Board gender diversity and voluntary disclosure: moderation of family ownership in India

• Date: 05 June 2024
• Pages: 749-772
• DOI: https://doi.org/10.1108/IJAIM-05-2023-0132
• Published date: 05 June 2024
• Subject Matter: Accounting & finance,Accounting/accountancy,Accounting methods/systems
• Author: Rupjyoti Saha,Santi Gopal Maji

Board gender diversity and

voluntary disclosure: moderation

of family ownership in India

Rupjyoti Saha

Department of Humanities and Social Sciences,

Indian Institute of Information Technology Guwahati, Guwahati, India, and

Santi Gopal Maji

Department of Commerce, Tezpur University, Tezpur, India

Abstract

Purpose –Given the dominance of family ownership in India, this paper aims to examine whether the

impact ofboard gender diversity (BGD) on voluntary disclosure(VD) is moderated by family ownership.

Design/methodology/approach –Based on a panel data set of the top 100 listedIndian f‌irms for f‌ive

years, this study examines the impact of BGD on VD by segregating the sample between family-ownedand

nonfamily f‌irms. For empiricalanalysis, we use appropriate panel data models. For robustness, we employ a

three-stageleast square (3SLS) model.

Findings –The f‌indings reveal the signif‌icantpositive impact of BGD in terms of its different measures on

VD for family and nonfamily f‌irms. However, the impact becomes insignif‌icant for nonfamily-owned f‌irms

when femaledirectors are not substantially represented on the board.

Originality/value –This study extends the ongoing debateabout the outcomes of the mandatory gender

quota on board by providing novel evidenceon the difference between the impact of BGD on VD for family

and nonfamilyf‌irms in the Indian context.

Keywords Board gender diversity, Voluntary disclosure, Panel data regression, India

Paper type Research paper

1. Introduction

The case for gender equality has neverbeen more apparent. Despite representing half of the

world’s population, women and girls still face inequalities that stif‌le social and economic

progress. Women are one-half of the world’s population but only contribute to 37% of the

global GDP. An economy cannot operate at its full potential if half of its population cannot

fully contribute [1]. This reinforces Swami Vivekananda’s famed observation that “there is

no chance of the welfare of the world unless the condition of women is improved. It is not

possible for a bird to f‌ly on one wing”. Given the burgeoning importanceof gender equality

in economic development, such an issue has also grabbed considerable attention at the

corporate board level, as the contribution of corporations accounts for a staggering part of

wealth creationin most developed and emerging economies.

The topic got more attention after the global f‌inancial crisis and corporate failures that

ignited the contention on weak corporate governance practices and have stressed the

regulators to probe into relevant reasons for the fallout. In re-examining corporate

governance norms, one of the antecedents that came into the spotlight has been the male-

dominant corporate boards that ledto the breakdown of corporate giantssuch as Enron and

Moderation of

family

ownership in

India

749

Received29 May 2023

Revised6 February 2024

19April 2024

Accepted6 May 2024

InternationalJournal of

Accounting& Information

Management

Vol.32 No. 5, 2024

pp. 749-772

© Emerald Publishing Limited

1834-7649

DOI 10.1108/IJAIM-05-2023-0132

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1834-7649.htm

WorldCom (Erhardt et al.,2003). The debate was accentuated on the premise that male-

dominated boards suffer from suboptimal conf‌iguration syndrome, with less diverse

viewpoints.Moreover, there appearsto be a consensus on the fact that increasing the shareof

female directors is essential for corporate boards for reasons that range from competitive

edge owing to better market insight, creativity, innovation, and improved problem-solving,

the better quality of decisions (Duppati et al.,2020;Vafaei et al.,2021). Despite women being

the powerhouse of talent, they were consistently under-represented in the boardroom (Rose,

2007;Carteret al.,2010;Joeckset al.,2013;Liuet al.,2014;Brahmaet al.,2021;Saha,2023).

Governments have respondedto the under-representation of females on corporate boards

at the country level by introducing gender quotas between 30% and 40% of women on

board in countries like Germany, Norway, Spain, France, Iceland, Italy, Belgium, and

Finland. India is one of the few Asian countries to mandate a minimum of one female

director on board under the Companies Act 2013. Good corporate governance practices

involve how corporationsare being run, and gender-diverse boards could act as a substitute

mechanism for corporate governance (Gul et al.,2011). A sound corporate governance

system also calls for adequate disclosure of information as it acts as a dialogue between a

f‌irm and its fund providers. Corporatedisclosure is categorized as mandatory and voluntary

disclosure. While mandatorydisclosure requires f‌irms to disclose information prescribed by

country-specif‌ic reporting regulations, Voluntary Disclosure (VD) is supplementary, which

augments the mandatory disclosure(Saha and Kabra, 2021). The term VD, as def‌ined by the

Financial Accounting Standards Board (FASB, 2001), “primarily includes the statements

that are not explicitly required by Generally Accepted Accounting Principles (GAAP) or

specif‌ic country rules.”

In recent years, researchers have observed a substantial gap between the information

disclosed by f‌irms per the regulatory standards and the information required by investors

(Eng and Mak, 2003;Saha, 2023). Investors have now started looking for information that

goes beyond traditional reporting and requires information that portrays a picture of

whether f‌irms recognize the importance of investing in employees, fosteringdiversity in the

workplace, dealing ethically with suppliers and customers, extending support to the local

community, and protecting the environment[2]. While mandatory disclosure regimes focus

on disclosing f‌inancial information, various nonf‌inancial information on corporate

background, vision, policies, strategies, corporate initiatives regarding employees,

environmental, social, and governance perspectives, etc. though equally important in the

rational decision-making process of investors, are largely ignored under the mainstream

reporting regulations. Interestingly, equity markets are observed to discount/premium the

way companies communicate their nonf‌inancial information [3]. Despite mandatory

disclosure requirements like accounting standards and listing regulations of different stock

exchanges that are being modif‌ied occasionally to promote complete and transparent

disclosure, their adoption onlyimproves the quality of f‌inancial statements. In contrast, the

quality of nonf‌inancial disclosurelargely depends on management’s discretion and attitude

(Ernstberger and Grüning, 2013). Moreover, researchers have a wide consensus on the

pivotal role played by internal corporate governance mechanisms in general and gender-

diverse boards, in particular in augmenting overall disclosure in the form of VD (Saha,

2023). As rightly stated by Christine Lagarde, IMF Managing Director, “What if Lehman

Brothers had been Lehman Sisters?”. Perhaps things would have been different if more

women ran corporations in the U.S. and worldwide (Adams and Funk, 2012). Hence, to

promote corporate transparency through disclosure, examining the impact of a gender-

diverse board on VD is pertinent to provide valuable insights about the watchfulness of

suspicious pursuitsof management.

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