Do gender diversity and foreign investor affect sustainability disclosure

Abstract

We examine the effect of female board members and foreign institutional investors on corporate social responsibility (sustainability) disclosure in Indonesian listed firms from 2015 to 2017. Our final sample comprised 1192 firm-year observations. We apply ordinary least squares pool regression to estimate the associations and address the endogeneity problem using the two-stage least squares model, generalized method of moments, and lagged variables. While previous studies have focused on the impact of female board members and foreign institutional investors on financial outcomes, we extend the literature by investigating the association between both female board members and foreign investors and sustainable disclosure in Indonesia, where the participation of women is nominal, especially at the top management level, and the level of foreign ownership is high. Our findings propose a proportion of women as board members for listed firms and promote attractive policies to increase the number of foreign investors investing in Indonesia. It also contributes to conflicting results regarding the relationship between corporate governance and corporate social responsibility (CSR) commitment. Our results were robust after testing for endogeneity and adding more control variables. Overall, the findings have practical implications for policymakers and investors regarding corporate disclosure and governance in Indonesia.