The Impact of Gender Diversity on Voluntary Environmental Disclosure

Author: Sil van Laar Adress:

E-mail: s.van.laar.2@student.rug.nl

Phone Number:

Study: Master Accountancy

Student Number: 2570653

Supervisor: dr. S. Mukherjee, PhD

Date: 25-06-2018

Word Count: 5067

The Impact of Gender Diversity

on Voluntary Environmental

Disclosure

Master Thesis Accountancy

1

Abstract

Even though there is substantial literature about gender diversity, most studies have focused on the effects on financial performance. This study examines the impact of gender diversity on voluntary environmental reporting. Using various regression models with a sample of 3.306 listed companies from 33 countries over a three-year period, we find a positive and significant relation between gender diversity (measured as the proportion of female directors) and voluntary environmental disclosure. We also find evidence that the presence of an environmental or CSR committee positively impacts voluntary environmental disclosure.

Keywords: Board of Directors, Corporate Governance, Gender Diversity, CSR, Environmental

2

Table of Contents

Conclusion & Discussion ... 19

References ... 21

3

Introduction

The field of Corporate Social Responsibility (CSR) has shown significant growth since the beginning of the 21st century (Lone et al., 2016). Research by KPMG (2017) showed that 77% of examined European companies and 88% of examined North-American companies disclosed information with regards to sustainability. Zhou (2017) concluded that disclosing information regarding sustainability has become a mainstream trend. However, they also recognize that CSR disclosure is still in its early stages and is developing gradually. CSR mainly entails the belief that a company has certain responsibilities when conducting business, both to its direct stakeholders and to society (Rao & Tilt, 2016). Under the definition of Carroll (1979) companies should take their broad set of stakeholders into consideration because they should be scrutinized on their non-financial performance as well.

Despite the large attention CSR has received, a lot of companies still marginally apply it (Rao & Tilt, 2016). This is mainly due to the lack of laws and regulations with regards to environmental reporting which results in that there is no standardised form to do so. The corporate disclosures of environmental related reports or information should thus be classified as voluntary (Al-Tuwaijn et al., 2004). Another reason for the limited CSR reporting is that there could be a lack of ability within the major decision makers to properly decide on matters concerning CSR and CSR disclosure (Rao & Tilt, 2016). The major decision maker with regards to CSR within the governance structure, is the board of directors (Herbohn et al., 2014). As mentioned earlier, under the concept of CSR, the board is responsible for a wide range of stakeholders that hold them accountable. This paper investigates the relation between gender diversity and voluntary environmental disclosures from a Corporate Governance point of view. Research on board composition has mainly focused on the effects on financial performance and less on how specific board attributes can influence CSR and environmental reporting (Rao & Tilt, 2016). Regarding board composition, board diversity has been at the centre of plenty of academic studies as it is argued that diversity amongst board members has the potential to influence corporate financial performance and financial reporting (Carter et al., 2003). On the other hand, very few studies have examined whether this effect also applies to non-financial performance (CSR) and disclosure. There is a limited number of studies that have investigated the link between CSR and board diversity (Bear et al., 2010; Post et al., 2011). The results of these studies indicate that board diversity can have a positive effect on CSR and CSR disclosure. This study examines the relationship between gender diversity, as an attribute of board diversity, and environmental reporting.

4 The (under)representation of women in corporate boards has been at the centre of many academic studies for the last two decades (Adams & Ferreira, 2009). Not only because the number of women on boards has steadily increased, which emphasizes the need to understand the way gender diversity impacts the functioning of the board (Traina et al., 2013), but also, because it is expected that the number of women on boards will continue to increase in the foreseeable future. This is a result of legislation that promotes or even enforces female participation on the board (Adams & Ferreira, 2009) as well as the fact that most good governance principles and an array of CSR indicators nowadays include measures of diversity and heterogeneity of the board (Fuente et al., 2017). Therefore, the question at the core of this study is:

What is the impact of gender diversity within the Board of Directors on voluntary environmental disclosures?

We argue that an organization with a larger proportion of female directors is more likely to voluntarily disclose environmental information. We do this based on three theoretical perspectives. From an agency perspective we argue that women enhance the boards monitoring function and therefore corporate transparency, both in terms of financial and non-financial disclosures. This is caused by the fact that female directors have better attendance records, and women are more likely to join monitoring committees (Adams & Ferreira, 2009). In addition, female directors promote effective board communication (Klenke, 2003) and intensify the board’s expertise (Hillman et al., 2002). From a stakeholder perspective we argue that female directors will create a broader perspective which will enable the board to better assess the needs of all the stakeholders. This is because women have a better connection to the stakeholders (Lückerath-Rovers, 2010) and can assess the needs of the stakeholder better compared to their male counterparts (Galbreath, 2011). In turn, this will result in the ability of boards to effectively disclose information to stakeholders. Lastly, we argue that boards play a vital role in retaining the legitimacy of an organization in the increasingly demanding society. More female directors will result in a more diverse board that will enhance its monitoring function and therefore disclose more information in order to retain the legitimacy of the organization (Mallin et al., 2013).

Our sample consists of 3.306 listed companies from 33 countries over the period 2013-2015. We find that there is a positive and significant relationship between the proportion of female directors and voluntary environmental reporting. Consistent with prior research, we also find

5 that the presence of an environmental or CSR committee positively impacts voluntary environmental reporting (Liao et al., 2015; Li et al., 2010; Konadu, 2017).

This archival study is relevant and of practical value for a number of reasons. First, we aim to contribute to the literature on CSR disclosures and further explore the role of female directors in the organization with regards to environmental disclosures. Till date most studies have focused on the influence on financial results (Ahern & Dittmar, 2012; Galbreath, 2018; Garcia-Sanchez et al., 2017; Dwyer et al., 2003; Post & Byron, 2015). Second, there is research that explores the relationship between board characteristics and CSR (Mallin et al., 2011; Villiers et al., 2011; Zhang et al., 2012; Galbreath, 2011). However, these studies mainly focus on one or a small number of countries. This makes the generalizability of their results limited and as a result that calls for further research to explore these effects in other countries. This paper therefore extends the literature by utilizing global data from 33 countries and thus ensures generalizability of the results. Finally, CSR disclosure has been at the centre of many scientific studies that mainly focused on the possible relations between company characteristics and CSR disclosure. Relatively few studies have researched the relation between board diversity and CSR disclosure (Jizi et al., 2014).

The thesis is structured as follows. Provided next is a review of gender diversity and environmental reporting literature, including the hypothesis development. After that, the methodology section will elaborate on the methods used. This paper will conclude with the results and the discussion.

6

Hypothesis Development

Deegan (2002) argues that we do not have an accepted theory with regards to social and environmental disclosures. More often than not, there are several theoretical perspectives used that may explain these disclosures. This section will discuss the generally used theoretical perspectives regarding social and environmental disclosures. After that we will identify additional literature that, together with the theoretical perspectives, forms the basis of our hypothesis.

Agency Theory

Agency Theory is the basis of most Corporate Governance frameworks. This theory assumes the separation between leadership and ownership of the organization. At the heart of the agency theory is the relationship between the manager (agent) and shareholders (principals).

From an agency perspective the key feature of the board of directors is to guide and monitor top management to make sure they act in the interests of shareholders and other stakeholders (Srinidhi et al., 2011). The overarching goal of the board is to reduce the level of information asymmetry. Empirical studies show that, constantly over time and countries, board structure and monitoring improve the amount and quality of corporate disclosures (Michelon & Parbonetti, 2012). Besides the usual business and financial issues, boards must also deal with corporate social responsibility and even business ethics on a regular basis (Hurst, 2004). The agency-centred view shows that corporate transparency, in terms of both financial and non-financial information, is enhanced by strong board monitoring to protect the interests of the shareholders. Research by Adams & Ferreira (2009) has shown that women significantly impact the functioning or corporate boards. They find that female directors have better attendance records, female directors have fewer attendance problems with more women on the board and women are more likely to join monitoring committees. They conclude that gender diversity within boards leads to tougher monitoring of the CEO and more alignment with the interests of the shareholders. Female directors also provide better oversight, especially when it comes to reporting oversight. Research in organizational theory provides evidence of tougher monitoring as the gender diversity of the board increases. Clarke (2005) showed that gender diverse boards have more informed deliberations and discuss issues that may be considered unpleasant to discuss by their male counterparts. In addition, Klenke (2003) showed that female board participation also promotes more effective board communication. Hillman et al. (2002) showed that women broaden the board’s expertise by increasing the range of professional experience

7 and augment the number of board members with advanced degrees. Together, these effects of gender diversity within the board improve the ability of the board to monitor the management of the organization (Terjesen et al., 2009; Hillman & Dalziel, 2003)

Stakeholder Theory

Contrasting to the agency theory, stakeholder theory focusses not only on the relation between management and shareholders but takes all other parties that can be identified as stakeholders into consideration. A stakeholder is any group or individual who can affect or is affected by the achievement of the organization’s objectives (Freeman, 1984).

Freeman (1984) states that the board has the important task to value and fulfil the stakeholder demands. Long-term support by the stakeholders is achieved through the disclosure of both financial and non-financial information by the board of directors (Johnson & Greening, 1999). Prior research has shown that the effectiveness of the board significantly impacts the amount of information disclosed by the organization (Rosenstein & Wyatt, 1997).

Emerging literature provides evidence that a more diverse board is more effective and capable to look after the interests of different stakeholders. Lückerath-Rovers (2010) showed that women tend to have a better connection with the different stakeholders which will lead to a more transparent organization because they feel the urge to fulfill the needs of these stakeholders. This finding is in line with research of Galbreath (2011) who claims that women have a better understanding of the needs of consumers and a better insight in the possibility of organizations to fulfill these needs. In addition, women seem more inclined to take into account the demands and expectations of stakeholders (Galbreath, 2011). A diverse board is thus likely to realize sufficient disclosures regarding both financial and non-financial information (Lim et al., 2007).

Summarized, the broader perspective women create will enable the board to better assess the needs of diverse stakeholders which may result in the ability of the board to effectively disclose relevant information to stakeholders (Bear et al., 2010).

Legitimacy Theory

Legitimacy theory is often used in studies that explore CSR and other sustainable disclosures. The theory is based on the stakeholders theory but significantly broadens this concept. Legitimacy theory is built on the premise that the activities of an organization are ‘legitimate’ if they are accepted by society (Patten, 2002). In other words, the existence of an organization

8 is only safeguarded through the voluntary disclosure of detailed accounts because of economic, social and political factors within society (Deegan, 2002).

Corporate disclosure policies are an important instrument by which management can influence external organizational perspectives and legitimize the actions of the organization (Deegan, 2002). Cho & Patten (2007) found that the amount and quality of both financial and non-financial disclosures, albeit discretionary, can alter the perception of the public and legitimize the actions of an organization. In brief, organizations disclose information about CSR and other environmental matters to legitimize the activities of the organization and possibly influence the public perception.

Recent studies acknowledge an important role of legitimacy in the increasingly demanding society. Macve & Chen (2010) showed that organizations are increasingly trying to gain legitimacy with regards to the responsiveness towards climate change, strategic orientation concerning social and environmental responsibilities and the mix of economic and ecologic organizational objectives. Mallin et al. (2013) argue that boards play an essential role in the legitimacy process of organizations regarding environmental performance and reputation. They concluded that the management of an organization often hesitates to disclose information about environmental matters and that board oversight is essential to monitor the possible legitimacy issues. Similar to the agency and stakeholder theory, the board plays an essential role as to the disclosure of environmental matters.

Board Diversity & Gender Diversity

Regarding the previous sections concerning the theoretical perspectives, an effective board is essential when it comes to the disclosure of sufficient information, both financial and non-financial. Forbes & Milliken (1999) support this claim by arguing that boards can be seen as human decision-making groups. They further stipulate that the effectiveness of such groups is dependent on social and psychological processes because their output should be considered cognitive in nature.

A well-recognised element of board composition is board diversity. Board diversity can be seen as heterogeneity among board members with multiple dimensions (Rao & Tilt, 2016). Dimensions can range from age to nationality, from relational skill to task skills and from sexual preference to political preference. Dimensions such as race, gender, nationality and age are classified as observable while educational background and industry expertise can be harder to identify (Kang et al., 2007). Watson et al. (1998) provide the basic argument in favour of

9 diversity. They argue that diversity results in a broader perspective which allows groups to have in-depth deliberations and generate different alternatives. This is enabled by the fact that diverse team members have different ways of perceiving problems through variations in their perspectives which results in a broad range of solutions and consequences for each option (Robinson & Dechant, 1997). Other research pointed out that board diversity also results in a larger quality of decision making (Andres et al., 2005), better performance (Knippenberg et al., 2004), boosted creativity and more effective problem solving (Carter et al., 2003).

Using this substantial amount of literature as base, we can argue that a more diverse board is better equipped to look after the interests of different stakeholders and is more effective. As a result, a diverse board will likely realize adequate disclosures of both financial and non-financial information (Lim et al., 2007). Gender diversity in the board room is classified as an important dimension because men and women have not enjoyed the same cultural and social privileges from a historical point of view (Liao et al., 2015). The issue of gender diversity captured the attention of companies due to the fact that several countries have enforced gender quotas (e.g. The Netherlands, Sweden, India) for boards in order to create equal representation among genders.

Research by Wehrmeyer & McNeil (2000) has shown that women are more concerned with environmental issues and therefore more inclined to act in order to reduce perceived environmental risks. In addition, Bear et al. (2010) showed that female board members promote environmental and CSR reporting. Ibrahim & Angelidis (1994) found that male and female board member differ significantly in their orientation. Males are predominantly concerned with economic performance while being less concerned about philanthropic aspects.

As a way of summarizing this section, there is extensive academic research that claims that a more diverse board, both in general and in terms of gender diversity, will have a positive effect on voluntary environmental disclosure. Therefore, the hypothesis of this study is:

H1: There is a positive relationship between the proportion of female directors on the board and voluntary environmental disclosures.

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Methodology

Sample

The sample of this study consists of 3.306 listed companies from 33 countries over the period 2013-2015. The data regarding these companies has been collected from the Thomson Reuters ASSET4 Database as well as the Worldscope Global Database which is also managed by Thomson Reuters. The ASSET4 Database contains data on environmental, social and corporate governance matters based on more than 250 Key Performance Indicators and 750 individual data points. All environmental and governance related data has been collected from ASSET4. The Worldscope Global Database contains detailed financial statement data and profile data on companies worldwide. The financial data used in this sample was collected from the Worldscope Global Database.

When comprising the sample, a number of criteria were used. First of all, financial institutions were excluded due to their operational and regulatory structure (Fama & French, 1992; Fraser et al., 2009). Secondly, only firms with data on all environmental, governance and financial variables required for this study were sampled. Finally, countries with less than 25 observations were excluded from the sample because of possible representativeness issues. Table 1 reports the sample statistics. After application of the criteria mentioned above, the sample dataset contains 8200 firm-year observations.

Dependent variable

Voluntary environmental reporting can adapt several forms. It can be included in the annual report or published as a separate CSR report, Health & Safety report or Sustainability report. The dependent variable is measured as a dummy variable with the value of 1 if the company disclosed CSR or Sustainability information and 0 otherwise.

The disclosure is tested on one condition, the disclosure needs to consist of a minimum of 5 pages. The form is not important, a separate report is weighed equal as an inclusion in the annual report. When a company publishes CSR reports bi-annually, the data point will record a zero in the year when there is no report.

11 Table 1: Sample statistics Year Obs. 2013 2524 2014 2597 2015 3079 Total obs. 8200 Industry Retail 1813 Production 2574 Technology 1404 Medical 509 Other 1900 Total obs. 8200 Country Australia 762 Austria 29 Belgium 51 Brazil 62 Canada 644 China 186 Denmark 46 Finland 70 France 228 Germany 214 Hong Kong 360 India 205 Indonesia 75 Ireland 30 Italy 73 Japan 520 Korea 98 Malaysia 111 Netherlands 82 New Zealand 52 Norway 44 Philippines 49 Russian Federation 60 Singapore 87 South Africa 250 Spain 87 Sweden 113 Switzerland 124 Taiwan 122 Thailand 72 Turkey 35 United Kingdom 693

United States of America 2484

Total obs. 8200

In this table we report the number of observations per category in the sample after implementing all sample criteria.

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Independent variable

The independent variable in this research, gender diversity within the board of directors, is measured as the proportion of female directors. This proportion is calculated by dividing the number of female directors by the total number of directors. In line with prior research, the proportion of female directors is used as a proxy for gender diversity (Liao et al., 2015; Lai et al., 2017; Adams & Ferreira, 2009). The consensus in scientific literature claims that it is better to use the proportion of women in the board rather than the absolute number of women. The reason for this is that the proportion of women contains more information than the absolute number and is therefore better suited for analysis.

Control variables

To ensure the accuracy of the results of this research, we use several control variables based on prior research. These can be divided into two categories: Corporate Governance variables and financial variables.

Control variables (CG)

The variable BOARDSIZE is measured as the total number of directors serving on the board (Liao et al., 2015) and BOARDMEETING is a proxy for the level of board activity (Laksmana, 2008) and is measured by the absolute number of board meetings per year. Another variable used is NONEXEDIR acts as a proxy for board independence and is measured as the proportion of non-executive directors by dividing the number of non-executive directors by the total number of directors serving on the board (Prado-Lorenzo & Garcia-Sanchez, 2010; Liao et al., 2015). We use DUALITY to control for CEO duality where DUALITY equals 1 if the CEO and Chairman of the Board are different and 0 otherwise (Liao et al., 2015). Last, ENVCOMM is a dummy variable that equals 1 if the company has a board-level environmental or CSR committee and 0 otherwise (Liao et al., 2015; Konadu, 2017; Michelon & Parbonetti, 2012)

13

Control variables (financial)

The variable FIRMSIZE is measured as the natural logarithm of the total assets as larger organizations tend to disclose more information (Al-Tuwaijn et al., 2004; Liao et al., 2015) and ROA is used as a proxy for profitability and is measured by net income before extraordinary items and preferred dividends divided by the total assets (Fuente et al, 2017; Konadu, 2017; Liao et al., 2015; Prencipe, 2004).

Besides all the control variables listed above, we have also controlled for year, industry and country. This was all done by dummy variables as listed in Appendix A.

Statistical model

We have used a LOGIT regression to estimate the following model.

ENVREP = β0 + β1 FEMALE + β2 BOARDSIZE + β3 BOARDMEETING + β4 NONEXEDIR + β5 DUALITY + β6 ENVCOMM + β7 FIRMSIZE + β8 ROA + β9 YEAR + β10 INDUSTRY + β11 COUNTRY + ε

βi represents the coefficients and ε represents the error term. The construction of the variables is reported in the Appendix A.

14

Results

Descriptive statistics

Table 2 shows the descriptive statistics of this study. We ended up with 8.200 observations from 3.306 organizations over the years 2013-2015. The mean of ENVREP is 0.585 and represents that on average 58,5% percent of the organizations disclosed environmental information during the years 2013-2015. Table 2 also shows that, on average, 13% of the board consisted of women within our sample. The three years are quite proportionally represented with slightly more observations in 2015 as compared to the other years.

Furthermore, the variables are corrected for extreme values before being used in the analysis. Using Winsorizing techniques, outliers are corrected to the average of +/- three times the standard deviation. Thereby limiting the possible disruptive effect of these outliers.

Descriptive statistics

Variable N Mean SD Min Max

ENVREP 8200 0.585 0.493 0 1 FEMALE 8200 0.130 0.120 0 .75 ENVCOMM 8200 0.549 0.498 0 1 DUALITY 8200 0.370 0.483 0 1 NONEXEDIR 8200 0.725 0.224 0 1 BOARDMEETING 8200 9.155 5.359 1 100 BOARDSIZE 8200 9.876 3.26 1 26 FIRMSIZE 8200 12,091,129 21,386,616 47 118,368,038 ROA 8200 0.031 0.096 -0.398 0.460 INDUSTRY 1: RETAIL 8200 0.224 0.417 0 1 INDUSTRY 2: PRODUCTION 8200 0.317 0.465 0 1 INDUSTRY 3: TECHNOLOGY 8200 0.178 0.382 0 1 INDUSTRY 4: MEDICAL 8200 0.057 0.233 0 1 INDUSTRY 5: OTHER 8200 0.224 0.417 0 1 COUNTRY US 8200 0.265 0.441 0 1 COUNTRY JP 8200 0.106 0.308 0 1 COUNTRY UK 8200 0.073 0.259 0 1 COUNTRY OTHER 8200 0.556 0.497 0 1 YEAR 2013 8200 0.301 0.459 0 1 YEAR 2014 8200 0.317 0.465 0 1 YEAR 2015 8200 0.381 0.486 0 1 Table 2:

15

Correlation Analysis

In anticipation of the regression analysis the correlation of the variables was tested. The results are shown in Table 3. The results show that the proportion of females on the board has a positive relation (r= 0.1580, p<0.05) with voluntary environmental disclosure. Furthermore, it shows that that all control variables, except for the proportion of non-executive directors, show a positive relation with voluntary environmental disclosure (p<0.05). The results of the correlation analysis can be used to identify the relations between the different variables. The correlation analysis also allows us to judge whether multicollinearity might impact the regression results. In line with prior research, we classify an indication of multicollinearity as a correlation larger than 0.6 (Bedeian, 2015) Table 3 shows that there are no values larger than 0.5608 thereby eliminating multicollinearity.

Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) ENVREP (1) 1.0000 FEMALE (2) 0.1580* 1.0000 ENVCOMM (3) 0.5608* 0.1481* 1.0000 DUALITY (4) -0.0758* 0.0226* -0.0295* 1.0000 NONEXEDIR (5) -0.0124 0.3790* 0.0046 0.0406* 1.0000 BOARDMEETING (6) 0.0496* -0.0749* 0.0368* -0.0819* -0.1630* 1.0000 BOARDSIZE (7) 0.2868* 0.1343* 0.2292* 0.0702* 0.0275* -0.0562* 1.0000 FIRMSIZE (8) 0.3903* 0.1052* 0.3271* 0.1312* 0.0208* 0.0445* 0.5112* 1.0000 ROA (9) 0.0673* 0.1749* 0.0140 0.0608* 0.1287* -0.1187* 0.0554* 0.1191* 1.0000 * p<0.05 (two-tailed) Table 3: Correlation matrix

16

Tests and results

We examine the impact of board gender diversity on voluntary environmental disclosure using logit regressions as well as the fixed and random effect regressions that were performed as robustness tests. The logit regression model is a non-linear model that can be used to estimate the effects of multiple variables on a dichotomous dependent variable (Mansson et al., 2015). Often, research questions with a binary dependent variable were addressed by either an ordinary least squares regression or a linear discriminant function analysis (Peng et al., 2002). However, research showed that both techniques were found to be inferior for dealing with dichotomous dependent variables because of their strict statistical assumptions, normality, linearity and continuity for OLS regressions (Peng et al., 2002).

Table 4 presents 6 models, based on which the hypothesis of this study will be accepted or rejected. Model 1 and model 2 show the results of the logit regressions, models 3 and 4 show the results of the fixed effects regression and models 5 and 6 show the results of the random effects regression.

Model 1 shows the results of the logit regression which examines the dependent variable

(ENVREP) and all control variables. With regards to the corporate governance control variables one can conclude that only ENVCOMM shows a significant and positive relationship (β=2.4558; p<0.01) to the dependent variable. The financial control variables (FIRMSIZE & ROA) both do not show a significant relationship to the dependent variable. The year dummies for 2014 and 2015 show a mixed result. The year dummy for 2014 does not show significant results which means that it does not significantly differ from the observations in 2013. However, the year dummy for 2015 does show significant results which means that the observation from 2015 significantly (β=-0.1307; p<0.01) differ from the observations in 2013. This might be due to the fact that 38.1% of the observations are from 2015.

Model 2 shows the results of the logit regression which examines the hypothesis of this paper.

In this model all control variables are included as well as the independent variable (FEMALE). It shows a significant and positive relationship (β=1.2038, p<0.05) between the proportion of female directors and voluntary environmental disclosure. This means that an increase in the proportion of female directors will lead to an increase in voluntary environmental disclosure. Based on this logit regression, hypothesis 1 is accepted. Again, ENVCOMM shows a significant and positive relation ((β=2.4549; p<0.01) to the dependent variable whereas, in line with model 1, the financial control variables (FIRMSIZE & ROA) both do not show a significant relation

17 to the dependent variable. The year dummies show similar results to model 1. Model 2 also reports a R² of 0.2881 which means that 28.81% of the variation in voluntary environmental disclosure is explained by the control variables and the independent variable.

Robustness Tests

To ensure the robustness of the results, we have performed two additional regressions. The results of these regressions are shown in models 3-6.

Model 3 shows the first additional regression which is a fixed effects regression and estimates

the effect of all control variables on the dependent variable (ENVREP). Model 4 shows the results of the full model fixed effects regression. After controlling for fixed effects, the results still show a significant and positive (β=0.1866; p<0.05) relation between the proportion of female directors and voluntary environmental disclosure. The results of model 3 and 4 also show similar results with regards to the control variables. The variable ENVCOMM again shows a positive and significant (β=0.5038; p<0.01) relationship with regards to the dependent variable.

Model 5 shows the second additional regression is a random effects regression and includes all

control variables and the dependent variable. Model 6 shows the results for the full model random effects regression. The results show a positive and significant relationship for the control variables BOARDSIZE (β=0.0010; p<0.01), NONEXEDIR (β=0.1172; p<0.01), ENVCOMM (β=0.2414; p<0.01) and FIRMSIZE (β=0.0875; p<0.01). The results of Model 6 also show the robustness of the relationship between the proportion of female directors and voluntary environmental disclosure because this relation is again positive and significant (β=0.2596; p<0.01).

The results of the two additional regressions indicate that our results of the logit regressions are robust.

18 Table 4:

Regression Models

Variables Model Model Model Model Model Model

(1) (2) (3) (4) (5) (6) BOARDSIZE 0.0240 0.0223 0.0033 0.0030 0.0108 ** 0.0010 ** BOARDMEETING 0.0001 -0.0001 -0.0001 -0.0001 -0.0002 -0.0002 NONEXEDIR 0.0292 -0.0001 0.0125 0.0069 0.1443 ** 0.1172 ** DUALITY -0.0433 -0.0439 -0.0054 -0.0055 -0.0131 -0.0132 ENVCOMM 2.4558 ** 2.4549 ** 0.5038 ** 0.5035 ** 0.2453 ** 0.2414 ** FIRMSIZE 0.0623 0.0566 0.0116 0.0112 0.0874 ** 0.0857 ** ROA -0.0593 -0.0336 -0.0078 -0.0045 0.0589 * 0.0536 YEAR 2014 -0.0201 -0.0358 -0.0019 -0.0045 0.0101 * 0.0058 YEAR 2015 -0.1307 ** -0.1631 ** -0.0193 ** -0.0244 ** 0.02 ** 0.0114 INDUSTRY 1: RETAIL 0.4447 ** 0.4441 ** 0.0698 ** 0.0697 ** 0.016 0.0089 INDUSTRY 2: PRODUCTION 0.5779 ** 0.5776 ** 0.0924 ** 0.0923 ** 0.0467 ** 0.0461 ** INDUSTRY 3: TECHNOLOGY 0.3128 * 0.3127 * 0.055 ** 0.0551 ** 0.018 0.0172 INDUSTRY 4: MEDICAL 0.4782 ** 0.4791 ** 0.0738 * 0.0740 * 0.0409 ** 0.0336 COUNTRY US -0.8334 ** -0.8313 ** -0.1487 ** -0.1484 ** -0.2646 ** -0.2660 ** COUNTRY UK 1.3596 ** 1.3624 ** 0.1706 ** 0.1707 ** 0.2392 ** 0.2271 ** COUNTRY JPN 1.0335 ** 1.0338 ** 0.1192 ** 0.1192 ** 0.1497 ** 0.1698 ** CONSTANT -1.0359 ** -1.0186 ** 0.2853 ** 0.2882 ** -1.0773 ** -1.0500 ** FEMALE 1.2038 * 0.1866 * 0.2596 ** Pseudo R² 0.2879 0.2881 Wald X² (16) 1107.32 Wald X² (17) 1108.65 Prob > X² 0.0000 0.0000 R Squared 0.3517 0.3958 Highest VIF 2.01 2.02 1.64 1.64 4.27 3.04 F-value 191.76 ** 171.69 ** *p value <0.05, **p value <0,01

19

Conclusion & Discussion

This chapter will answer the main research question as stated in the introduction of this paper. Furthermore, we will reflect on the limitations of this research and discuss the possibilities for future research.

Conclusion

This paper investigates the impact of gender diversity within the Board of Directors on voluntary environmental disclosure. As noted earlier, the topic of gender diversity is subject to academic as well as social debate within the field of corporate governance. This paper tries to contribute to this discussion by using global data from 3.306 listed organizations from 33 countries over the period 2013-2015. To test the hypothesis, we used the proportion of female directors and a dummy variable that indicated environmental disclosure.

The aim of this study is to contribute to the literature on CSR disclosures and further explore the role of female directors in organizations with regards to environmental disclosures. Although gender diversity plays a leading role in literature, till data most studies have focused on the influence on financial results (Ahern & Dittmar, 2012; Galbreath, 2018; Garcia-Sanchez et al., 2017; Dwyer et al., 2003; Post & Byron, 2015). In this paper, the implications women have on environmental disclosure on an organization are analysed.

The results of the empirical study support the hypothesis that gender diversity within the board of directors has a positive and significant impact on voluntary environmental disclosure. These results are generally consistent with the results of previous studies (Liao et al., 2015; Jizi, 2017; Seto-Pamies, 2015). In line with prior research findings by Michelon & Parbonetti (2012) and Konadu (2017) this study found evidence that a company is more likely to voluntarily disclose environmental information as the proportion of female directors increases. In addition, we also found evidence that the presence of an environmental or CSR committee positively impacts voluntary environmental reporting which is consistent with prior research (Liao et al., 2015; Li et al., 2010; Konadu, 2017)

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Limitations & Future research implications

The first limitation finds its origin in the data used for this study. By using international data we may find various country specific characteristics such as gender quota by the regulator that possibly impact the results of this study. This opens opportunities for future research to include country specific characteristics to see whether this impacts the relation. In addition, our sample is restricted to large (listed) organizations where corporate governance nuances may be different for small- and medium-sized enterprises.

Another limitation of this study is a consequence of the fact that our data is non-specific with regards to the content of the disclosed information. The disclosed reports are not scored at any scale, while initiatives as the Global Reporting Initiative do offer guidelines for CSR and sustainability reports. Future research could take this into consideration and investigate whether the disclosed reports are based on these guidelines.

Finally, we use the ratio/percentage of women serving on the board of directors to measure gender diversity. This does not take into consideration the characteristics of the women serving on the board. It might be interesting to investigate several dimensions of diversity simultaneously, as suggested by Nielsen & Huse (2010). Future research might explore other aspects of diversity, such as age and ethnic origin, at the level of the board to discover possible relationships with environmental disclosures.

21

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26

Appendix A

A dummy variable that is equal to 1 if the company disclosed environmental information and 0 otherwise The number of female directors divided by the total amount of directors

The total number of directors serving on the board The total number of board meetings held in a year

The number of non-executive directors divided by the total amount of directors

In this table we present the variables used in this study with the method of their calculation

Four dummy variables: US, UK, JPN, Other. Three countries with the most observations and a reference group A dummy variable that is equal to 1 if the CEO and Chairman of the board are different and 0 otherwise

A dummy variable that is equal to 1 in the company has a board-level environmental committee and 0 otherwise The natural logarithm of the total assets

Net income before Extraordinary items/Preferred Dividends divided by total assets Three dummy variables that control for the three years in the sample