Cognitive governance and ESG transparency: board educational diversity, director ownership, and ESG disclosure in China

Abstract This study examines how board educational diversity shapes corporate ESG disclosure among Chinese A-share listed firms from 2014 to 2023. Drawing on upper echelons theory and agency theory, we conceptualize board educational diversity as a cognitive governance resource that enhances directors’ capacity to process complex sustainability-related information and support transparent disclosure. Using Bloomberg ESG disclosure scores, decomposed into environmental, social, and governance dimensions, and measuring educational diversity through the Blau index based on directors’ educational institutions and academic disciplines, we find that educationally diverse boards are positively associated with overall ESG disclosure and with each ESG dimension. However, director ownership weakens this positive relationship, suggesting that ownership-based incentives may constrain the translation of board cognitive capacity into disclosure transparency. Additional analyses show that the effect of educational diversity is stronger when directors also serve as executives and is more pronounced in regions with stronger educational infrastructure. The results remain robust when applying a Bartik shift-share instrumental variable approach to address potential endogeneity concerns. This study contributes to the disclosure and governance literature by showing that board educational diversity does not automatically enhance ESG transparency; rather, its effectiveness depends on the interaction between cognitive capacity, ownership incentives, managerial authority, and regional context.