Document Type : Research Paper

Authors

• Mohsen Khotanlou ¹
• Mahdi Kazemioloum ²
• Yasaman Moradi Behjat ³

¹ Assistant Prof., Department of Accounting, Faculty of Economics and Social Science, Bu-Ali Sina University, Hamedan, Iran.

² Assistant Prof, Department of Accounting, Faculty of Economic and Social Science, Bu-Ali Sina University, Hamedan, Iran.

³ Master of Accounting, Department of Accounting, Alvand Institute of Higher Education, Hamedan, Iran.

Abstract

In recent years, non-financial disclosure has become increasingly important for stakeholders in making informed decisions. Non-financial disclosures by companies, such as Environmental, Social, and Governance (ESG) information disclosure, can be influenced by the characteristics of directors and other corporate governance mechanisms. Accordingly, the purpose of this research is to investigate the impact of board gender diversity on ESG disclosure, with a focus on the moderating role of audit committee characteristics. In this study, data from 78 companies listed on the Tehran Stock Exchange from 2013 to 2024 (858 firm-years) were collected, and the research hypotheses were tested using pooled data and multiple regression analysis. The research findings indicate that gender diversity on the board of directors has a positive and significant impact on ESG disclosure. In other words, an increase in the presence of women on the board is associated with a corresponding increase in the ESG disclosure index. The research findings also indicated that the independence and financial expertise of the audit committee moderate the relationship between board gender diversity and ESG disclosure; however, the size of the audit committee members does not have a moderating effect on this relationship. This study offers valuable insights for managers and investors to evaluate the impact of gender diversity on the boards of directors and audit committees in ESG disclosure, and to inform their decision-making. Furthermore, legislators and policymakers can revise corporate governance mechanisms to promote greater inclusion of women not only on company boards but also in sub-committees to protect the rights of stakeholders better. The findings of the present study indicate a low number of female board members in companies listed on the Tehran Stock Exchange (9.2% of observations), which may affect the research results.

Introduction

In 2015, the United Nations introduced the Sustainable Development Goals to address poverty, environmental degradation, inequality, and justice, with the 2030 Agenda promoting sustainability for all stakeholders and guiding companies to shift from profit maximization to sustainable growth. Non-financial disclosures related to environmental, social, and governance (ESG) factors have gained strategic importance for stakeholders, including governments, investors, and employees, in decision-making processes. These disclosures address environmental concerns (e.g., green technologies), social issues (e.g., human rights), and governance matters (e.g., board independence). Agency and stakeholder theories emphasize the need for long-term, sustainable perspectives, though some view corporate social responsibility activities as a source of agency problems. In contrast, others see them as a competitive advantage. The board of directors, particularly in terms of its gender diversity, plays a critical role in enhancing ESG disclosures and stakeholder accountability, despite conflicting research findings. The audit committee strengthens transparency and accuracy in ESG reporting. This study examines how board gender diversity, moderated by audit committee characteristics, influences ESG disclosures, thereby contributing to the literature, particularly in the unique political context of Iran.
Research Question: What is the impact of board gender diversity on environmental, social, and governance (ESG) disclosures, with the moderating role of audit committee characteristics?

Literature Review

Environmental, Social, and Governance (ESG) issues have gained significant importance for companies due to current competitive requirements and stakeholder attention. By disclosing ESG information, companies aim to reduce agency problems and positively impact capital markets. Since ESG disclosure is often voluntary, studying the factors influencing the improvement of its quality is crucial. Research indicates that corporate governance factors, such as the board of directors and audit committees (especially in the context of agency theory), can play a significant role in reducing information asymmetry and conflicts of interest in ESG information disclosure.
Based on the theoretical foundation and prior research, the following hypotheses are formulated:
Hypothesis 1: Gender diversity on the board of directors has a positive and significant impact on ESG disclosure.
Hypothesis 2: The size of the audit committee moderates the relationship between gender diversity on the board of directors and ESG disclosure.
Hypothesis 3: The independence of audit committee members moderates the relationship between gender diversity on the board of directors and ESG disclosure.
Hypothesis 4: The financial expertise of audit committee members moderates the relationship between gender diversity on the board of directors and ESG disclosure.

Methodology

This applied study utilizes data from audited financial statements, explanatory notes, audit committee reports, and board activity reports submitted to the general assembly of shareholders of firms listed on the Tehran Stock Exchange, utilizing the CODAL system. The data were analyzed with EViews software, and multiple regression analysis was applied to test the research hypotheses. The study encompasses all firms listed on the Tehran Stock Exchange over the period from 2013 to 2023.

Results

The research findings indicate that gender diversity on the board of directors has a positive and significant impact on ESG disclosure. In other words, an increase in the presence of women on the board is associated with a corresponding increase in the ESG disclosure index. The research findings also indicated that the independence and financial expertise of the audit committee moderate the relationship between board gender diversity and ESG disclosure; however, the size of the audit committee members does not have a moderating effect on this relationship..

Conclusion

This study offers valuable insights for managers and investors to evaluate the impact of gender diversity on the boards of directors and audit committees in ESG disclosure, and to inform their decision-making. Furthermore, legislators and policymakers can revise corporate governance mechanisms to promote the greater inclusion of women not only on company boards but also in subcommittees, thereby better protecting the rights of stakeholders. The findings of the present study indicate a low number of female board members in companies listed on the Tehran Stock Exchange (9.2% of observations), which may affect the research results

Keywords

• Audit Committee
• Board Gender Diversity
• Environmental
• Social
• and Governance Disclosure

Main Subjects

• Financial Accounting
• Accounting and various aspects of finance