Gender diversity performance and voluntary disclosure: Mind the (gender pay) gap

We study whether voluntary gender diversity disclosure is predictive of gender diversity performance. Exploiting a mandate in the United Kingdom that requires firms to disclose 2017 gender pay gap (“GPG”) data for the first time, we find that providing voluntary gender diversity disclosure in 2016 is correlated with having a worse gender pay gap in 2017. Our results are concentrated in industries with worse gender diversity reputations, consistent with legitimacy theory, where firms facing more public pressure use voluntary disclosure to help legitimize their reputations. We further examine whether this disclosure reflects a firm's intent to improve its gender diversity performance over time. We find that forward-looking disclosures, such as gender diversity targets, are positively associated with GPG improvement from 2017 to 2019. Collectively, these gender pay gap findings shed light on how voluntary ESG disclosure can be used to predict current and future ESG performance.