Gender Diversity and Corporate Sustainability Disclosures in Swedish Listed Companies

Gender diversity and corporate sustainability disclosures in Swedish listed companies - A quantitative study examining female representation on boards and in the CEO role and their effects on corporate sustainability disclosures

Master’s Thesis 30 credits Programme: Master’s Programme in Accounting and Financial Management Specialisation: Financial Accounting

Department of Business Studies Uppsala University Spring Semester of 2021

Date of Submission: 2021-06-02

Ehsan Alkhatib Fatima Al-Ramahi

Supervisor: Katarzyna Cieslak

Abstract This study investigates the relationship between female representation, women as chief executive officers, and corporate sustainability disclosures in Swedish listed companies. The used data was collected from the Swedish listed companies in Nasdaq Stockholm for the period 2017-2020. The specific research period is due to the new amendments of the Swedish Annual Accounts Act (Årsredovisningslagen) which came into force 2017. To investigate the effect female representation, and women as chief executive officers have on the legally issued corporate sustainability disclosures, this study applies content analysis and quantitative methods. By estimating multiple regression models, the results revealed a non-significant relationship of female representation on the board of directors and of women as chief executive officers, on the quality of corporate sustainability disclosures. For the critical mass of at least three women, a non-significant impact is detected. Lastly, an additional test for reversed causality has been conducted, however no significant relationship was documented.

Keywords: Corporate Sustainability Disclosures, Women, Female Representation, Gender Diversity, Board of Directors, Chief Executive Officer, Critical Mass

Acknowledgements We would like to express a huge gratitude to our supervisor Katarzyna Cieslak whose expertise, guidance, valuable and constructive suggestions benefited us for this master thesis. Thanks to her guidance we had a very educational experience during this semester. We would also like to direct our great appreciation to our fellow students in the seminar groups for this thesis, whom provided us with helpful feedback and suggestions during this semester. The discussions during the seminars were truly valuable and significant in order to improve this thesis further. Without your assistance, this thesis would not have been possible.

2nd of June 2021 Uppsala

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Ehsan Alkhatib Fatima Al-Ramahi

Table of contents

LIST OF ABBREVIATIONS 1

1. INTRODUCTION 2

1.1 Background 2

1.2 Problem statement 4

1.3 Purpose 6

2. THEORETICAL FRAMEWORK 7

2.1 Corporate sustainability 7

2.2 Corporate sustainability disclosure in Sweden 7

2.3 The stakeholders theory 8

2.4 The political costs theory 9

2.5 The upper echelon theory 9

2.6 The critical mass theory 10

2.7 The CEO in the company 11

2.8 Previous research on female impact on corporate sustainability disclosures 12

2.9 Hypothesis development 14

3. METHODOLOGY 17

3.1 Research approach 17

3.2. Data 17 3.2.1 Corporate sustainability disclosure data 17 3.2.2 Data regarding women on boards 18 3.2.3 Data of the control variables 18

3.3 Population and sample 18

3.4 Reliability and validity 20

3.5 Variables 20 3.5.1 Dependent variable 20 3.5.2 Independent variable 22 3.5.2.1 Women as board members 22 3.5.2.2 Women as chief executive officers 22 3.5.2.3 Two and three women or more on the board of directors 23 3.5.3.1 Company size 23 3.5.3.2 Company risk 24 3.5.3.3 Company value 24

3.6 Panel data regression 25

3.6.1 Selection of the model 25 3.6.2 Assumptions of ordinary least squares regression models 26 3.6.2.1 Normal distribution 26 3.6.2.2 Multicollinearity 27 3.6.2.3 Endogeneity 27 3.6.3 Models 28

4. RESULTS 30

4.1 Descriptive analysis 30

4.2 Correlation matrix 33

4.3 Regression analysis 34 4.3.1 Testing hypotheses for the models 35 4.3.1.1 Normality 35 4.3.1.2 Multicollinearity 35 4.3.1.3 Heteroscedasticity 37 4.3.2 Results of regression models 37 4.3.2.1 Result of hypothesis 1 39 4.3.2.2 Result of hypothesis 2 40 4.3.2.3 Result of hypothesis 3 41

4.4 Additional test of the potential reversed causality 42

5. ANALYSIS AND DISCUSSION 44

5.1 Female representation on the board of directors 44

5.2 Women as chief executive officers 46

5.3 Two and three women or more on the board of directors 47

6. CONCLUSION 50

6.1 Limitations 51

7. REFERENCE LIST 52

8. APPENDICES 68

List of abbreviations

BOD Board of directors CEO Chief executive officer CG Corporate governance

CSD Corporate sustainability disclosure CSP Corporate sustainability performance CSDind Corporate sustainability disclosure index ESG Environmental, social and governance CGC Corporate governance code UET Upper echelon theory AAA Annual Accounts Act (Årsredovisningslagen in Swedish, ÅRL) KPIs Key performance indicators ROA Return on assets TQ Tobin's-Q

FEM Fixed effect model OLS Ordinary least square VIF Variance inflation factor

1. Introduction

1.1 Background Sustainability has become the primary concern within the corporate world. The reasoning behind this is due to the increased focus on environmental, social, and governance aspects (ESG) by managers (Robert, Mary, Colin & Judith, 2020). A study conducted by PriceWaterhouseCoopers finds that corporate directors emphasize the importance of taking social and environmental sustainability issues into account (PwC, 2020a). This is due to the directors realizing that the company cannot achieve its economic performance nor its maximized value without providing any contributions to society, and without considering the importance of stakeholders in improving the performance. To do that, the board of directors (BOD) focus their efforts on the sustainability issues, introduces the activities, and discloses the sustainable initiatives to the stakeholders (PwC, 2020a).

In fact, corporate sustainability disclosures (CSD) are issued by the BOD in which the chief exclusive officer (CEO) of the company is sometimes a member of (Swedish Corporate Governance Code, 2016). Thus, both the BOD and the CEO are responsible for issuing the CSDs of the company and highlighting the social and environmentally sustainable activities that should be presented to the stakeholders. In order to achieve that, the BOD draws policies, make decisions, control activities as well as disclose sustainability reports regarding sustainable performance (Dibra, 2016). CSDs provide information about the current and future position of the company from economic, environmental, and social aspects as well as its expected needs for the stakeholders. (Arvidsson, 2011).

Recently, companies’ impact and responsibility regarding sustainability, inequality and other social issues have brought attention to the stakeholders and shareholders, resulting in further strict regulations within this area (Szabó & Sørensen, 2015). That is when the European Commission introduced that sustainability reporting’s should be improved, which ultimately resulted in a new directive 2014 (Directive 2014/95/EU). In Sweden, this was incorporated 2017 as the definition in the regulation 6 kap. § 10 Annual Accounts Act (1995:1554, originally Årsredovisningslagen in Swedish) requires that larger companies disclose information including sustainability, employees, human rights, corruption, and development. In general, CSD regulations can provide several advantages including creating measures and benchmarks that lead to significant practices by the company (Elise & Cynthia, 2010). This is due to CSDs being directed to generate sustainable relationships with governments, communities and respond to the customers' needs

(Henderson, 2007). In order to accomplish this, CSDs work as a tool that communicates with the company’s stakeholders, and it is a mechanism that provides the investors with the information that is necessary when assessing risks and making decisions, which helps to reduce the cost of capital (Dhaliwal, Li, Tsang & Yang, 2011; Botosan, 1997). As a result, CSDs provide many benefits to the company. On one hand, the BOD intend to invest in sustainability issues to appear socially responsible for the public and their stakeholders (Graham, Harvey & Rajgopal, 2005; Dhaliwal et al., 2011; Plumlee, Brown, Hayes & Marshall, 2015). On the other hand, CSDs can provide positive signals captured by investors such as company situations, risks and the expected return gained later (Li, Gong, Zhang & Koh, 2018). When the company issues high-quality CSDs, it usually reflects lower business risks and decreases estimated risks to investors. As a result, it decreases the rate of return required by investors and ultimately reduces the cost of capital. Thus, the information provided in the CSDs usually influences the investors and is crucial for supporting their decisions when investing in the company (Li et al., 2018). In that sense, disclosures regarding sustainability issues reduce the expectation gap between the company and its stakeholders and mitigate information asymmetries between them as well (Arvidsson, 2011; Dhaliwal et al., 2011; Plumlee et al. 2015).

As the government’s interests is to issue CSDs, corporate governance (CG) focuses on the roles performed by the BOD and CEO in governing the company and building significant relationships with the shareholders. In Sweden for instance, the corporate governance code (CGC) has profoundly presented the responsibility of board members in governing the company. However, it does not clarify the role of characteristics from the BOD and the CEO, such as board diversity when issuing CSDs (Swedish Corporate Governance Code, 2016). Practically, this gap has been bridged by a lot of researchers who have documented the crucial role of board diversity, especially the role of women on boards and their effect on the quality of CSDs (Al-Shaer & Zaman, 2016; Manita, Bruna, Dang & Houanti, 2018; Al Fadli, Sands, Jones, Beattie & Pensiero, 2019; Lin, Lin & Lei, 2020; Nadeem, 2020), the role of CEOs and CSD (Nalikka, 2009; Prabowo, Mohammad, Deo, Arief & Dian, 2017; Furlotti, Mazza, Tibiletti & Triani, 2019), and the importance of increasing the number of women on the BOD for improving the quality of CSDs (Arayssi, Dah & Jizi, 2016; Prabowo et al., 2017).

Further evidence that supports the importance of increased female representation on BOD is that granting more women seats in the companies leads to more representation over the years. PriceWaterhouseCoopers found increased female representation on the BOD annually from 16 % in 2009 to 26 % in 2019 (PwC, 2020a). Also in Sweden, the number of women on BOD have

3 increased with 30% from the beginning of the 2000 century, which makes Sweden one of the most equal countries when it comes to the number of women on the BOD (Ekonomifakta, 2021). These findings undoubtedly highlight the impact of gender diversity on board performance, but also emphasize the importance of functions performed by women themselves associated with corporate sustainability performance (CSP), CSDs as well as issuing high-quality CSDs that meet the requirements of legislative bodies and stakeholders (Langer, 2015).

1.2 Problem statement Gender diversity is still a common issue that has come to attention in the business world, especially female representation on the BOD. Until recently, the BOD was dominated by men whereas women did not have a significant role. One of many consequences is that women face obstacles when they strive to ascend within the corporate governance field (Francoeur, Labelle & Sinclair-Desgagné, 2008). There is no specific regulation that stipulates a required number of women on the BOD in Sweden, however, there is a noted increase in the number of women on the BOD (d'Hoop-Azar, Sancho, Martens & Papolis, 2017). This can be due to the connection between female CEOs and gender diversity within boards in Sweden. The authors explain that female CEOs tend to recruit more females to the boards in Swedish companies, indicating that more females in higher positions contribute to gender diversity within boards (AllBright, 2021). Based on this, women have responsibility in managing the company and communicating with stakeholders who desire information about the sustainability activities of the company. In order to do this, the BOD has to disclose the sustainability activities in compliance with the Swedish legal requirements (Bolagsverket, 2020; Svensk Bolagsstyrning, 2020).

Recently, it has become mandatory for large Swedish companies to issue CSDs in accordance with the last amendments of the Swedish Annual Accounts Act (AAA, 1995:1554) since there are no formal standards to follow like IFRS that concerns CSDs. The regulation stipulates that a company is obligated to report its CSDs from the beginning of the fiscal year January 1, 2017, which has now been four years. This period is enough time to explore to what extent women on the BOD or women as CEOs contribute to complying the AAA regulation regarding CSDs. Another factor that motivates the research of the role of women on the BOD and CSDs is the lack of commitment to issue CSDs by some Swedish companies, according to a report conducted by PriceWaterhouseCoopers. Despite that the quality increased overall and that it is clearly regulated that companies are obligated to issue CSDs, there is still cross-sectional difference in quality that

4 differs among companies according to the report (PwC, 2020b). Also, the quality of CSDs has been proven to have capital market effects such as lower cost of capital (Li et al., 2018). That is also why it is necessary to understand the drivers of high quality since there are no formal standards to follow like IFRS for financial reporting. Also, there might be a difference in quality of these reports given the latest trend of female representation on boards (d'Hoop-Azar et al., 2017). That is why it is necessary to investigate female representation on boards as one channel of impact on the quality of CSDs.

Previous research conducted in France, UK, Malaysia, Saudi Arabia, and the Arab Gulf countries have studied the same problem and area as this study intends to, and present that women do have impact on CSDs (Chebbia, Aliedanb & Alsahlawic, 2020; Arayssi et al., 2016; Bakar, Ghazali & Ahmad, 2019; Habbash, 2016; Issa & Fang, 2019). Similar scientific studies could not be found in Sweden, which creates a further motive to explore the reasons that stand behind the volatile compliance when disclosing sustainability activities, and how women on the BOD or as CEOs enhance the quality of CSDs in Sweden. Therefore, there is still room for providing further understanding on how to improve the CSDs in Sweden.

The presence of the CEO is proven to be a factor that affects the CSDs, were the CEO is described as a full-power person in the company (Prabowo et al., 2017). The CEO is very careful to hold its reputation and deal with management risks. Therefore, the CEO strives to provide high levels of information and CSDs to the stakeholders to minimize the surrounding risks (Manita et al., 2018). The problem might be greater when dealing with female CEOs as they sometimes receive negative reactions from the market (Prabowo et al., 2017).

In line with this, various researchers have documented a positive relationship between female representation on the BOD and CSDs. Hersh (2016) concludes that board diversity supports further CSDs due to the discussions between the board members which contributes to improved CSD decisions (Hersh, 2016). Abad, Lucas-Pérez, Minguez-Vera & Yagüe (2017) explain that women tend to be more open-minded in meetings where they communicate and share information, reflections, thoughts, and ideas inside the board deliberations. This will ultimately reflect positively in mitigating information asymmetry within the company and the relationship with the stakeholders. Rossi, Hu & Foley (2017) however detect a negative relationship between women on the BOD and corporate risks due to women being rather risk averse. This thereby motivates women to be more active in CSDs, which then helps to reduce the volatility in stock returns in the financial markets, risks, adverse selection and information asymmetry between the company and the stakeholders (Abad et al., 2017).

In contrast, some researchers have not documented a relationship, or they have documented a negative relationship between the presence of women on BOD and CSDs. Ramon-Llorens, Garcia-Meca & Pucheta-Martínez (2021) reveal that females with social and political connections do not enhance CSD transparency but rather reduce it. The reason for this is based on these directors avoiding to present CSDs which society might observe as negative.

Rao & Tilt (2016) point out that women who seek management careers disregard feminine stereotypes and are more likely to have male-like needs, beliefs, and leadership approaches. Hence, they prefer to act in a masculine way which makes gender diversity unlikely to be a predictor of sustainability effectiveness (ibid). In line with this, Yarram & Adapa (2020) agree on the statement that female directors might impersonate the role of male directors which entail “agentic” behaviour as opposed to “communal” behaviour. Specifically, in cases when there is merely one female director, this tends to bring performance pressures and does not indicate positive effects on CSDs (Yarram & Adapa, 2020).

Although various previous studies have examined the relationship between gender diversity and CSDs, studies that investigate how gender diversity on the BOD or the presence of women as CEOs affect the legally issued CSDs in Sweden specifically, are lacking. Considering the inconsistent results about the role of gender diversity on CSDs, and the lack of profound research in Sweden specifically, this study aims to investigate CSD quality and its affect from female representation on boards or as CEOs as further research on this area in Sweden is needed.

1.3 Purpose The purpose of this study is to examine if the quality of corporate sustainability disclosures is affected by female representation in the companies’ board of directors, or by women as CEOs in Swedish listed companies. The research question then reads:

Does female representation on the board of directors or in the CEO role affect the quality of corporate sustainability disclosures in Swedish listed companies?

2. Theoretical framework

2.1 Corporate sustainability Over the years, the concept of sustainability has developed to the extent that many definitions have been developed in the literature (Mensah, 2019). Principally, the corporate sustainability concept starts from a point that the value of any action done by the company is based on the motive which hides a real goal behind it (Dunfee, 2015). The motive might be for business, social or philanthropy reasons, however the goal usually includes deep strategic dimensions. When a company has heavy stakeholders and interest groups, it attempts to cover its activities and procedures with social sustainability motives (Rashid, Shams, Bose & Khan, 2020). Depending on the context, factors such as economic, legal, moral, social, and physical are important factors that should be considered during the BOD decision-making process (Rodriguez-Gomez, Arco- Castro, Lopez-Perez & Rodríguez-Ariza, 2020).

2.2 Corporate sustainability disclosure in Sweden The literature has presented CSDs in different terms, views, and classifications. It is agreed that CSDs should be issued in a form of reports that almost have the same form and content, and are intended for both parties; shareholders and stakeholders. CSDs are issued as a part of the annual report or separately, and function as a legitimizing tool. CSDs are also considered as a strategic document that offers information and further understanding of the company operations when investment decisions are made by investors (Abrahamson & Park, 1994).

CSDs do not follow a specific worldwide guideline due to the differentiation in regulations between countries (Al-Htaybat, 2014). Hence, every country composes laws and regulations that organize CSDs. In 2014, the EU issued the EU-Directive (EU 2014/95, NFRD) which imposed the companies that have a certain size to disclose non-financial information (Finnsinspektionen, 2020). These CSDs can be partially described as a mandatory action by EU companies due to the quantitative and qualitative information not typically presented in line with specific regulations (Pelikánová, 2019). In Sweden, the government started enforcing the new guidelines of the CSDs to the public sector in 2008. The government imposed the companies fully owned by the government or partially to prepare CSDs according to Global Reporting Initiatives (GRI). Results provide evidence of the presence of tangible improvements when disclosing CSDs in those companies. This can therefore conclude that the CSDs enhance the changing culture and motivate to adopt CSD procedures (Borglund, Frostensson & Windell, 2010). In contrast, the Swedish

7 private companies are not obligated to follow GRI, rather they present CSDs according to AAA (Marton, Lundqvist & Pettersson, 2016).

The Swedish Annual Accounts Act (1995:1554) includes information about what the company should include in its CSDs, as well as how the company should disclose its environmental and social sustainability activities. The chapters in AAA related to CSDs have been adjusted by the law which presented the new instructions 2017 (SFS 2016:947). According to the adjusted law, the large Swedish companies that meet certain conditions and criteria must disclose their sustainability activities in the annual reports or separately in sustainability reports (CSDs). To classify a company as large, it should fulfil more than one condition of the following: the average employees in the company during the last two years not being less than 250; the sum of the total assets during the last two years being more than 175 million SEK and the company’s net sales during the last two years are more than 350 million SEK (SFS 2016:947 6 kap. 10§).

Practically, 6 kap. in AAA includes the requirements that companies should apply when issuing CSDs. Corporate sustainability disclosures should include the information required in order to understand the company, its development, financial position, information about its social and environmental activities, manpower, human rights as well as anti-corruption; business model; policies; risks and how to manage them and lastly, the associated Key Performance Indicators (KPIs).

2.3 The stakeholders theory The stakeholders’ theory assumes that the BOD invests in CS activities taking into consideration the surrounding environment. Therefore, in the decision-making process, the BOD has to consider the interests of all stakeholders that have associations with the company, including customers, employees and groups who may have a direct effect on the company's welfare (Jensen, 2002). This imposes the companies to share information and disclose sustainability activities due to the importance of information to stakeholders, who grant legitimacy to the company through a social contract (Campbell, 2000).

As the company indeed exists in a society, it operates in line with the socially and legally desired standards in exchange for its legitimacy and survival. Therefore, sufficient social sustainability disclosures are necessary to be released by the BOD to determine if it is a successful corporate citizen (Mousa & Hassan, 2015). Hence, the BOD can attain a clear perception of stakeholders'

8 views of corporate sustainability, and its ability to meet responsibilities (Magness, 2006). When the BOD issue CSDs, it contributes to mitigated conflicts and creates an alignment between the company activities and the stakeholders' interests, as it helps create a better understanding of the CS activities by the stakeholders (Hess, 2008; Cortado & Chalmeta, 2016). Also, as further CSDs provide the stakeholders with information, it can help to decrease the cost of capital and adverse selection. (Abad et al., 2017; Dhaliwal et al., 2011).

2.4 The political costs theory This theory highlights the role of the government when setting CSD regulations that companies must follow when they issue CSDs. According to the political costs theory, the CSDs acquire their legitimacy through the information that should be disclosed by the company. Therefore, the government’s role in this case is to establish regulations that enhance transparency and provide the required information needed by the stakeholders (Jackson, Bartosch, Avetisyan, Kinderman & Knudsen, 2020). As the government is a type of stakeholder, it supports further issuing of high-quality CSDs by companies as it considers CSD regulations as an instrument for achieving its sustainability policy. If the companies do not issue CSDs according to the regulations, they will face political costs as a sort of punishment policy through many tools in the market (Jackson et al., 2020). Deegan (2014) points out that numerous factors affect the company when dealing with the external environment such as size, investments, salary payments to employees and taxes to the government. The company is therefore pressured by several types of stakeholders, which might result in organizational and political costs. Thus, they are obligated to disclose further information to eliminate those costs (Von Alberti, Al-Htaybat & Hutaibat, 2012). If the companies do not issue CSDs according to the law, they are exposed to punishments and penalties. (Ma, Zhang, Zhong & Zhou, 2020).

2.5 The upper echelon theory Corporate governance (CG) provides an explanation of the complex roles of the BOD, board diversity and BOD tools to face the internal and external challenges, but also takes decisions regarding the company’s interest (Madhani, 2019). One of the important aspects within CG is the role of the BOD in managing the company, especially after the separation of the management and ownership (Berle & Means, 1932). The BOD functions through a variety of diversified board members that are not merely restricted to men but also women, who effectively contribute to

9 discussions and decision-making processes in board meetings. The gender diversity on the BOD allows women, through their characteristics, to reach high positions within management (Madhani, 2019).

The upper echelon theory posits that the organizational performance of the company is affected by the gender diversity and the behavioural characteristics of the BOD and CEOs. Factors like age, experience and educational background influence the acquired values and perception which in turn affects the decision-making (Kim, 2021). One of the interpretations is that the complex decisions in the company are not often generated based on an economic background, but rather on behaviour (Alazzani et al., 2019). According to that, the CEOs or the BOD choices can be categorized into two segments which are psychological and observable (Kim, 2021). The observable category includes age, career experiences, functional tracks, socioeconomic background, education, financial position as well as group characteristics. The psychological aspects, known as the cognitive base and values present the different aspects of the CEO’s and BOD personalities that are rather deep-seated and permanent (Kim, 2021). Women have many values and features that sometimes make them superior to men on the BOD. The authors conclude that women on the BOD have a crucial function and influence in decision-making before, during and after meetings, as well as outside the meetings (Huse & Solberg, 2006). Similarly, Thambugala & Rathwatta (2020) confirms that gender, values, experiences, education, and characteristics of the BOD impacts the strategic decisions regarding CSDs. Female’s biological qualities such as compassion, caring, motherhood and empathy promotes the CSDs as the UET clarifies the importance of the directors’ values and characteristics on decision-making (Thambugala & Rathwatta, 2020). Furthermore, Hassan, Saleh & Ibrahim (2020) describe that board diversity improves CSDs as the board members various experience, skills, education competencies and expertise are taken into consideration in the decision-making processes within boards (Hassan et al., 2020). As a result, Yang, Yang & Gao (2018) conclude that the characteristics of women on the BOD and as CEOs has a significant influence on the CSDs, considering their activities and background within the company (Yang et al., 2018).

2.6 The critical mass theory The critical mass theory demonstrates to what extent women can influence the decision-making processes on the BOD, including decisions related to CSDs. The theory argues that in BOD meetings, the majority attempt to affect the minority and reduce their contributions in order to

10 impose their opinions. When it comes to women, one or two seats on the BOD does not give them significant influence on decision-making. However, as the number of women increases, so do their chances to influence potential developments in the company (Jia & Zhang, 2013). In other words, one woman on the BOD is considered as a token, two are considered as an existence whereas three are considered as an actual voice, necessary for organizational goals (Liu, Wei & Xie, 2014; Kristie, 2011).

Charumathi & Rahman (2019) argue that three women or more on the BOD are enough to increase their influence in BOD deliberations and establish a significant minority through critical mass, were number three is considered as a pivotal area in group dynamics. Similarly, Torchia, Calabrò & Huse (2011) validate that the critical mass for women and their influence on decision- making being at least three. The authors explain that at least three women on the BOD contribute to a significant impact. Furthermore, the authors also claim that only one woman is considered as token and two women do not contribute to significant difference within boards, nor eliminate tokenism. It is therefore hard to avoid being stereotyped, ignored, and categorized as a woman by the majority group (ibid).

Moreover, the critical mass of women can improve the CSDs. Hillman, Shropshire & Cannella (2007) argue that due to women being more concerned to hold their reputations and enhance the company image, they tend to disclose more high-quality CSDs in order to reflect a positive atmosphere leading to improved performance. This therefore shows that even the presence of one female on the BOD enhances the CSDs. Female’s features and experiences support the impact they have in making decisions related to CSDs, as well as providing strong information that can be communicated with stakeholders and enhance the CSP (ibid).

2.7 The CEO in the company The CEO is considered as a fundamental person in the company. As the CEO is responsible of the strategic decisions in the company, the CEO plays a crucial function in improving the CSDs (Li et al., 2018; Rashid et al., 2020).

Benjamin & Michael (2012) argue that the CEO usually has monitoring features which causes the CEO to be less engaged in the current value-increasing activities and creates room for disclosing further activities in the future. This gradually make the person appear more able which ultimately entail increased CSDs. Another reason for the CEO to issue more CSDs is that this

11 allows the CEO to achieve more features including personal returns, fame, image, and reputation (Wang, Choi & Li, 2008; Li et al., 2018; Barnea & Rubin, 2010; Rashid et al., 2020). In contrast, some CEOs tend to issue less CSDs when they have greater ownership in the company as they believe that disclosing further CSDs might reduce their returns in the short term (Barnea & Rubin, 2010; Rashid et al., 2020).

Despite that the CEO signify a male function, women usually do not face any issues from taking on the CEO position. This is due to the post being performed in accordance with a specific self‐ schema based on rules and guidelines, and not based on gender self‐schema (Furlotti et al., 2019). Li, Lin & Zhang (2019) find that the environmental and social sustainability disclosures of the company become more significant depending on the education, expertise, and the period the CEO spends in the company.

2.8 Previous research on female impact on corporate sustainability disclosures Many studies have documented to what extent women on the BOD are associated with the CSDs. Despite that many results find that improved CSDs are correlated with CSP, other studies find non-significant relationships or do not document any effect between the two sides. Arayssi et al (2016) examine the influence of women on the BOD and the issued CSDs. A sample of companies listed in the Financial Times Stock Exchange (FTSE) 350 index is used between the period 2007-2012. The authors use Bloomberg ESG Disclosure scores to calculate the CSD index which consists of scores ranging from 0, 1 to 100. Results show that increased female representation in the boardroom has a prompt impact on the CSDs, were an increase of 1% of female representation entails positive outcomes in the CSDs, as well as decreased risks which go in line with the stakeholder's interests. Specifically, women on the BOD improve CSDs that provide positive information about the company’s financial position and future expected growth to stakeholders. Hence, this leads to enhanced shareholder welfare and improves decision-making which ultimately enhances the perception the investors have towards competency and legitimacy of the reported CSDs.

In line with this, Hyun, Yang, Jung & Hong (2016) also detected a positive influence of the presence of women in BOD in regard to CSDs. The authors provide an interpretation that women have significant sensitivity towards their credibility and reputation at both individual and organizational levels. This motivates women to declare their concerns about CSDs in BOD

12 meetings, especially when the company activities are related to the market, customers, and CS activities.

Al-Shaer & Zaman (2016) examine the relationship between women on the BOD and the quality of CSDs. The study uses many gender diversity measures such as the number of women and their proportion on the BOD. By using a sample of 273 companies from two databases; Thomson Reuters Eikon and Ethical Investment Research Services (EIRIS), between the period 2006-2014, a CSD index is constructed that ranges between -1 and +1. Results support that an increase of females on the BOD curtail the negative impressions about conducted CSDs by stakeholders. This is because women are more engaged when it comes to disclosing information that is more clear, reliable, and comparable, which results in women mitigating manipulation of non-financial CSDs. In addition to this, the study asserts to adopting a balance between the number of men and women on the BOD. This is because women prevent manipulation or negatively presented disclosures when preparing the social and environmental CSDs, leading to transparency.

Cabeza‐García, Fernández‐Gago & Nieto (2018) study the effect of women on the BOD by using a sample of 128 companies listed in the Madrid Stock Exchange General Index (IGBM) between the period 2009-2013. To measure the CSD, an index ranging its values between 0-2 is used. Based on this, value 0 is given when the company does not disclose its social and environmental CSDs, value 1 when the CS information is presented in the annual report, and value 2 is given when the CSDs are in accordance with the GRI index. Results find that an increase of women on the BOD to a minimum threshold (critical mass) contributes to increased CSDs, and the disclosures will be improved when women are external and independent. The authors believe that independent women, who do not represent shareholders' ownership, hold a significant role in standardizing CSDs.

Manita et al (2018) address the role of women in environmental, social and governance disclosures generated by the company. A sample of 279 companies listed in the S&P 500 is used during the period 2010-2015. Regarding the data related to disclosures, the authors construct a CSD index extracted by Bloomberg’s ESG disclosure which is ranging between 0-100. Results do not find any significant relationship between gender diversity and CSDs, and they do not document any significant effect of the critical mass on the CSD. In a similar direction, Nalikka (2009) investigates the impact of female representation in the BOD in 108 companies in the Helsinki stock market by three positions: Chief Executive Officer, Chief Financial Officer and as board members. Results show that the CFO position has a positive impact on CSDs, whereas a negative impact of female CEOs on CSD was found, which can be attributed to female CEOs

13 being more focused on strategic issues compared to conducting CSDs. Thus, this is a reason to conclude that women as CEOs have less effect on the CSDs.

Table 1. Previous research CSD Researcher Country Period index Independent variable Relationship Base Dienes & Velte (2016) Germany 2011 GRI % Women on BOD + South JSE-SRI Modiba & Ngwakwe (2017) 2010-2014 No Women on BOD + Africa indexes Naseer & Rashid (2018) Pakistan 2014-2015 ERI- GRI % Women on BOD +

Bakar et al (2019) Malaysia 2015 SRG No of Women on BOD +

% Women on BOD under 50% + Buallay, Hamdan, Barone & Multi 2007-2016 Bloomberg Hamdan (2020) % Women on BOD over 50% -

Shamil, Shaikh, Ho & Sri Lanka 2012 Dummy No Women on BOD - Krishnan (2014)

Adeniyi & Fadipe (2018) Nigeria 2016-2016 GRI No Women on BOD No Matitaputty & Davianti Indonesia 2014-2016 GRI % Women on BOD No (2020) Zou, Wu, Zho & Yang (2018) China 2006-2014 GRI Women as CEOs +

2.9 Hypothesis development This study investigates the relationship between gender diversity and CSDs, specifically the role of female representation on the BOD and as a CEO in relation to CSDs. To test the hypotheses, two aspects of gender diversity on the BOD are developed: the woman as a board member, and the woman as a CEO in the company.

When the BOD issues CSDs with high qualitative information based on regulations, the CSP will be positively reflected. This enhances the value of the company and reduces the potential political costs resulting from a lack of compliance (Hummel & Schlick, 2016; Clarkson, Li, Richardson & Vasvari, 2008). In line with this argument, and under the inability to separate the performance of men from women, it is argued that the presence of women on the BOD represents an important factor, also in disclosing the social and environmental high-quality-CSDs, leading to enhanced CSP and increased value of the company. The existence of women on the BOD adds legitimacy to the company and sends messages and signals to stakeholders that the company will perform well in line with the expectations. Besides, women seek to hold their reputations and enhance the company image at the same time. In that sense, they tend to disclose further qualitative CSDs to

14 reflect a positive atmosphere leading to improved CSP (Hillman et al., 2007). Based on this, the following hypothesis is posited:

H1: Ceteris paribus, there is a positive relationship between female representation on the BOD and the quality of CSDs.

Due to the significant role of stakeholders in the company, the stakeholders’ theory assumes that the BOD aims to satisfy stakeholders and therefore provide CS information for them (Rashid et al., 2020; Freeman, 2010). In a similar way, the CEO is considered as the important person in the company and desires to protect its own characteristic and position in the company. Therefore, the CEO also considers the stakeholders as a part of the system that gives the CEO legitimacy and improves the company performance. Hence, from the perspective of its responsibility, the CEO discloses high-quality CSDs to hold a significant relationship and attain their satisfaction and support (Rashid et al., 2020). However, women usually have logical values and behaviours but simultaneously tend to be more conservative, which makes them adopt strategies that avoid risks. Thus, female CEOs often have similar behaviour, and they conduct high-quality CSDs which is motivated by low-trust and fear of potential future risks (Lin et al., 2020). Based on that, the following hypothesis is posited:

H2: Ceteris paribus, there is a positive relationship between women as CEOs in the company and the quality of CSDs.

The upper echelons theory assumes that there are many factors that influence the managers' behaviours when executing their functions, including personal characteristics. Manager's decision-making is often related to their experience, knowledge and self-judgment like decisions related to the quality of CSDs (Lin et al., 2020). Women use a unique leadership style on the BOD that derives from gained experiences of other fields out of the business area. Also, as women have the tendency to take social issues into account, they can use their human capital represented by knowledge, competence and high education in disclosing information regarding CS activities (Hillman et al., 2000). Nonetheless, since three women or more are expected to affect BOD deliberations positively as this is the number that is required to ensure critical mass

15 on the BOD (Charumathi & Rahman, 2019), a positive relationship between the presence of three women on the BOD and CSDs is expected, otherwise no relationship is expected. Based on this, the following hypotheses are developed:

H3a: Ceteris paribus, there is no relationship between the presence of two women on the BOD and the quality of CSDs.

H3b: Ceteris paribus, there is a positive relationship between the critical mass of at least three women on the BOD and the quality of CSDs.

3. Methodology

3.1 Research approach This study investigates the impact of female representation on the BOD and females as CEOs on the quality of CSDs, based on AAA. To fulfil this purpose, a quantitative research method based on a deductive approach is applied when analysing the information content. A quantitative method in scientific research uses quantitative and measurable data to interpret a specific phenomenon by using statistical analysis tools (Cárdenas, 2019). The content analysis technique is a methodology to understand the messages that are communicated by the sender in many ways such as texts, images, or symbols (Gheyle & Jacobs, 2017). The content analysis method is applied due to various reasons. Firstly, the method encodes the annual reports content in various classifications (Al Fadli et al., 2019; Guthrie & Abeysekera, 2006). Secondly, the content analysis method is suitable practically in the field of CSDs (Furlotti et al., 2019; Al Fadli et al., 2019; Guthrie & Parker, 1990). Lastly, due to the study covering multiple years, this enables the researchers to predict how the CSDs develop and improves considering changes with time.

3.2. Data This study relies on data collected from a secondary source which is the sustainability reports issued by the companies separately, or within their annual reports in accordance with AAA. The data is obtained from many sources including the companies report from their websites and from Nasdaq Stockholm.

3.2.1 Corporate sustainability disclosure data The data regarding the constructed CSD index has been collected manually from the separated sustainability reports or the sustainability information issued within the annual reports. It is noted that some reports disclose information related to sustainability in many sections in the annual report. This motivated the researchers to track, verify, and document the information in the CSD index. Given that AAA has provided guidelines regarding what should be disclosed in the sustainability reports, however without any detailed information about the aspects, this motivates the researchers to build an own perception about the required disclosures and compare them with the information contained in the sustainability reports.

3.2.2 Data regarding women on boards Previous studies have documented increased positive and direct participation of women on CSDs (e.g., Arayssi et al., 2016) when having various positions in the company. Based on that, this study focuses on the role of women and CSD quality from three categories; women as members on boards, women as chief executive officers and the existence of at least three women on the BOD. The data related to those categories is collected from the management report or the CG section in the annual report. Most of the reports contain information about the BOD members and the CEO including the name, photo, job description, current position, education, and other information. If information about the gender of a board member or the CEO is lacking, the researchers searched the companies’ websites in order to find the information.

3.2.3 Data of the control variables It is known that conducting CSDs is not only affected by female representation on the BOD. For instance, the performance, size, risk and the book- and market value are important control factors that influence the disclosed information. Control variables play an important role in determining the causal effect of the independent variable on the dependent variable by preventing and blocking the effect of other variables (Hünermund & Louw, 2020). Data about the company size, risk and value have been collected from many sources including the company's websites, the Eikon database and Nasdaq Stockholm.

3.3 Population and sample This study's population covers the large, medium, and small Swedish companies listed in Nasdaq Stockholm. These companies are obligated to disclose their sustainability activities, only when the criteria according to AAA is met during the period 2017-2020. The list of companies has been retrieved from Nasdaq Stockholm as the financial markets are considered as reliable sources for financial and non-financial data (Al Fadli et al., 2019; Neu, Warsame & Pedwell, 1998). For the company to be included in this sample, its annual report must either include information about sustainability, or the auditor's report which examines if the company complies with AAA regarding sustainability reports.

The study period is solely four years starting from 2017-2020. The reason for choosing 2017 as a beginning year in this study is due to the law (SFS 2016:947) that obligated companies to issue

CSDs for the first time in the next fiscal year, which instantly begun after 31st of December 2016. As the new law came into force 2017 and obligated companies to issue CSDs, it is interesting to explore the nature of this relationship in the short term, especially as various studies in other countries about female representation on the BOD and CSDs also have investigated this matter at short term periods (e.g Handajani, Bambang, Sutrisno & Erwin, 2014; Masoud & Vij, 2020).

All the companies listed in Nasdaq Stockholm are included in the sample. However, the companies that did not fulfil the requirements of the law and were lacking sustainability reports during this study’s period were excluded. In order to ascertain which companies fulfilled the requirements of the law, all the companies were examined to ensure if at least two of the requirements were fulfilled in relation to the law. If two of the requirements were not fulfilled, then the company was excluded. This allowed the researchers to only include the relevant companies that provided the necessary information needed for this study. Furthermore, important to recognize is that this study aims to investigate the relationship in Sweden, namely Swedish companies. Therefore, the companies were also examined to determine if the company is Swedish, and if the company was not Swedish it was excluded.

In addition to this, the companies that were obtained from Nasdaq Stockholm which data could not be found in the Eikon database were also excluded due to errors in the system and missing data. Based on that, table 2 below illustrates the final sample of this study that compiled in 903 observations.

Table 2. Population and sample Year 2017 2018 2019 2020 Total

Population (number of companies per year) 338 338 338 338 1352

Companies that do not have data in the Eikon DataStream 19 19 19 19 76 compared with the company list in Nasdaq Stockholm

Missing data 26 26 26 26 104

Companies with headquarters HQ outside of Sweden 20 20 20 20 80

Companies that are not legally required to publish a 53 46 44 44 187 sustainability report Companies that have not issued an annual report 2020 0 0 0 2 2 Sum of observations 220 227 229 227 903

3.4 Reliability and validity Reliability is a significant factor that determines to what extent the data provide assurance and that it has an acceptable level of accuracy, stability, and applicability. This occurs when the collected data is obtained from reliable and documented sources which leads to consistent and identical results based on the same situation on different occasions (Cooper & Schindler, 2014).

Validity of data is another condition to execute qualified scientific research. It clarifies how the collected data is representative of the actual area of the study from many aspects such as construct, content, and criterion (Taherdoost, 2016). Thus, validity leads to the possibility of generalizing and applying the results based on the consistency of their constructed indexes (Bryman & Bell, 2011). To achieve that, two types of validity should be fulfilled when managing the data; internal and external validity. This relies on the presence of clear and specific criteria that helps predicting and estimating the phenomena (Cooper & Schindler, 2014).

This study uses various measures to ensure reliability and validity and capture the relationship between female representation on the BOD, females as CEOs and CSDs. For instance, the data is extracted from the Eikon and Retriever Business databases as they provide reliable data. The STATA statics program analyses relationships between the used variables, and various statistical tests like variance inflation factor (VIF) and Breusch‐Pagan test which are conducted to enhance this study’s validity. These tests are applied to investigate if the regression models’ assumptions are fulfilled. Furthermore, a pilot test on a sample of 15 reports is executed to ensure the credibility of the self-constructed CSD index (e.g Al Fadli et al., 2019).

3.5 Variables

3.5.1 Dependent variable The sustainability areas included in the AAA are considered useful to understand various aspects of the company’s position, including the results and development. CSDs provide understanding regarding social and environmental issues, employment, and human rights (AAA, 1995). Despite that AAA imposes sustainability disclosures in many areas, it is noted that companies do not fully comply with the regulation when issuing CSDs (PwC, 2020b). The self-constructed CSD index therefore provides a further perception about what areas should be developed to issue more high- quality CSDs when women are board members or CEOs.

The dependent variable in this study is the CSD index (CSDind) which is self-constructed based on disclosure instructions provided in AAA. The study uses this way of constructing the CSDind as various previous studies on disclosures have used the same method in other areas (e.g Masoud & Vij, 2020). The suggested checklist for the CSDind has been derived from the disclosure areas provided in AAA. It is divided into activities and subareas in a total of 40 points. The activities cover five aspects including environmental, social, employee, human rights as well as anti- corruption. In addition, every disclosed activity should consider areas including business models, policies, controls, results, negative results, risks, how to manage the risks and KPIs. Table 3 below illustrates the aspects included in the CSDind.

Table 3. Corporate sustainability disclosure index (see appendix 2)

Disclosure aspects Components of CSD index Based on AAA The company discloses a clear business model regarding the sustainability issue to create a sustainable Business model value.

Policy The company discloses that it has a policy to perform the sustainable issue.

Control The company discloses at least one rule, law, or regulation to follow up the results of the policy.

Result The company discloses at least one consequence resulting from executing the applied policy.

Risk The company discloses a minimum of one of the risks that face the sustainability issues.

The company discloses at least one of the negative consequences associated with the sustainability Negative consequence issue.

Management of the risk The company discloses how to manage at least one of the risks related to the sustainability issue.

KPIs The company discloses at least one of the KPIs related to the sustainability issue. Note: The components of the CSDind are based on chapter 6 and 7 of the Swedish Annual Accounts Act (1995:1554) and (2016:947)

The CSDind takes the differences in the CSDs into account (Al Fadli et al., 2019). Thus, the sustainability reports will be examined to determine if the company complies and fulfils the items in the checklist (Cooke, 1992; Hummel & Schlick, 2016). As the CSDind is described as a dichotomous variable, this gives 1 point to the company if it fulfils the disclosure requirements in the CSDind, otherwise it receives 0 points. Lastly, every company in the sample will achieve a total number of scores out of maximum 40 points. Table 4 illustrates the division of scores between the activities according to the CSDind. For a more profound assessment of the CSDind, see Appendix 2.

Table 4. Division of CSD index scores among the activities Human Anti- Sum Activity Environmental Social Employees rights Corruption index Business model 1 1 1 1 1 5 Policy 1 1 1 1 1 5 Control 1 1 1 1 1 5 Result 1 1 1 1 1 5 Risk 1 1 1 1 1 5 Negative consequence 1 1 1 1 1 5 Managing risks 1 1 1 1 1 5 KPIs 1 1 1 1 1 5 Total 8 8 8 8 8 40 Note: Corporate sustainability disclosure index (CSDind) assessment were the company achieve 1 point if it discloses the sustainability issues described in table 3. Maximum achieved points are 5 for the activity and a total of 40 points for the report.

3.5.2 Independent variable The independent variables in this study are the percentage of women as board members, women as CEOs and the critical mass of women on the BOD. These variables are measured as the following paragraphs explain.

3.5.2.1 Women as board members The first independent variable expresses gender diversity of the company. It represents the ratio of women on the BOD, measured by calculating the percentage of women on the BOD for every company alone. This is done by dividing the number of women by the sum of the board members in the company. This method is applied in various research (e.g Manita et al., 2018; Adams & Ferreira, 2009; Campbell & Mínguez-Vera, 2008). As gender diversity enhances corporate sustainability initiatives, it is important to the company and results in more disclosures about those sustainability practices (Valls Martínez, María del Carmen, Cruz Rambaud & Parra Oller, 2019). Therefore, the researchers expect a positive relationship between women on the BOD and the CSDs in the Swedish companies listed in Nasdaq Stockholm.

3.5.2.2 Women as chief executive officers The second independent variable is women as CEOs in the companies. It is a dummy variable were it receives number 1 when the CEO is a woman, otherwise number 0 (Nalikka, 2009). The

CEO is a significant position in the company were its managerial ability plays an important role in enhancing transparency and improving the company's relationship with stakeholders. The CEO is responsible for the companies’ sustainability investments. By presenting these investments, the company sends positive signals to the stakeholders about the managing of the company and its transparency which creates best the possible relationships with the stakeholders (García‐Sánchez, Aibar‐Guzmán, Aibar‐Guzmán & Azevedo, 2020). According to the UET, the position of the CEO is also associated with many characteristics, values and qualifications of the person who will be appointed as a CEO by the BOD. Those features are acquired through two ways; the general ability and communication skills (Kaplan, Klebanov & Sorensen, 2012). Based on this, the researchers assume that women as CEOs have high-quality characteristics and predict a positive relationship between women as CEOs and CSDs.

3.5.2.3 Two and three women or more on the board of directors The third and fourth independent variables are two and three women or more on the BOD. Accordingly, this can help determine the effect of two women or less on the BOD as well as the threshold of three women in the company that have an influence on the quality of CSDs. A dummy variable is applied to distinguish between the number of women on the BOD. When the BOD includes two women, the variable takes value 1, otherwise the variable takes value 0. When the BOD includes three women or more, the variable will take value 1, otherwise 0 if the number of women is less.

The critical mass theory supposes that three women or more can affect the decision-making in the company, where one woman is a token, two are considered as an existence and three are considered as an actual voice (Liu et al., 2014; Kristie, 2011). Therefore, three women as a minimum on the BOD can enhance the CSDs (Al Fadli et al., 2019). Based on that, the researchers predict no relationship between the presence of two women on the BOD and the CSDs, while female representation by at least three women on the BOD can positively influence the CSDs.

3.5.3 Control variables

3.5.3.1 Company size Company size measured by the number of employees at the end of the year is a significant factor in practicing CSDs, were larger companies documented more CSDs compared to smaller ones

(Cincalova & Hedija, 2020). Gamerschlag, Möller & Verbeeten (2011) consider the employees as one of the potential underlying assets of the company. Therefore, disclosing activities about employees can be described as an investment and it provides various benefits in the relationship with the stakeholders and society. Widyadmono (2016) argues that the company size has a positive impact on the CSDs. Specifically, the BOD in large-classified companies tend to invest more in CSDs due to the need for funds financed by stakeholders. Based on that, it is expected to find a positive relationship between the CSDs, and the size of the company measured by the number of employees.

3.5.3.2 Company risk Company risk is measured by using leverage measures that are calculated by dividing total debt to equity (Fahad & Rahman, 2020). One of the risks the BOD faces is increased cost of capital and the difficulty to find cheap resources to finance the company's investments. Thus, the BOD is obligated to disclose more CSDs to mitigate the information asymmetry between the company and stakeholders, dispel fears regarding future risks as well as gain more trust from the stakeholders. Therefore, Sial, Zheng, Cherian, Gulzar, Khan & Khuong (2018) argue that CSDs can reduce the company risks and motivates stakeholders to invest or provide loans to the company after considering potential risks. For companies that have been financed with high debts, they are obligated to disclose more information about their CS activities motivated by creditors pressures (Fahad & Rahman, 2020). Therefore, it is an expected negative relationship between the CSDs and the company risk in order to mitigate the issues related to stakeholders.

3.5.3.3 Company value Company value is measured by two quotas: book and market value. Return on assets (ROA) represents a book value and is measured as net income to total assets ratio (Baalouch, Ayadi & Hussainey, 2019). ROA reflects the historical value of the company, and it is an important factor for the stakeholders in their response to meet the company's needs. A company with a higher value protects its resources and fulfils implicit as well as explicit contracts with stakeholders. Thus, this can be a motive to present more CSDs (Fahad & Rahman, 2020), which can be perceived as an attractive factor to the stakeholders of the large companies. Rossi & Harjoto (2020) determine a positive correlation between the company value and CSDs. Moreover, increased CSDs result in companies maximizing their investments, stakeholders' interest, and

24 social- and environmental concerns which ultimately results in higher company value (Rossi & Harjoto, 2020).

Tobin's-Q (TQ) measures the market value of the company. The ratio can be calculated by dividing the market value of shares plus the market value of debt with the replacement cost of assets. However, due to difficulties in measuring the market values and the replacement value, the researchers of this study will instead use the book values of equity and debt (Sarkar & Selarka, 2020). What distinguishes TQ from ROA is that TQ reflects the current value of shares in the market based on stakeholders' evaluations and investors. Therefore, this measure is useful in reflecting the investors' predictions regarding the future performance of the company and CSDs (Hossain, Farooque, Momin & Almotairy, 2017).

As the socially responsible companies are more profitable, they strive to present their commitment towards the society and stakeholders. As a result, more CSDs can provide evidence about their sustainability activities and effect the performance positively (e.g., Rossi & Harjoto, 2020; Fahad & Rahman, 2020; Naseem, Riaz, Rehman, Ikram & Malik, 2017). Therefore, a positive relationship between the CSDs and the value of the company measured by ROA and TQ is expected.

3.6 Panel data regression

3.6.1 Selection of the model The collected data is described as pooled panel data because it combines cross-sectional observations with time series. Panel data can provide more effective information, less multicollinearity as well as more endogeneity between the variables (Gujarati & Porter, 2009). To estimate panel data, the Ordinary Least Squares (OLS) method is used by applying one of three models: pool ordinary least squares (OLS), fixed effect (FE) model or random effect (RE) model (Thach, Kreinovich & Trung, 2021). These models are used by various researchers in short term periods (see e.g., Bunget, Mates, Dumitrescu, Bogdan & Burca, 2020; Mitra & Chatterjee, 2008; Issa, 2017). The differences between the models are the coefficients expressed by intercepts and slopes. The pooled regression model has constant coefficients, and therefore the data can be pooled and estimated as OLS regression. The FE model treat the units separately, thus the differences observed within cross-sectional units can be captured in the differences of intercept and error terms represented by β in the model. Lastly, the RE model treats the individual

25 effects of the units randomly, and therefore all the individual effects are represented in the error term in the model (Hiestand, 2005). The principal formulation of the regression method OLS is based on the relationship between the dependent and independent variables according to the following general formulation (Gujarati & Porter, 2009):

Yit = β0 + β1 Xit + β2 Xit + β3 Xit + εit

i = 1,2, . . .N, units

t = 1, 2, . . . T, time

Yit is the dependent variable, Xit is the independent variable and β1 and β2 known as the parameters of the model (intercept and slope coefficients). ε is known as an error term that represents all those factors that affect the dependent variable without explicitly. N is the number of units (country, company…) and T expresses the time (year, month, day...).

3.6.2 Assumptions of ordinary least squares regression models Many assumptions should be used in order to estimate the OLS models. The assumptions are that the data is normally distributed, that there is no multicollinearity among the explanatory variables as well as no heteroscedasticity among the data.

3.6.2.1 Normal distribution Normality is the first assumption of estimating OLS models as it mitigates the bias and makes the variance at a minimum for the data. The winsorization technique is considered convenient to mitigate the outliers’ effect of the data (Jadhav, Nileshkumar & Kashid, 2014), which occurs when the residuals follow the normal distribution. A Shapiro–Wilk parametric test is used as it is considered as an appropriate measure to test normality. The P-value of the test should be more than 0.05 in order to assess if the data is normally distributed. Another scale can be used by controlling the values of skewness and kurtosis of the variables. The data is normally distributed if the calculated values are 0, respectively 3. In contrast, some researchers argue that there are no complications if the sample is not normally distributed in the panel data models when the sample is not sufficiently large. When dealing with small and finite sample sizes (less than 100 observations), the normality may be a critical assumption due to the difficulty in deriving the

26 probability distributions, however in large samples, normal distribution may not be that important (Pelucio-Grecco, Geron, Grecco & Lima, 2014; Issa, 2017; Gujarati & Porter, 2009).

3.6.2.2 Multicollinearity Multicollinearity refers to the full linear relationship between all or some of the explanatory variables in a model, which makes some significant variables statically insignificant (Shrestha, 2020). When that occurs, it means that the coefficients of the explanatory variables are indeterminate and therefore error terms are infinite, leading to difficulty in estimating the coefficients accurately (Gujarati & Porter, 2009). The VIF is an appropriate and primary technique to estimate if there is multicollinearity among the explanatory variables. If the VIF value equals 1, this indicates no correlation between the variables. When the VIF value is 1< VIF <5, it indicates moderating correlation between the explanatory variables. Lastly, if the VIF value is between 5 and 10, it means high multicollinearity observed among the explanatory variables (Shrestha, 2020).

3.6.2.3 Endogeneity

The linear regression model supposes that variations in the model are based on homoscedastic factors. This means that the variances of the independent variables should be the same at all changes in the dependent variable. If not, the variations can be attributed to the correlations between independent variables and the error term leading to biases in the regression model. As a result, an endogeneity problem occurs, known as heteroscedasticity. Gujarati & Porter (2009) state that various reasons for heteroscedasticity may be due to outlier values in the observations, important omitted variables, a presence of skewness in the distributions of the variables or incorrect data transformation. Breusch-Pagan and white tests are convenient measures that investigate the endogeneity problem. If the P-value is more than 0.05, it indicates no heteroscedasticity problem in the model.

Manita et al (2018) attribute the heteroscedasticity problem to two reasons. The first reason is due to the omitted unobserved variables in the model correlated with female representation on boards (or in CEO roles) for instance the appointment of the women on the BOD might be to the company culture or social qualifications of women. In this case, spurious results are documented for women which are not valid. To deal with the problem of omitted variable biases, FE regression can be applied as it takes these biases into consideration based on certain assumptions.

The second reason is the reverse causality. In this case, the authors suppose that women on the BOD need more time to affect the decisions related to CSDs. Also, there might be a risk that women seek companies that produce high-quality CSDs rather than women themselves contributing to CSDs becoming high-quality. In that sense, the CSDs may affect women instead, resulting in increased number of women on the BOD which ultimately results in a one-year lagged measure. The usage of a lagged model does not fix the reversed causality problem nor the endogeneity issues, but is has however been applied (see Liu et al., 2014; Manita et al., 2018). Therefore, the regression will be estimated by the FE model taking the one-year lagged independent variable women percentage into consideration, in relation to CSDind as a dependent variable. Contrariwise, the one-year lagged CSDind variable will be used as an independent variable against women percentage as a dependent variable. The result of this test will be presented in section 4.4.

3.6.3 Models Three regression models will be estimated based on OLS and FE models in this thesis. This allows the researchers to investigate the relationship between CSDs and women on the BOD, measured by the percentage of women on the BOD, women as CEOs and women represented by two and three board members.

(1) Corporate sustainability disclosure = β0 + β1 Womenpercit + β2 logSizeit + β3 logRiskit +

β4 logROAit + β5 logTQit + Yeardummy + Industrydummy + εit

(2) Corporate sustainability disclosure = β0 + β1 Womceoit + β2 logSizeit + β3 logRiskit + β4 logROAit + β5 logTQit + Yeardummy + Industrydummy + εit

(3) Corporate sustainability disclosure = β0 + β1 TwoWomit + β2 ThreeWomormoreit + β3 logSizeit + β4 logRiskit + β5 logROAit + β6 logTQit + Yeardummy + Industrydummy + εit

Table 5 illustrates the description of variables in the models.

Table 5. Variable overview

Expected Collecting Variable sign Description Source of data method CSDind Corporate sustainability disclosure score, measured by the scores as described in table 4 CSD reports Manually

Womenperc + Women percentage measured by the Sum of women on the BOD / Sum of BOD members in the company CSD reports Manually

Womceo + Dummy variable receives value 1 if the company has a female CEO, and value 0 otherwise CSD reports Manually

TwoWom No Dummy variable receives value 1 if the company has two women on the BOD, and value 0 otherwise CSD reports Manually Dummy variable receives value 1 if the company has three women or more on the BOD, and value 0 ThreeWomormore + CSD reports Manually otherwise Size + Company size measured by logarithm the number of employees at the end of the year Eikon database Manually

Risk - Company risk measured by logarithm debt/ equity ratio Eikon database Manually

ROA + Return on assets measured by logarithm net income to total assets ratio Eikon database Manually

TQ + Tobin's Q ratio measured by logarithm (Market capitalization + book value of debt)/ Book value of assets Eikon database Manually

Yeardummy Year effects Annual report Manually

Industrydummy Industry effect Annual report Manually

β Intercept

i Company identification

t Year

ε Error term Table of the study’s abbreviation list.

4. Results

4.1 Descriptive analysis Table 6 presents the descriptive statistics of this study’s variables based on original data for the CSDind and the number of women on the BOD, while a logarithm is used for the other variables. The table presents the variables mean, median, minimum, maximum, standard deviation, skewness, and kurtosis for 903 observations. By using the original data for the CSDind and number of women on the BOD, descriptive analysis can provide a clearer and more understandable view about the nature of the numbers.

Table 6. Descriptive statistics Std. Variable Mean Median Min Max Skewness Kurtosis Dev. CSDind 25.8 26 4 39 5.16 -1.095 5.717

NuWom 2.608 2 0 8 1.231 0.799 4.071

Womenperc 0.337 0.33 0 0.75 0.122 0.199 3.376

OneWomorless 0.158 0 0 1 0.365 1.872 4.503

TwoWom 0.345 0 0 1 0.475 0.649 1.422

ThreeWomormore 0.487 0 0 1 0.5 0.051 1.003

WomCeo 0.175 0 0 1 0.38 1.711 3.927

logSize 7.127 6.935 2.079 12.618 1.943 0.197 2.569

logRisk -0.73 -0.466 -8.331 3.263 1.395 -1.872 10

logROA -2.93 -2.802 -8.36 -0.067 0.93 -1.2 6.904

logTQ 1.207 1.142 -0.576 4.021 0.662 0.465 3.631 LARGE 0.705 1 0 1 0.456 -0.901 1.812 MED 0.189 0 0 1 0.392 1.586 3.514 SMALL 0.104 0 0 1 0.306 2.593 7.723 Observations 903 903 903 903 903 903 903

Note: The table reports the summary of descriptive statistics for the sample between the period 2017-2020. The dependent variable is corporate sustainability disclosure index (CSDind), the independent variables are percentage of women on the board of directors (Womperc), two women (TwoWom), three women or more (ThreeWomormore) and women as CEOs (Womceo). The control variables are the size of the company measured by the number of the employees (logSize), the risk measured by debt to equity (logRisk), Return on assets (logROA) and Tobin's Q ratio (logTQ). The sample is divided into large (LARGE), medium (MED) and small companies (SMALL). The table fully defines all the variables used by mean, median, minimum, maximum, standard deviation, skewness, and kurtosis.

The table above presents that the mean of the CSDind in the sample is 25.8 points with the highest value of 39 and the lowest value is 4 out of 40 points. The median is 26 points which indicates

30 that 50 % of the observations have more than 26 points. The other 50% of the observations have less than 26 points. This result indicates that the Swedish listed companies do not fully comply with the requirements in AAA when disclosing the sustainability activities in their CSDs. This finding is consistent with the results reported in the PwC study on a sample of Swedish companies in 2020, were they documented volatility and a lack of commitment by the companies when they disclose corporate sustainability activities (PwC, 2020b). Despite the previous documented volatility, Table 7 below refers to the yearly trends of the CSDind and it is successively increasing. This indicates that as the years pass by, the companies comply more further in line with the AAA requirements regarding CSDs.

Table 7. Yearly trend CSDind Year 2017 2018 2019 2020

Mean CSDind 24.32 25.58 26.18 27.07

The companies in the sample vary between large, medium, and small companies. In general, most companies lay under the large size category where the mean is 70.5%, medium companies 18.9% and the small companies 10.4%. This creates differences in the number of employees, ROA and TQ among the companies. For instance, the mean of the logSize is 7.127 which equals the number of employees in the sample being 7798. The highest numbers of employees are 302055. These findings are consistent with Isidro & Sobral (2015) study that documented a variation among the number of employees on a sample of large European companies.

The average number of women on the BOD is 2.6 members with the highest number being 8 and the lowest being 0. Table 8 below shows the distribution of women as boards members and as CEOs among the companies during the period 2017-2020.

Table 8. Division of females on the BOD and as CEOs during 2017-2020 Total %Frequency Nu of women on the BOD 2017 2018 2019 2020 Mean sample total sample 0 5 2 1 2 2.5 10 1.11% 1 35 37 36 30 34.5 138 15.28% 2 82 86 79 74 80.25 321 35.55% 3 53 62 71 73 64.75 259 28.68% 4 25 27 24 28 26 104 11.52% 5 15 11 13 13 13 52 5.76% 6 4 3 1 5 3.25 13 1.44% 7 1 2 1 0 1 4 0.44% 8 0 0 1 1 0.5 2 0.22% 220 230 227 226 903 100

Total %Frequency Nu of women as CEOs 2017 2018 2019 2020 Mean sample total sample 0 178 192 189 186 186.25 745 82.50% 1 42 38 38 40 39.5 158 17.50% 220 230 227 226 903 100

Table 8 shows that two female members is the most common number of women on the BOD. 321 observations are documented with a percentage of 35.55%. It is also noted that three women as board members are repeated 259 times with a percentage of 28.68%. However, the most frequent is two women or less on the boards, were the table shows 469 out of 903 observations with a percentage of 51.94%.

Table 8 also shows that the mean of women as CEOs is 17.5% with a standard deviation of 0.38, which is a small percent compared to the increase of the number of women on the BOD. As presented in the table, there is a decrease in the number of women as CEOs from 2017 being 42 women compared to 2020 being 40 women.

Two-sample t-tests are conducted for the women percentage on the BOD, where the variable is divided into two sub-samples with the women percentage over and below the median. Table 9 below shows the results of mean and the mean differences of women percentage on the BOD over and below the median. The t-test helps investigating whether the differences between the means of both two subsamples are significant. The table does not document significant mean differences for the women percentage on the BOD in relation to the CSDind.

Table 9. Panel B: Independent two-sample t test Differences of the P Variable Womenperce < median Womenperc > median mean value CSDind 25.6692 25.98143 -0.31223 0.37 Size 5813.985 10566.55 -4752.565*** 0.0049 Risk 0.7275645 0.9863678 -0.2588033** 0.0229 ROA 0.0569383 0.0503474 0.0065909 0.3649 TQ 4.082171 4.000402 0.081769 0.7936 Note: The table reports the result of two samples t test for the study's variables based on dividing the women percentage variable into two subsamples, women percentage below the median and women percentage above the median. *** p<.01, ** p<.05, * p<.1.

4.2 Correlation matrix Table 10 presents the correlation matrix for the study’s variables according to Pearson correlation. The table focuses on the characteristics regarding the relationship between the variables and correlation strength. The finding documents a non-significant correlation between the variables’ women percentage on the BOD and the CSDind. The matrix does not show high correlation between the variables at a significance level of 90%. The correlation between the CSDind and women percentage on the BOD is non-significant and records 2.9%. The CSDind correlates negatively and non-significantly at 2.3% with the presence of one woman or less on the BOD and 1% with the presence two women on the BOD. Three women are positively and non-significantly correlated with CSDind at a percentage of 2.1%. This indicates that women on the BOD do not significantly affect the CSDs.

The presence of women as CEOs in the company points out a negative and non-significant relationship with the CSDind at 5.8%. Regarding the other variables, they point to a non- significant relationship with the CSDind, except ROA. ROA has a positive and significant relationship with 10.1%.

The size is positively correlated with women percentage in BOD at 10.9% as well as three women and more at 19.8%. It is however negatively and significantly correlated with two women at 12.7%. The risk variable is positively correlated only with women percentage on the BOD at 7.7%. Moreover, the ROA is significantly correlated with two variables, positively with the CSDind at 10.1% and negatively with risk at 12.2%. TQ is however significantly correlated with three different variables, positively with two women at 14%, negatively with three women or more at 8.5% and positively with risk at 49.7%.

Table 10. Correlation matrix Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (1) CSDind 1 (2) Womenperc 0.029 1 (0.389) (3) TwoWom -0.008 -0.165* 1 (0.818) (0.00) (4) ThreeWomormore 0.021 0.615* -0.708* 1 (0.526) (0.00) (0.00) (5) Womceo -0.058 0.081* -0.106* 0.169* 1 (0.079) (0.015) (0.001) (0.00) (6) Size 0.058 0.109* -0.127* 0.198* 0.057 1 (0.08) (0.001) (0.00) (0.00) (0.088) (7) Risk 0.035 0.077* -0.014 0.041 -0.008 0.047 1 (0.287) (0.021) (0.666) (0.214) (0.82) (0.162) (8) ROA 0.101* 0.005 0.04 -0.001 0.05 0.012 -0.122* 1 (0.002) (0.87) (0.233) (0.972) (0.13) (0.71) (0.00) (9) TQ -0.033 0.047 0.140* -0.085* 0.016 0.025 0.497* 0.02 1 (0.329) (0.159) (0.00) (0.01) (0.628) (0.462) (0.00) (0.555) Note: The variables are corporate sustainability disclosure index (CSDind), percentage of women on the board of directors (Womenperc), two women (TwoWom), three women or more (ThreeWomormore), women as CEOs (Womceo), size of the company (Size), company risk (Risk), Return on assets (ROA) and Tobin's Q ratio (TQ). * p<0.1.

4.3 Regression analysis This study tests three hypotheses of the relationship between women on the BOD and CSDs as well as the relationship between women as CEOs and CSDs. The researchers use the CSDind as a dependent variable and women on the BOD and women as CEOs as independent variables. The first hypothesis is expressed by equation 1 where the dependent variable is the CSDind and women percentage as an independent variable. The second hypothesis is expressed by equation 2, where the CSDind is a dependent variable and women as CEOs is an independent variable. The third hypothesis is expressed by equation 3 where the independent variable for the first sub equation 3a is two women, and the second sub equation 3b is three women or more. The researchers use four variables to control the models which are logSize, logRisk, ROA and TQ.

When conducting the regression, the researchers choose to estimate the regression by regard the effect of years and disregard them. The researchers winsorize all the variables including CSDind, women percentage, logSize, logRisk, logROA and logTQ. The winzorizing is conducted at

34 percentile of 1% and 99%. The researchers choose to cluster the standard errors at company level as the observations from the same company over the years are not independent but may be autocorrelated.

4.3.1 Testing hypotheses for the models

4.3.1.1 Normality To examine the normality assumption of the regression models, table 6 shows the values of skewness and kurtosis of all the variables which are compared with the value 0 and 3. The values are considered normally distributed when the calculated numbers of skewness and kurtosis are near the critical values. It is noted that the skewness of the variables is volatile above and below zero and have slightly symmetric values. The variables logRisk and logROA are left-skewed with the values of -1.872<0 and -1.2<0 while the values of the women variables are; women percentage 0.199>0, two women 0.706>0, three women 0.051>0 and women as CEOs 1.711>0. The logSize and TQ have the values 0.197>0 and 0.465>0 and are right-skewed. When examining the kurtosis, it is presented that some variables have fat tails. For instance, the value of kurtosis for logRisk is 10>3, ROA is 6.904>3, women percentage is 3.376>3 and TQ is 3.631>3. Two women has a value under 3 which is 1.73<3, three women has the value 1.003<2 and lastly the logSize has 2.569<3.

The reason behind the volatile skewness and kurtosis is due to the companies’ sample being asymmetric, hence this creates differences in the companies’ results. For instance, as the sample has large, medium, and small companies, this creates differentiation in the sizes of the BOD, number of women on the BOD and the number of employees. As a result, differences in sustainability performance occur and lead to a variation in the results such as ROA and TQ.

The result of the Shapiro–Wilk test in table 11 shows that the P-value equals 0 for the residuals which is less than 0.05. This confirms that residuals do not follow the normal distribution.

4.3.1.2 Multicollinearity Table 11 presents the VIF values for the models. By estimating regression models and taking the dummy variable years into consideration, the results show that all the VIF values are below 2. For instance, VIF women percentage and the VIF women as CEOs without the dummy variable years, and with the dummy variable years resulted in the same values being 1.03 respectively

1.01. Likewise, results have the same value with and without the dummy variable for VIF TwoWom being 2.20. However. VIF ThreeWomormore yielded in 2.46 without the dummy variable years and 2.48 with the dummy variable years. The control variables show low VIF values that do not exceed the value of 2. According to the VIF scale, the values can be considered as having a small correlation due to values being near 1, and therefore no multicollinearity appears in model 1.

Table 11. Tests for VIF, heteroskedasticity and normality Panel 1. VIF test

Variables Hypothesis 1 Hypothesis 2 Hypothesis 3a and 3b

Womenperc 1.03 1.03 - - - - Womceo - - 1.01 1.01 - - TwoWom - - - - 2.2 2.2 ThreeWomormore - - - - 2.46 2.48 logSize 1.1 1.1 1.09 1.09 1.3 1.31 logRisk 1.3 1.31 1.3 1.31 1.3 1.31 logROA 1.28 1.29 1.28 1.29 1.29 1.3 logTQ 1.08 1.11 1.08 1.1 1.11 1.13 Mean VIF 1.16 1.29 1.15 1.16 1.61 1.62 Year No Yes No Yes No Yes

Panel 2. Heteroscedasticity test

Breusch-Pagan test Hypothesis 1 Hypothesis 2 Hypothesis 3a and 3b Chi2(1) 10.06 7.24 6.71 8.29 5 4.81 P- value 0.0015 0.0071 0.0096 0.004 0.0254 0.0283

Panel 3. Normality test

Hypothesis 1 Hypothesis 2 Hypothesis 3a and 3b

Shapiro–Wilk test (P value) 0.00 0.00 0.00 0.00 0.00 0.00

Note: H1; positive relationship between women on the BOD and CSDs. H2; positive relationship between women as CEOs and the CSDs. H3a; no relationship between two women and the CSDs respectively. H3b; positive relationship between three women or more and CSDs. Variables are percentage of women on the board of directors (Womenperc), two women (TowWom), three women or more (ThreeWomormore), women as CEOs (Womceo), size of the company (logSize), company risk (logRisk), Return on assets (logROA) and Tobin's Q ratio (logTQ). Dummy variables are year and industry. VIF = 1 no multicollinearity. 1< VIF < 5 moderate multicollinearity. 5 < VIF < 10 high multicollinearity. Heteroscedasticity test is executed by Breush-Pagan test. P value < 0.05 means that there is a heteroscedasticity problem. Shapiro–Wilk test for normality. P value > 0.05 means that residuals follow normal distribution.

4.3.1.3 Heteroscedasticity Table 11 above explores that there is heteroskedasticity in all the models were p<0.05 based on the Breush-Pagan test. This problem can be attributed to the correlation between the residuals and then lead to an ineffective model and misleading results (Handajani et al., 2014). To avoid mistakes when estimating the models resulting from residuals' heteroscedasticity, the models are estimated with robust standard errors (see Manita et al., 2018; Al Fadli et al., 2019).

4.3.2 Results of regression models Table 12 presents the findings of the regression models. After winsorizing the data, the observations decreased from 903 and resulted in 767 observations to the models when taking the years effect into consideration. Also, the observations decreased and resulted in 768 when disregarding the effect of the years. Hence, table 12 provides results that interpret the relationship between the quality of CSDs, the presence of women on the BOD and as CEOs, as well as to what extent the control variables affect the reported CSDs.

Model 1, 2, 3 and 4 present the results of hypothesis 1 which investigates the relationship between the presence of women on the BOD and the quality of CSDs. Model 5, 6, 7 and 8 provide the results for hypothesis 2 about the relationship between women as CEOs and the quality of CSDs.

Model 9, 10, 11 and 12 point out the results of hypothesis 3 about the influence of two women on the BOD and the quality of CSD as well as the relationship of three women (critical mass) on the BOD and CSD quality.

For the interpretation power of the models, R² refers to the percentage of variance in the dependent variable that can be predicted and interpreted by the independent variable. The values of R² consist of a range between 0.012 being the lowest and 0.255 being the highest value. Although the percentages are not high enough to give high interpreting power, they predict the proportion that the independent variables women on the BOD, women as CEOs, two women and three women or more can interpret the variance of the dependent variable CSD. For instance, model 1 explore a positive and non-significant relationship were the F-value equals 0.996. Model 1 does not take the year effect into consideration whereas model 2 points out a positive and significant relationship with a value of 11.918 at significance level 1% when taking the year effect into account.

37 Table 12. Regression models for the CSDind H 1 (Women percentage on the BOD) H 2 (Women as CEO) H 3a and 3b (Critical mass) Variables OLS FE FE OLS FE FE OLS FE FE Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9 Model 10 Model 11 Model 12 Womenperc 2.082 1.37 3.515** 1.652 (0.377) (0.565) (0.049) (0.297) Womceo -1.22 -1.141 -0.61 -0.116 (0.139) (0.164) (0.118) (0.788) TowWom 0.424 0.351 0.704 0.474 (0.634) (0.691) (0.283) (0.401) ThreeWomormore 0.282 -0.005 1.355** 0.599 (0.757) (0.996) (0.03) (0.281) Size 0.213 0.232 3.052*** 0.849 0.254* 0.265* 3.251*** 0.913 0.225 0.265* 3.104*** 0.876 (0.149) (0.117) (0.000) (0.162) (0.074) (0.062) (0.000) (0.133) (0.148) (0.089) (0.000) (0.148) Risk 0.062 0.083 0.53*** 0.399** 0.056 0.076 0.522*** 0.394** 0.071 0.092 0.546*** 0.404** (0.814) (0.749) (0.002) (0.017) (0.826) (0.765) (0.002) (0.019) (0.790) (0.724) (0.002) (0.016) ROA 0.358 0.465 -0.388** -0.079 0.348 0.453 -0.408** -0.083 0.358 0.468 -0.371** -0.074 (0.425) (0.294) (0.036) (0.586) (0.411) (0.281) (0.028) (0.568) (0.425) (0.290) (0.044) (0.610) TQ -0.512 -0.657 -0.249 -0.49 -0.463 -0.617 -0.279 -0.506 -0.523 -0.692 -0.242 -0.479 (0.333) (0.224) (0.618) (0.292) (0.376) (0.247) (0.57) (0.267) (0.334) (0.209) (0.615) (0.309) Constant 25.36*** 27.404*** 2.007 21.139*** 25.887*** 27.731*** 1.825 21.265*** 25.71*** 27.596*** 1.967 21.034*** (0.000) (0.000) (0.742) (0.000) (0.000) (0.000) (0.772) (0.000) (0.000) (0.000) (0.749) (0.000) Industry dummies Year dummies No Yes No Yes No Yes No Yes No Yes No Yes Nr of observations 768 767 768 767 768 767 768 767 768 767 768 767 R-squared 0.014 0.061 0.101 0.254 0.020 0.068 0.096 0.253 0.012 0.061 0.104 0.255 F-value 0.996 11.918*** 6.489*** 13.865*** 1.333 11.612*** 5.526*** 13.690*** 0.636 10.414*** 6.834*** 12.291*** Note: The table shows the regression result of the sample of 903 observations within the study’s period 2017-2020 of Swedish listed companies. The dependent variable is corporate sustainability disclosure index (CSDind), the independent variables are percentage of women on the board of directors (Womenperc), two women (TwoWom), three women or more (ThreeWomormore) and women as CEOs (Womceo). The control variables are the size of the company measured by the number of the employees (logSize), the risk measured by debt to equity (logRisk), return on assets (logROA) and Tobin's Q ratio (logTQ). The models are estimated by clustering the company’s variables. T statistics are in parentheses and ***, **, * denote significance at 1, 5, and 10 percent respectively.

4.3.2.1 Result of hypothesis 1 As a result from estimating the regression by using OLS and FE models, the findings of hypothesis 1 in table 12 does not provide significant outcomes to interpret the relationship between the quality of CSDs and the presence of women on the BOD, as well as to what extent the control variables affect the reported CSDs.

It is noted that the values of R² increase when adding the effects of the dummy variable years to the regression models. R² for OLS model 1 shows only 0.01, while the value increases to 0.06 when adding the dummies. When estimating the FE model, the values increase to 0.10 and 0.254 respectively and these values are rather acceptable to be interpreted. To give an example, R² for model 3 is significant at level 1% and it means that women on the BOD can only predict 10% of the variance of the CSDs, and R² for the model 4 is also significant at level 1% and implies that women on the BOD can only predict 25.4% of the variance of the CSDs.

However, the FE model 3 is a significant model which refers to a positive and significant relationship between female representation on the BOD and the quality of CSDs, were the coefficient is ß1=3.515, P=0.049<0.05 at a significance level of 5%. Nonetheless, the constant is positive but non-significant with a value of ß0=2.007, P=0.742>0.05, which supports hypothesis 1 about female representation on BOD and the quality of CSDs.

For the control variables in model 3, the size, represented by the number of employees, associates positively and significantly with CSDs were the coefficient is ß2=3.052, P=0<0.05 at a significance level of 1%. The risk, represented by debt-to-equity ratio, has a positive and significant relationship with the CSDs were the coefficient is ß3=0.53, P=0.002>0.05 at a significance level of 1%. In contrast, the ROA associates with CSDs in a negative and significant relationship which is ß4 =-0.388, P=0.036<0.05 at a significance level of 5%. Lastly, the TQ ratio has a negative but non-significant relationship with CSDs, which is ß5 =-0.249, P= 0.618>0.05. The results regarding ROA and TQ are inconsistent with the results from the OLS models.

As the result of model 3 documents a positive and significant relationship between the women on the BOD and CSDs, this significance supposedly mirrors the trend of more women and more CSDs over time. While it is found that companies with increased values of women on boards are associated with increased values of the CSDind, a similar relationship between these variables across companies could not be established. In the past, women could have been the driving factor for enhanced CSDs. Now however, the pressure for issuing CSDs is pervasive. When estimating

39 the FE model without the dummy variable, the relationship between women on the BOD and CSDs was significant, while with the dummy variable it is non-significant. This moderately confirms that these results may be driven by trends for both women and the quality of CSDs. As a result, hypothesis 1 demonstrates that female representation on the BOD does not enhance the corporate sustainability disclosures issued in accordance with AAA.

4.3.2.2 Result of hypothesis 2 The findings of hypothesis 2 in table 12 provide results that interprets the relationship between the quality of CSDs and women as CEOs of the Swedish listed companies, as well as to what extent the control variables affect the reported CSDs.

It is noted that the values of R² increase when adding the dummy variable effects to the regression models. R² for OLS model 1 shows only 0.02, while the value increases to 0.07 when adding the dummy variable years. When estimating the FE model, the values increase to 0.10 and 0.253 respectively and these values are rather acceptable to be interpreted. To give an example, R² for model 6 is significant at level 1% and it means that women as CEOs can only predict 7% of the variance of the CSD, and R² for the model 8 is also significant at level 1% and means that women as CEOs can only predict 25.3% of the variance of the CSD.

However, the OLS and FE model do not point out any significant relationship between the presence of women as CEOs and the quality of CSDs.

OLS model 5 refers to a negative and non-significant relationship between the women as CEOs and the quality of CSDs, were the coefficient is ß1= -1.22, P= 0.139>0.05. The constant is positive and significant with a value of ß0=25.887, P=0<0.05. For the control variables, the size associates positively and significantly with the quality of CSDs were the coefficient is ß2= 0.254, P=0.074<0.05 at a significance level of 1%. The other control variables risk, ROA and TQ do not show any significant relationship with the quality of CSDs.

OLS model 6 documents a negative and non-significant relationship between the women as CEOs and the CSDs. The coefficient is ß0= -1.141, P=0.164>0.05, and the constant is positive and significant with a value of ß0 =27.731, P=0<0.05 at a significance level of 1%. For the control variables, the size and ROA associates positively and significantly with the quality of CSDs were the coefficients are ß2 = 3.251, P=0.000<0.05 and ß5=0.522, P=0.002<0.05 at a significance level of 1% respectively. In contrast, TQ ratio has a negative but non-significant relationship with the quality of CSDs which is ß5= -0.617, P= 0.247>0.05. Lastly, the risk does not show any

40 significant relationship with the quality of CSDs. Based on this, hypothesis 2 about the relationship between women as CEOs and the quality of CSDs is rejected.

4.3.2.3 Result of hypothesis 3 The results of hypothesis 3 are presented in table 12. The hypothesis is divided in two sub- hypotheses that examine the relationship between two women as well as the effect of the critical mass of three women on the BOD and the CSDs.

The values of R² are slightly the same values that are referred to in the last models regarding hypothesis 1 and 2. Despite that all the constants and some control variables have significant relationships with the quality of CSDs, none of the models show a significant relationship regarding the representation of two women on the BOD. For instance, the value of R² in OLS model 10 with years dummies is 0.06. When estimating FE model 12 with the dummy variable years the value of R² increases to 0.255 at a significance level of 1%. This means that two women and three women or more on the BOD can predict 25% of the variance of the CSD.

The coefficient of the variable two women in OLS models 9 and 10 show positive and non- significant values being ß1= 0.424, P=0.634>0.05 and ß1= 0.351, P=0.691>0.05 respectively. FE model 11 points out ß1= 0.704, P=0.283>0.05 without the dummy variable years, while FE model 12 refers to ß1= 0.474, P=0.401>0.05 with the dummy variable years. As a result, sub hypothesis 3a which states that there is no relationship between the presence of two women on the BOD and the quality of CSDs is accepted.

The coefficient of the variable three women or more in OLS models 9 and 10 are both inconsistent however non-significant. Model 9 present a positive value of ß3=0.282, P=0.757>0.05 whereas model 10 present a negative value of ß3= -0.005, P=0.996>0.05. Regarding FE model 11, the result points to a positive and significant relationship between at least three women on the BOD and the CSDs without the dummy variable years. The value of the coefficient presented is ß3=1.355, P=0.03<0.05 at a significance level of 5%. FE model 12 presents a positive but non- significant relationship with the dummy variable years. The value of the coefficient is ß3=0.599, P=0.281>0.05.

The positive and significant documented result regarding the critical mass of at least three women on the BOD cannot be considered. The reason behind this can be attributed to the coefficient becoming non-significant when estimating the FE model with the dummy variable years. As documented previously, enhanced CSDs cannot be associated with women’s critical mass since the pressure of sustainability and further issuing of CSDs has become imperative overall.

Based on this, sub-hypothesis 3b that states there is a positive relationship between the critical mass of at least three women on the BOD and the quality of CSDs is rejected.

For the control variables, they document a positive and significant relationship with the quality of the CSDs in some models. For instance, the size has a positive and significant relationship were it points out ß3=3.104, P=0.000<0.05 at significance level 1% in model 11. Also, the risk has a positive and significant relationship were it points out ß4=0.404, P=0.016<0.05 at significance level 5% in model 12. In contrast, ROA has a negative and significant relationship with the quality of CSDs were the coefficient is ß5=-0.371, P=0.044<0.05 at a significance level of 5% in model 11.

4.4 Additional test of the potential reversed causality To cover the endogeneity issues, the researchers choose to conduct an additional test of reversed causality. The dependent variable is the CSDind and the independent variable Womenperc. In this test, the researchers convert these variables, which means that Womenperc becomes the dependent variable and the CSDind becomes the independent variable. Afterwards, the researchers lagged the independent variable CSDind with one year. Table 13 below presents the results of the FE model. The F-value that is 1.787 is non-significant. The independent variable lagged-CSDind does not have a significant relationship with the dependent variable Womenperc. Also, none of the other variables included shows a significant relationship with the variable Womenperc. As the lagged-CSDind is non-significant, no evidence of reversed causality in the model can be assured.

Table 13. Reversed causality with lagged-CSDind

Variables FE

CSDind lag 0.002 (0.185) Size 0.044 (0.145) Risk -0.005 (0.505) ROA 0.00 (0.994) TQ -0.012 (0.572) Constant -0.006 (0.978) Industry Year Yes Nr of observations 572 R-squared 0.029 F-value 1.787 Note: Regression model results for the dependent variable women percentage on the BOD and lagged-CSDind as an independent variable. The regression model is estimated by the Fixed effect model. The model is run with cluster the company variable. Numbers within parentheses refer to P-values. *** p<.01, ** p<.05, * p<.1.

5. Analysis and discussion

5.1 Female representation on the board of directors The results from OLS and the FE models regarding the first four models point out that hypothesis 1, that investigates the relationship between female representation on the BOD and the quality of CSDs in Swedish listed companies, cannot be accepted. The models do not indicate a significant relationship between female representation on the BOD and the quality of CSDs.

Despite the increased female representation on the BOD (PwC, 2020a), the results of this study could not manifest that gender diversity enhance the quality of the CSDs. One reason behind this could be due to the increased focus on sustainability regarding environmental, social and governance aspects among corporate directors (Robert et al., 2020; PwC, 2020a). The authors do not however state that gender diversity contributes to increased focus on the sustainability, rather that the sustainability itself has increased in order to maintain economic performance and stakeholders’ trust. This could partially be a reason to why this study’s result regarding the relationship between female representation on the BOD and the quality of CSDs is non- significant. It could be that the CSDs and the sustainability issues themselves drives women to the BOD and not the other way around. However, this thesis also tests for reversed causality by using women percentage as a dependent variable and the lagged CSDind as an independent variable. The test also shows no significance of the relationship between women percentage and the lagged CSDind. The non-significant results indicate that no reversed causality can be detected nor rejected. With this said, it is therefore not possible to determine whether women are driven to companies with high-quality CSDs or not.

Generally, most of the previous studies do find a positive and significant relationship between female representation on the BOD and CSDs (Hersh, 2016; Al-Shaer & Zaman, 2016) however it could differ depending on the overall gender equality within these countries. Manita et al., (2018), Adeniyi & Fadipe (2018) and Matitaputty & Davianti (2020) result are however in line with this study’s results, as the authors did not find a significant relationship between female representation on boards and CSDs. The exact reason behind this is unclear, however in Europe, Sweden is considered as one of the most equal countries when it comes to the number of women on the BOD. The number of women on the BOD in Sweden is 38% globally. This is an increase of 30% in Sweden from the beginning of the 2000 century. Despite not being fully equal, Sweden indeed is one of the countries with the highest number of women on the BOD (Ekonomifakta,

2021). This could be a reason to why the number of women in this study’s research period 2017- 2020 have not significantly increased, as presented in table 8. With this in mind, the researchers suppose that the reason to why female representation in the BOD do not contribute to higher CSD quality in Sweden is due to number of women already being more prominent as opposed to other countries. This could also be the reason to why previous studies have found a positive and significant relationship between female representation on the BOD and the CSDs with a small number of women (Arayssi et al., 2016; Hyun et al., 2016; Cabeza-García et al., 2018; Dienes & Velte, 2016; Modiba & Ngwakwe, 2017; Naseer & Rashid, 2018; Bakar et al., 2019), given that perhaps the boards in other countries do not generally have a high number of female directors on boards.

With respect to the political cost theory, the non-significant result can be interpreted that women do not have any effect on the quality of CSDs based on AAA. This might indicate that female representation on the BOD cannot avoid political costs which might also result in negative consequences when the companies do not fully comply the law (Von Alberti et al., 2012). The negative consequences can occur directly as a penalty by the government or indirectly as a reaction by the market, such as the stakeholders (Jackson et al., 2020). In this case, female representation on the BOD cannot be attributed to positive and enhanced CSDs which mitigates negative consequences and political costs.

The stakeholders’ theory takes the relationship between the stakeholders and the BOD into consideration. This theory supposes that the stakeholders enhance the legitimacy for the company when the relevant information is provided for them (Campbell, 2000). Also, the stakeholders’ theory supposes that the communication between the BOD and the stakeholders can mitigate information asymmetry and decrease the cost of capital. (Abad et al., 2017; Dhaliwal et al., 2011). The results of the models presented in table 12 do not support the idea that women on the BOD strive to communicate further information for the stakeholders through the CSDs and mitigate cost of capital. As mentioned, the CSDs work as a communicative tool that provides further understanding about environmental and social activities. This suggests enhanced reputation and image of the company for the stakeholders as presented by previous studies (Hess, 2008; Cortado & Chalmeta, 2016; Hillman et al., 2007; Holder-Webb, Cohen, Nath & Wood, 2009; Omran & Ramdhony, 2015) which this study cannot support. This study cannot confirm the relationship between female representation on the BOD and its relation to the stakeholders’ theory through CSDs due to the non-significant results.

The risk presented in FE models 3 and 4, measured by debt to equity is noted to have a positive and significant relationship with CSDs. This can be interpreted as the company leverage affects the quality of CSDs were more debt leads to more potential risks that ought to be disclosed by the BOD. Thus, the result refers to a legitimate relationship between the risk and the CSDs, and it is consistent with Nadeem’s (2020) results. The argument is consistent with the idea that CSDs reduce company risks and motivates stakeholders to invest or provide loans to the company after considering potential risks (Sial et al., 2018).

5.2 Women as chief executive officers The results regarding hypothesis 2 indicate a negative and non-significant relationship with women as CEOs and the quality of the CSDs. However, prior studies explain that the CEO is the person in the company that has the interest to disclose further CSDs in order to build a strong relationship with the stakeholders, which contradicts the results of this study. The results are partially consistent with Nalikka (2009) as these authors conclude negative and significant effects with women as CEOs. The results of this study are however fully inconsistent with Zou et al (2018) as these authors concluded a positive and significant relationship with women as CEOs.

In this study, the results indicated both negative and non-significant results. Nalikka (2009) explain that the reasoning behind this is due to women focusing more on strategic issues in comparison to conducting CSDs (Nalikka, 2009; Li et al., 2018; Rashid et al., 2020). Why this study resulted in non-significant results cannot fully be interpreted or accounted for, however it is suggested that similarly to Nalikka (2009), female CEOs in Sweden might as well focus on strategic decisions rather than CSDs which could be a reason why the results are non-significant.

Other studies confirm this as they also suggest that the more ownership the CEO has, the less they will focus on CSDs as they believe that further disclosures might reduce their short-term returns (Barnea & Rubin, 2010; Rashid et al., 2020). However, some authors argue that as the CEOs strive to appear more able, reflect their image, reputation etc, this incentivise the CEOs to increase the CSDs, which however contradicts this study’s findings that found the opposite (Benjamin & Michael, 2012; Wang et al., 2008; Li et al., 2018; Barnea & Rubin, 2010; Rashid et al., 2020). Based on this, hypothesis 2 which states that there is a positive relationship between women as CEOs in the company and the quality of CSDs is rejected.

The results also present that the number of women as CEOs is much less compared to men. However, according to Furlotti et al (2019) women do not usually face issues when they strive to take on the CEO position. The authors explain that as the CEO position is influenced by specific rules and guidelines, the position is therefore not incused by gender characteristics (Furlotti et al., 2019). However, the environmental and sustainability disclosures become more imperative considering the expertise, education and experience the CEO has of the company (Li et al., 2019). From a gender perspective, the researchers of this study suggest that it is important to keep in mind that women usually are more oriented towards social and environmental issues despite the negative and non-significant findings, and that women usually direct their social and human capital to issue more CSDs (Hillman et al., 2000). As the findings of this study impose that the female CEO do not affect the CSDs significantly in Sweden, it is a possibility that this result cannot be generalized to other countries as they have different regulations, guidelines, and expertise in the CEO position.

The OLS model 6 with the dummy variable years in table 12 presents that the company size has a positive and significant relationship with CSDs. This result is similar to Yusri & Amran (2012) and can be interpreted due to the fact that the sample for this study varies between large, medium and small companies. However, most companies lay under the large size category at 70.5%, where some companies have large numbers of employees, and other companies have a small number of employees. The employee aspect of the CSDs is important when reflecting the interests of the company with its human resource, as it improves competitiveness and enhances the image and the reputation of the company towards the stakeholders (Yusri & Amran, 2012).

5.3 Two and three women or more on the board of directors The findings of this study present that there is no relationship between two women on the BOD and the quality of CSDs. Based on this, hypothesis 3a is accepted.

These results reveal that two women are non-significant, implying that two women on the BOD do not contribute to further improvements of the CSDs. Previous studies have stated that one woman on the BOD is considered as a token, two are considered as an existence whereas three are considered as an actual voice, necessary for organizational goals (Liu et al., 2014; Kristie, 2011).

This is equivalent to this study’s results that shows no significance with the presence of two women on the BOD and no significant impact on the quality of CSDs. This results also go in line Torchia et al (2011) as the authors conclude that one woman is a token and two women do not contribute to a difference within corporate boards. The authors explain that one woman tend to accommodate the majority groups’ behaviours and ideas, signifying that one woman is considered as a token. The authors also explain that two women indicate no significant effect within boards, confirming this study’s findings as well. In line with this, Manita et al (2018), results for the critical mass also revealed no significance for one, two and three women on boards. The researchers of this study assume that the findings could rely on that two women are not enough to contribute to significant effects on the BOD, suggesting that even two women on the BOD in Sweden might accommodate the majority groups’ behaviours and ideas, as Torchia et al (2011) have stated. However, it could also be argued that as this study has a newer sample, and the strong trend regarding CSDs which is mostly accounted for, female representation does not play a crucial part. It is suggested that it might have been women in earlier years who supported the CSDs, but as the sustainability matter has become more prominent, board diversity might not matter.

Hypothesis 3b which states that there is a positive relationship between the critical mass of at least three women on the BOD and the quality of CSDs is rejected. Based on the models in table 12, there is no significance between the critical mass of at least three women on the BOD and the quality of CSDs. Researchers have stated that the features of females and their experiences support the critical mass in making-decisions related to CSDs. This provides strong information communicated with stakeholders which ultimately enhances the CSDs (Al Fadli et al., 2019; Charumathi & Rahman 2019; Jia & Zhang, 2013). Based on that one can argue that three women, despite previous research, is not enough in Swedish boards to reject the presence of tokenism. The findings of this study suggests that the contributions of female directors are not dependent on the critical mass of the minority group, indicating that the critical mass theory is not applied and operationalized in this study (Torchia et al., 2011). This however does not comply with Al Fadli et al (2019) results, as these authors explain that the presence of solely one woman enhances the CSDs due to their features and qualities.

However, studies have concluded that one woman enhances the quality of the CSDs, and there are also studies that explain that the critical mass for women is at least three or more (Charumathi & Rahman, 2019). This study’s result does not confirm the previous studies that detected a positive and significant relationship when there are at least three women on boards, implying that

48 the critical mass of three does not apply for the boards in Swedish listed companies. Based on this, it is suggested that the gender diversity in Swedish listed companies must include more than three women on the BOD in order to enhance the CSDs. This is attributed to the upper echelon theory, as the directors’ values play a significant role in the decision-making process which is also reflected in the CSDs.

Thambugala and Rathwatta (2020) explain that gender, values, experiences, education, and characteristics allow the directors to process CSD information. Furthermore, the authors mean that the strategic decisions that are taken regarding CSDs are influenced by the directors’ characteristics. Female directors specifically promote CSDs due to their biological qualities being compassion, empathy, and motherhood. As the UET explains that values and characteristics of directors have a significant impact on decisions, in this case, female qualities are however not proven to have a significant and positive effect on the CSDs, despite the critical mass of three (Thambugala & Rathwatta, 2020; Kim, 2021; Alazzani et al., 2019). In line with this, Hassan et al (2020) explain that board diversity creates room for various traits that will create a strong motivation among the board members, which ultimately improves the CSDs. The authors clarify that board members with various experience, education, skills, competencies as well as expertise supports CSDs (Hassan et al., 2020). As explained previously, Swedish boards already have a high rate of female directors as opposed to other countries (Ekonomifakta, 2021), which also in this case could be a factor to why the critical mass within boards in Swedish listed companies cannot be operationalized.

Conclusively, the results found in this study contradicted the researchers’ expectations as they did not find that two women, nor three women are enough to have a significant impact on the quality of CSDs. The results are not confirming the critical mass of at least three women in Swedish listed companies. Also, in relation to previous studies and research, the results of this study cannot confirm the significant impact of two women and three women on the BOD and the quality of CSDs in Swedish listed companies.

6. Conclusion This study aims to investigate if the quality of the CSDs is affected by female representation on the BOD and by women as CEOs in Swedish listed companies. Specifically, this study takes AAA into consideration as the purpose is to investigate what impact female representation has had on CSDs since the regulation was established. To answer the research question shortly, the non-significant findings of this study cannot conclude if female representation on the BOD or females as CEOs affects the quality of CSDs, in accordance with AAA in Swedish listed companies. As the theory claims, the reason behind women enhancing the CSDs is due to their characteristics, qualities, and values (Thambugala & Rathwatta, 2020). This however does not fully apply to the results of this study as there is no relationship found between female representation on the BOD and the quality of CSDs. This therefore rejects the first hypothesis which states a positive relationship with female representation on the BOD and the quality of CSDs.

Women as CEOs present a negative as well as non-significant impact on the CSDs, indicating that hypothesis 2 also is rejected. However, hypothesis 3a is accepted as no relationship was found between the presence of two women on the BOD and the quality of CSDs. In addition, this study unexpectedly finds a negative and non-significant relationship between the critical mass of at least three women on the BOD and the quality of CSDs. Hence, this study does not confirm, nor apply the critical mass of three women on the BOD in Swedish listed companies. According to the theoretical framework, some studies have found that the presence of solely one woman on the BOD has a significant impact on the CSDs, while other studies found that a minimum of three women and more on the BOD enhances the CSDs (Liu et al., 2014; Kristie, 2011; Al Fadli et al., 2019). This study provides an empirical contribution from Sweden regarding female representation on the BOD, women as CEOs, the critical mass of women on the BOD and its relationship with the quality of CSDs.

Although this study contributes to some prior theoretical literature and empirical findings, it is however limited to Sweden and the AAA regulation. Important to note is that when constructing the CSDind, there was a remarkable difference between the first conducted sustainability and annual reports 2017 and the sustainability and annual reports published 2020. The researchers of this study therefore infer that when the first issued CSDs after the regulation was established 2017, the companies were presumably not fully accustomed to the new regulation, nor fully aware of how the reports had to be conducted as there is no specific guideline or mould for those (Gray,

1988; Cooke & Wallace, 1990; Xiao et al., 1996; Nobes, 1998; Roberts et al., 1998; Radebaugh & Gray, 2002; Al-Htaybat, 2014). However with time, the researchers could detect that the sustainability information regarding financial position, anti-corruption, environmental and social measures, human rights, manpower, business models and KPIs were reported more distinctively and consistently.

A reason for this study’s non-significant results might be attributed to a sample of only four years between 2017-2020. However, as previous studies from other countries have found positive and significant results between female representation on BOD, female as CEOs and the quality of CSDs, it is therefore relevant to investigate this matter further in Sweden. For future research, it would therefore be interesting to separately investigate the different categories in the CSDind and independently analyse them in relation to female representation. In that way, one can investigate to what extent females take the different categories into consideration. Another suggestion for future research would be to examine the Scandinavian countries that apply identical laws and regulations to AAA, and compare the countries to conclude which country complies more with the regulation in regard to female representation.

6.1 Limitations This study included all the Swedish listed companies which fulfilled the requirements in AAA regarding CSDs. When assessing the CSDind, the researchers noted a difference between some reports. Various sustainability reports were issued separately from the annual report whilst other companies combined the sustainability information within the annual reports. The integrated sustainability information with the rest of the annual report was many times hard to distinguish. Many companies clearly point out the specific pages addressing sustainability issues while other companies present the sustainability information throughout the entire report. In cases where the information was incorporated throughout the report, the researchers had to examine the entire annual report in order to assess the information for the CSDind. In such case, there was no specific sustainability report, nor any specific section of the annual report that was focused on, rather the entire report needed to be examined in order to assess the index. The CSDind is constructed based on a single‐country analysis and disclosure requirements included in the AAA. Therefore, any generalization needs to take the similarity in the context studied into consideration. Also, due to no specific detailed regulation for how CSDs should be presented, the researchers rely on the content analysis based on self-assessment of how companies comply with the requirements in AAA.

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8. Appendices

Appendix 1. List of the companies included in the study No Company name No Company name No Company name 1 AAK AB (PUBL) 38 BONAVA AB 75 ELOS MEDTECH AB 2 ABB LTD 39 BONESUPPORT HOLD 76 ELTEL AB 3 ACADEMEDIA AB 40 BONG LJUNGDAHL AB 77 ENEA AB 4 ACTIC GROUP AB 41 BOOZT AB 78 ENIRO AB 5 ADDLIFE AB 42 BOULE DIAGNOSRISCS ab 79 EOLUS VIND AB 6 ADDNODE GROUP AB 43 BRAVIDA HOLDING AB 80 TELEFONAKTIEBOLAGET 7 ADDTECH AB 44 BTS GROUP AB 81 ESSITY AB EVOLUTION GAMING 8 AF POYRY AB 45 BUFAB AB (PUBL) 82 GROUP AB 9 ALFA LAVAL AB 46 BULTEN AB 83 EWORK GROUP AB 10 ALIMAK GROUP AB 47 BURE EQUITY AB 84 FABEGE AB 11 AMBEA AB (PUBL) 48 BYGGMAX GROUP AB 85 FAGERHULT AB 12 AQ GROUP AB 49 CAMURUS AB 86 FASTIGHETS AB BALDER 13 ARISE AB 50 CASTELLUM AB 87 Fastpartner AB 14 ARJO AB (PUBL) 51 CATELLA AB 88 FEELGOOD SVENSKA AB 15 ASSA ABLOY AB 52 CATENA AB 89 FINGERPRINT CARDS AB 16 ASTRAZENECA PLC 53 CELLAVISION AB 90 FM MATTSSON MORA CHRISTIAN BERNER TECH 17 ATLAS COPCO AB 54 91 FORMPIPE SOFTWARE TRADE AB 18 ATRIUM LJUNGBERG AB 55 CLAS OHLSON AB 92 G5 ENTERTAINMENT AB 19 ATTENDO AB 56 CLOETTA AB 93 GARO AB AVANZA BANK 20 57 COLLECTOR AB 94 GETINGE AB HOLDING AB 21 AXFOOD AB 58 CONCEJO AB (PUBL) 95 GHP SPECIALTY CARE 22 B3 CONSULTING GROUP 59 CONCENTRIC AB 96 GRANGES AB 23 BALCO GROUP AB 60 CONCORDIA MARITIME AB 97 HALDEX AB 24 BE GROUP AB (PUBL) 61 COOR SERVICE MGMT AB 98 HANZA HOLDING AB 25 BEIJER ALMA AB 62 CTT SYSTEMS AB 99 HENNES & MAURITZ AB 26 BEIJER ELECTRONICS 63 DEDICARE AB (PUBL) 100 HEXAGON AB 27 BEIJER REF AB 64 DIOS FASTIGHETER AB 101 HEXATRONIC GROUP AB 28 BERGMAN & BEVING AB 65 DOMETIC GROUP AB 102 HEXPOL AB 29 BERGS TIMBER AB 66 DORO AB 103 HMS NETWORKS AB 30 BESQAB AB (PUBL) 67 DUNI AB 104 HOIST FINANCE AB 31 BETSSON AB 68 DUROC AB 105 HOLMEN AB 32 BILIA AB 69 DUSTIN GROUP AB 106 HUFVUDSTADEN AB 33 BILLERUDKORSNAS AB 70 EASTNINE AB (PUBL) 107 HUMANA AB 34 BIOGAIA AB 71 ELANDERS AB 108 HUSQVARNA AB 35 BIOTAGE AB 72 ELECTRA GRUPPEN AB 109 I.A.R SYSTEMS GROUP 36 BJORN BORG AB 73 ELECTROLUX AB 110 ICA GRUPPEN AB 37 BOLIDEN AB 74 ELEKTA AB (PUBL) 111 IMMUNOVIA AB (PUBL)

Appendix 1. List of companied included in the study (continued) No Company name No Company name No Company name 112 INDUSTRIVARDEN AB 152 NEW WAVE GROUP AB 192 SINCH AB 113 INDUTRADE AB 153 NGS NEXT GENERATION GROUP 193 SEB BANKEN 114 INSTALCO AB 154 NIBE INDUSTRIER AB 194 SKANSKA AB 115 INTRUM AB 155 NOBIA AB 195 SKF AB 116 INVESTOR AB 156 NOBINA AB (PUBL) 196 SKISTAR AB 117 INVISIO AB 157 NOLATO AB 197 SOFTRONIC AB 118 INWIDO AB (PUBL) 158 NORDEA BANK ABP 198 SSAB SVENSKT STAL STENDORREN 119 ITAB SHOP CONCEPT 159 NOTE AB (PUBL) 199 FASTIGHETER AB 120 JM AB 160 NP3 FASTIGHETER AB 200 STRAX AB 121 KABE GROUP AB 161 OEM-INTERNATIONAL AB 201 STUDSVIK AB SVEDBERGS I 122 KARO PHARMA AB 162 OREXO AB 202 DALSTORP AB 123 KINDRED GROUP PLC 163 OSCAR PROPERTIES HOLDING 203 CELLULOSA AB 124 KINNEVIK AB 164 PANDOX AB 204 HANDELSBANKEN 125 KLOVERN AB 165 PEAB AB 205 HANDECARE GROUP 126 KNOWIT AB 166 PLATZER FASTIGHETER 206 SWECO AB (PUBL) 127 KUNGSLEDEN AB 167 POOLIA AB 207 SWEDBANK AB 128 LAGERCRANTZ GROUP 168 PREVAS AB 208 SWEDISH MATCH AB LAMMHULTS DESIGN SWEDISH ORPHAN 129 169 PRICER AB 209 GROUP AB BIOVITRUM AB 130 LATOUR INVESTMENT 170 PROACT IT GROUP AB 210 SYSTEMAIR AB 131 LEOVEGAS AB 171 PROBI AB 211 TELE2 AB 132 LIFCO AB (PUBL) 172 PROFILGRUPPEN AB 212 TELIA COMPANY AB 133 LINDAB INTERNAT AB 173 RATOS AB 213 TETHYS OIL AB 134 LOOMIS AB 174 RAYSEARCH LABORAT AB 214 TF BANK AB 135 LUNDBERGFORETEN 175 REJLERS PUBL AB 215 THULE GROUP AB 136 LUNDIN ENERGY AB 176 RESURS HOLDING AB 216 TOBII AB 137 MAGNOLIA BOSTAD 177 RIZZO GROUP AB 217 TRADEDOUBLER AB 138 MALMBERGS ELEKTAB 178 RNB RETAIL 218 TRELLEBORG AB 139 MEDCAP AB (PUBL) 179 ROTTNEROS AB 219 TROAX GROUP AB 140 MEDICOVER AB 180 SAAB AB 220 VBG GROUP AB 141 MEKONOMEN AB 181 SAGAX AB 221 VITEC SOFTWARE 142 MIDSONA AB 182 SAMHALLSBYGGNADSBOLAGET 222 VITROLIFE AB 143 MIPS AB 183 SANDVIK AB 223 VOLATI AB 144 MODERN TIMES MTG 184 SAS AB 224 VOLVO AB 145 MOMENTUM GROUP 185 SCANDI STANDARD AB 225 WALLENSTAM AB 146 MUNTERS GROUP AB 186 SCANDIC HOTELS GROUP AB 226 WIHLBORG FAST AB 147 MYCRONIC AB (PUBL) 187 SECTRA AB 227 WISE GROUP AB 148 NCC AB 188 SECURITAS AB 228 XANO INDUSTRI AB 149 NEDERMAN HOLDING 189 SEMCON AB 229 ZETADISPLAY AB 150 NELLY GROUP AB 190 SENSYS GATSO GROUP AB 151 NET INSIGHT AB 191 SERNEKE GROUP AB

Appendix 2. Corporate sustainability disclosure index The following illustrations clarifies the empirical case of how the researchers of this study assessed the Swedish Annual Accounts Act (AAA) corporate sustainability disclosure index, and what specific points were the main focus. The AAA provides six points, however the researchers of this study chose to take eight points into account in order to assess the index more easily. The further two points that the researchers extracted from AAA are related to the six points in the regulation. For instance, point two in AAA 6. kap §12 mentions the different policies in which the company applies, as well as its controls. The controls became an additional point which contributed to an easier assessment of point two in AAA 6. kap §12. Similarly, point four in AAA 6. kap §12 mentions negative consequences related to company risks. This study also added an additional point based on negative consequences that helped in the assessment of the risks. After each explained assessment approach, an example from an annual or sustainability report is provided, in order to clarify for the reader how all points were assessed.

1. Business model: The company discloses a clear business model regarding sustainability issues to create a sustainable value. The example below provides a business model specifically related to the environment.

2. Policy: The company discloses its policies and how these are performed in regard to the sustainability issue.

3. Control: The company discloses at least one rule, law, guideline, principle, or regulation to follow up the results of the policy.

4. Result: The company discloses at least one consequence resulting from executing the applied policy.

5. Risks: The company discloses at least one of the risks that affects the sustainability issues.

6. Negative consequence: The company discloses at least one of the negative consequences associated with the sustainability issues.

7. Managing risks: The company discloses at least one example of how the documented risks are managed or assessed.

8. KPIs: The company presents at least one of the KPIs related to the sustainability issues or how the different sustainability aspects are measured.