Mandating Gender Diversity and the Value Relevance of Sustainable Development Disclosure

Abstract

This study investigates whether investors react to disclosures of sustainable development. The study further examines if the legislative change has affected investors' perception on sustainability disclosure via the corporate governance mechanism. With the recent legislative change in Korea, the gender quota may have negatively impacted corporate governance due to tokenism. In this study, we employ a natural experiment and event study with the 72 largest Korean firms listed in the stock market. Findings indicate that firms with female directors experience significant abnormal returns around event days, and that the firms meeting the minimal gender quota requirement indicate insignificant abnormal returns. This implies that firms with female directors provide better governance with diversity in the boardroom. However, the benefits from gender diversity become weak when tokenism is applied to them. The study makes several contributions to the governance and sustainability literature by providing additional evidence on tokenism. Findings have implications about the relationship between corporate governance and sustainable development for academia and practitioners.