Misreporting of Mandatory ESG Disclosures: Evidence from Gender Pay Gap Information

66 Pages Posted: 22 Aug 2022 Last revised: 5 Apr 2024

See all articles by McKenna Bailey

McKenna Bailey

University of Michigan, Stephen M. Ross School of Business

Stephen Glaeser

University of North Carolina (UNC) at Chapel Hill

James D. Omartian

University of Michigan - Ross School of Business

Aneesh Raghunandan

London School of Economics

Date Written: August 17, 2022

Abstract

We examine misreporting of ESG information, in the context of gender pay gap reporting. The UK government requires UK employers to report gender employment ratios and pay gaps. We find that a large number of employers misreport as evidenced by their reporting a set of disclosures that in concert are mathematically impossible. We also find that a disproportionate number of employers report perfectly-balanced gender statistics, consistent with some employers intentionally misreporting as a form of ESG-washing. We find that employers involved in ESG controversies and that commit labor violations are more likely to misreport, consistent with ethical considerations affecting misreporting. Consistent with capital market and media scrutiny discouraging misreporting, public employers, employers that are the subject of an article about their gender pay gap reports, and employers that receive an ESG audit or financial audit from a big-4 auditor are less likely to misreport. Employers that misreport receive higher ESG scores and are less likely to receive negative media attention, consistent with benefits of misreporting. Our results suggest that inferences drawn from measures of ESG performance collected by second parties or on information self-reported in the presence of meaningful oversight are particularly valuable.

Keywords: gender pay gap; ESG; ESG washing; social responsibility; misreporting; gender representation; mandatory disclosure

JEL Classification: G38; L21; M14; M41; M48

Suggested Citation

Bailey, McKenna and Glaeser, Stephen and Omartian, James D. and Raghunandan, Aneesh, Misreporting of Mandatory ESG Disclosures: Evidence from Gender Pay Gap Information (August 17, 2022). Available at SSRN: https://ssrn.com/abstract=4192257 or http://dx.doi.org/10.2139/ssrn.4192257

McKenna Bailey

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Stephen Glaeser

University of North Carolina (UNC) at Chapel Hill ( email )

102 Ridge Road
Chapel Hill, NC NC 27514
United States

James D. Omartian

University of Michigan - Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI 48109-1234
United States

Aneesh Raghunandan (Contact Author)

London School of Economics ( email )

United Kingdom

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