Gender diversity regulation of major stock exchanges: empirical analysis of diversity disclosure by companies listed at the Hong Kong Stock Exchange

Abstract

The Stock Exchange of Hong Kong (SEHK) upgraded in 2019 a voluntary provision on board diversity to a listing rule, making it mandatory for listed companies to adopt and disclose a board diversity policy. Although the concept of board diversity encompasses many variables of diversity, this work mainly focuses on board gender diversity, an issue that has been at the center of the debate on gender parity for decades. Stock exchanges have a unique platform to influence the business community and raise awareness towards female corporate representation, yet not many stock exchanges have implemented diversity related regulations and those that did so usually introduced them within their Corporate Governance Codes under a “comply or explain” regime. As of now, the Hong Kong Stock Exchange is the only major exchange addressing board diversity directly in its listing rules, requiring that companies disclose the content of their board diversity policies and any diversity objectives that they have set. The aim of this study is therefore exploring how companies listed at SEHK develop their diversity related disclosure against this rule and whether the adoption of diversity policies has also encouraged greater gender diversity at boards. This work starts with an international overview of the gender diversity regulation in place at some major stock exchanges, including a detailed history of the development of the regulation at SEHK. The second chapter provides a review of the literature on board diversity, first explaining the wider concept of board diversity and then focusing on the issue of board gender diversity, addressing its evolution, its current status worldwide and the core obstacles that still keep women out of corporate top positions. The last part of this chapter moves to a closer perspective on the impact of the diversity regulation implemented by stock exchanges, discussing empirical studies on diversity disclosures by companies listed at the stock exchanges of Australia and New Zealand. This review introduces us to the third and final chapter of this work, where a research on firms’ response to the SEHK listing rule on board diversity is conducted. First, an assessment of the quality of diversity reporting is realized through an empirical analysis of annual reports disclosure by 50 leading companies in 2018 and 2019, that is before and after the diversity provision became mandatory. Given that the ultimate goal of the rule is to enhance female representation on the boards of listed companies, the second part of the research investigates the nexus between board diversity reporting and actual female presence on the boards of directors, trying to assess whether the regulatory approach chosen by the Hong Kong Stock Exchange actually encouraged listed companies to change their attitude towards board gender diversity.