Board Gender Diversity and Negative Disclosure Tone in JSE-Listed Firms

Abstract

Motivation: Research on board gender diversity (BGD) and disclosure practices in South Africa is limited. However, under-representation of women in leadership roles presents an opportunity to evaluate transparency and accountability.
Purpose: This study examines the relationship between BGD and negative disclosure tone (NDT) in integrated reports of the top 40 Johannesburg Stock Exchange (JSE)-listed firms, emphasising the impact of a critical mass of female directors on financial performance.
Design and methodology: The integrated reports of the top 40 JSE-listed firms from 2013 to 2022 are analysed. The Loughran and McDonald (2011) financial dictionary is used to measure the NDT. To address concerns about endogeneity, a dynamic panel system estimator and robustness checks are employed.
Main findings: The study shows that BGD is positively associated with NDT, indicating that boards with diverse gender composition are more likely to report clearly and risk-awarely. Getting a critical mass of female directors (at least 30% or 3) greatly improves a company's performance, which supports Critical Mass Theory (CMT).
Practical Implications: The results present policymakers, regulators, and investors with useful information. It stresses the importance of having a diverse group of board members, including members of different genders, to improve the quality of disclosures and financial results, which aligns with King IV governance principles.
Novelty: This research is the first empirical investigation into the relationship between BGD and NDT in South Africa, providing evidence from an emerging market and enhancing Upper Echelons Theory and CMT.