Abstract
Board diversity is widely advocated as a corporate governance mechanism that can enhance environmental, social, and governance (ESG) disclosure. Yet the pathways through which diversity becomes consequential for disclosure remain insufficiently theorised and empirically underexplored, especially in institutional environments characterised by regulatory pluralism, state influence, cultural embeddedness, and shifting norms of corporate accountability. Existing studies, dominated by large-sample archival designs, typically operationalise diversity as static board attributes and treat ESG disclosure as a reporting outcome, leaving limited understanding of how directors interpret ESG, how diverse perspectives are activated (or muted) in board processes, and how institutional complexity conditions governance effects.
This study addresses these gaps by examining how board diversity shapes ESG disclosure through board-level sensemaking and governance practices in Chinese listed companies. Adopting an interpretivist and inductive design, we draw on an ongoing qualitative project of 35 semi-structured interviews with board directors. Using a systematic coding approach supported by NVivo, we progressed from open coding to axial and selective coding to develop an emergent process model.
Findings show that board diversity does not translate mechanically into enhanced ESG disclosure. Instead, its effects are mediated by four interrelated mechanisms: (1) contextualised governance capability, where diversity improves deliberation quality and risk sensitivity but is expressed through culturally legitimate, harmony-oriented interaction norms; (2) human and knowledge capital, where diversity provides differentiated expertise that shapes ESG salience, interpretation, and disclosure credibility; (3) translation conditions, where economic sequencing, incentive structures, and compliance logics determine whether board-level awareness becomes reportable disclosure; and (4) institutional and cultural logics, where state-led diffusion pathways, hybrid governance arrangements, and Confucian relational norms shape how diversity is mobilised and constrained.
The study contributes by (i) advancing a process-based theory of board diversity as an activation capability rather than a compositional variable, (ii) reframing ESG disclosure as a conditional, legitimacy-laden governance practice rather than a purely technical reporting outcome, and (iii) extending governance research on ESG into China’s evolving regime of institutional complexity, offering implications for boards and policymakers seeking credible disclosure under uncertain and plural institutional demands.