Board gender diversity and environmental disclosure: evidence from the banking sector
| DOI | https://doi.org/10.1108/JCEFTS-08-2021-0046 |
| Published date | 12 July 2022 |
| Date | 12 July 2022 |
| Pages | 350-371 |
| Subject Matter | Economics,International economics |
| Author | Amina Buallay,Layla Alhalwachi |
Board gender diversity and
environmental disclosure:
evidence from the banking sector
Amina Buallay
Collage of Business and Finance, Ahlia University, Manama, Bahrain, and
Layla Alhalwachi
Collage of Business, Bahrain Polytechnic, Isa Town, Bahrain
Abstract
Purpose –This study aims to examinethe relationship between board gender diversityand environmental
disclosure(ED) in the banking sector.
Design/methodology/approach –Data pooled from Bloomberg database on 2,116 banks from the
period of 2007 to 2016 ends up with 7,951observations. Panel regression model that include random effects
was used to test studyhypothesis.
Findings –The findings showed that when femaleboard members were between 21% and 50%, it had a
significant positive effect on the ED disclosure. Furthermore, the results showed that bank located in non-
OPEC countries have better gender diversity in their board and greater ED than non-OPEC countries.
Moreover, the results demonstrated that the boarddiversity and ED are better in banks that are located in
countriesthat ranked 26–50 in oil production.
Originality/value –Althoughfindings of this research clearly discussed the importanceof board diversity
in enhancing ED, the results of this study give us a crucialsignal as a wake-up call for regulators to start
consideringwomen quota on board for higher ED.
Keywords Board gender diversity, Environmental disclosure, Oil countries
Paper type Research paper
1. Introduction
The past few decades have witnessed a dramatic growth of research interest a great and
increasing interest in the natural environment, which stemmed from the environmental
effects resultingfrom industrial activities as well as the economic growth achievedby global
economies (Lu and Herremans,2019). A number of measures have been adopted by business
organizations aimed at protecting the environment from pollution and misuse of natural
resources, which comes as a resultof their commitment to their social responsibilities on the
one hand and compliance withlaws and regulations on the other hand (Amorelli and García-
S
anchez, 2021). Environmental disclosure (ED) is one of the most important strategies that
business organizations canadopt to describe their environmental contributions, improve its
image, enhance its reputation and legitimizeits activities, which guarantees it obtaining the
necessary resources to carry out its activities (Wang et al.,2021). Moreover, the adoption of
environmental policies gives a better opportunity to attract more attention from investors,
as there are ethical and social considerations that must be taken into accountwhen making
investment decisions(Cordeiro et al.,2020).
Board of directors is a group of elected or appointed memberswhose functions are to set
the policies of a company or organization, to monitor and control its activities and to make
JCEFTS
15,3
350
Journalof Chinese Economic and
ForeignTrade Studies
Vol.15 No. 3, 2022
pp. 350-371
© Emerald Publishing Limited
1754-4408
DOI 10.1108/JCEFTS-08-2021-0046
The current issue and full text archive of this journal is available on Emerald Insight at:
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its final decisions, as the activities of the board of directors are determined by the powers,
duties and responsibilities granted to it by an external authority, which may be the law,
regulations, constitution of the organization and others (Haque and Jones, 2020). Thus,
board gender diversity is considered one of the main mechanisms of governance that can
affect the environmental performance of banks, as they are likely to work to harmonize the
behavior of the institution withthe interests of stakeholders and make it socially acceptable,
by adopting policies that wouldprotect their rights and meet their needs (Shakil et al.,2020).
Boards that are diversified in terms of gender are expected to be more committedto ethics,
stakeholders and their communities (Kennedyand Kray, 2014;Hillman, 2015). According to
agency theory, board genderdiversity is likely to increase its independence, and the chances
of self-control overthe behavior of its managers (Hindasah and Harsono, 2021).
However, the failure of banks to adopt ED practices may lead to the possibility of
exposure to a number of risks, includingthe threat of increased regulatory oversight by the
government or international organizations, and risks arising from pollution and poor use of
resources, which could affect the bank’s reputation (Hani
cet al., 2021). Furthermore,
Giannarakis et al. (2020) illustrated that there are many determinants that make traditional
accounting unable to show the environmental effects, the most important of which is the
lack of laws and regulationsthat urge banks to disclose their environmental performance.In
addition, banks’reliance on the financial concept in disclosing environmental impacts
prevents them from being shown in their annual reports, in addition to the lack of an
integrated theoreticalframework for regulating ED processes (Brooks and Schopohl,2020).
Much attention paidto the banking sector may be due to the fact that it is a dominantand
large economic sector that facilitatesloans and capital for firms that operate in any economy
worldwide, where it functions as a financial intermediary for other businesses. Needless to
mention, the importance of such sector in creating new opportunities for economic growth
without neglecting the long-term outcomesof investments on the society and environment.
However, the banking sector has received criticism for being a major player in the world
financial crisis in 2008, thus, its reputation is on the edge, so many banks are thriving to
enhance their reputationby providing what is called “green finance”.
In the aftermath of the global financial crisis in 2008 that erupted in the banking sector
due to the collapse of LehmanBrothers, many researchers have claimed that bankingsector
boards are largely male-dominated,which causes excessive take of risk and other issues that
are associated with masculine paradigm thinking (de Larosière Group, 2009). After an in-
depth literature research, it was concluded that there is a lack of previous literature in
addressing whether there is any relationship between board gender diversity and ED,
collecting samples from different countries, therefore this paper came to fill this gap by
taking into consideration a sample from different cultures and countries. Furthermore, the
negative attitudes of managers’culture towards women’s representation on boards of
directors due to administrative opportunism and the spread of administrative corruption
lead to the emergence of a problem represented by asymmetry of information and
consequently a lack of qualitydisclosure in financial reports. Therefore, this paper appeared
to highlight the importance of gender diversity in the board of directors and its impact on
the environmental dimension (Herli et al.,2021;Gallego-Sosa et al., 2021). In addition, board
gender diversity was under the scopeof many studies that linked gender diversity to ethics
(Hillman, 2015; Kennedyand Kray, 2014). As ED practices are an ethical issue that is related
to the corporate practices, it would be interesting to find the association between board
gender diversity, as an indicator for ED practices, as a form of social commitment, in
banking sector, which struggles to enhance its environmental commitments in the business
world to overcome consequencesof previous scandals.
Board gender
diversity
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