Board diversity and carbon emission disclosure in Indonesian banking companies

Abstract As climate change issues escalate, companies face increasing pressure to disclose their environmental impact. In this context, effective corporate governance is critical in promoting transparency and ensuring sustainability practices. Grounded in Legitimacy Theory, this study aims to explore the relationship between independent director (INBOARD), female director (FEMALE), and foreign director (FOREIGN) on carbon emission disclosure (CARBON) in Indonesian banking companies with a sample of 242 firm-year observations from 2017 to 2022. The banking sector is not a direct emitter of carbon, but contributes significantly to national emissions through financed emissions derived from providing financing to industries, particularly high carbon emitting industries. The results show that independent director and female director positively affect carbon emission disclosure. In contrast, foreign director has a negative effect on carbon emission disclosure and have been confirmed through robustness tests, including alternative measurement, coarsened exact matching (CEM), and Heckman two-stage estimator. This study offers valuable insights and unique contributions by integrating corporate board diversity and carbon emission disclosure in the banking sector with relatively high concentrations of indirect emissions from financed emissions. Furthermore, this study explores the role of minority groups in board structures and reveals that their presence and voices can influence board deliberations and corporate transparency.