainability disclosure when the proportion of female directors was between 20% and 40%.
  • The study's findings indicate that corporations should deliberately examine the ratio of female directors to enhance corporate sustainability disclosure.

Sources:

  • Setiawan, D., & Zulvina, D. (2024). Does the proportion of female director influence corporate sustainability disclosure? Evidence from the emerging market firms with two-tier system. Corporate Governance: The International Journal of Business in Society, 25(6).
  • Emerald. (n.d.). Corporate Governance: The International Journal of Business in Society. https://doi.org/10.1108/cg-01-2024-0045 (Free access to the journal article)