Lennart Prinz - Gender Diversity Disclosure Regulation - Empirical Evidence from Germany

Bestellen

Equal participation of women and men, particularly in corporate management positions, has increasingly become a subject of public and political debate. Various regulatory approaches exist to promote gender equality in corporate management positions. In addition to mandatory gender quotas for specific corporate bodies, regulators can adopt less restrictive measures. The German legislature has introduced a disclosure requirement obligating companies to comprehensively report on gender diversity at various management levels (so-called gender diversity disclosure regulation, GDDR). Unlike mandatory gender quotas, GDDR does not impose fixed gender targets but requires companies to set individual targets for female representation. The disclosure requirement aims to create transparency and generate public pressure, incentivizing companies to increase the share of women in management positions. Although this regulatory approach seeks to influence the composition of corporate boards, empirical research on its effects remains scarce.

Against this backdrop, this study examines the development of gender diversity following the introduction of GDDR, the determinants of increased gender diversity, and whether and to what extent changes in leadership composition affect corporate reporting quality. The empirical study is based on a sample of 214 German companies subject to GDDR between 2015 and 2021.

The results show that 22% of reports do not comply with the legal disclosure requirements. Companies reporting on gender diversity frequently set a target of 0% for female representation (e.g., every second target at the executive board level). Furthermore, the analysis reveals that publicly listed companies tend to provide more comprehensive disclosures and set more ambitious gender diversity targets compared to private companies. The analysis of the determinants shows a significant relationship between public pressure, companies’ listing status, company age, and prior reporting practices.

As a potential consequence of changes in the composition of supervisory boards driven by public pressure under GDDR, the results suggest a negative relationship between increased gender diversity and financial reporting quality. However, this negative relationship is only observed in companies that increase female representation in the supervisory board in the context of high public pressure. No general relationship between lower financial reporting quality and higher gender diversity is found.

This study contributes to literature in the area of GDDR. The empirical results have implications for regulators, users and preparers of reports, auditors, and enforcement institutions.