Does board ethnic diversity affect IFRS disclosures?

Abstract

Purpose

This paper examines the impact of board ethnic diversity on the level of compliance with international financial reporting standards (IFRS) disclosures.

Design/methodology/approach

Using a unique hand-collected dataset from South Africa, we develop a comprehensive disclosure index against 570 mandatory requirements of IFRS. Further, we employ the fixed-effects model to investigate whether board ethnic diversity affects IFRS disclosures.

Findings

We document a significant positive association between ethnic minority directors and IFRS disclosure levels. Furthermore, we reveal that non-busy ethnic minority directors have a greater impact on IFRS disclosure levels than their busy counterparts. Additional analyses show that ethnic minority directors have less impact on IFRS disclosure levels when their number exceeds two. Companies with more ethnic directors on audit committees are more likely to comply with IFRS disclosure requirements and ethnic diversity increases accounting disclosures irrespective of the level of ownership concentration.

Originality/value

Our findings shed new light on the impact of board ethnic diversity on firms’ compliance with IFRS disclosure requirements. The results are robust to alternative econometric techniques, proxies and potential endogeneity concerns.

Citation

Tawiah, V.K., Gyapong, E. and Wang, Y. (2024), "Does board ethnic diversity affect IFRS disclosures?", Journal of Accounting Literature, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JAL-03-2024-0043