Board nationality diversity and reputation concern

This study examines whether disclosure-only regulation can induce substantive changes in corporate board composition. While board diversity is increasingly regarded as a governance mechanism, less is known about whether mandatory disclosure, absent binding quotas, affects nationality diversity. Building on studies of board diversity and voluntary responses to mandated disclosure (Adams & Ferreira, 2009; Kays, 2022), this paper investigates the effect of Nasdaq Rule 5606 on board nationality diversity. Using 9,718 firm-year observations for 1,468 U.S. firms from 2015 to 2023, we estimate difference-in-differences (DID) models with firm and year fixed effects (FE) and validate the results using propensity score matching (PSM) and placebo tests. The results show that Nasdaq-listed firms increased the proportion of foreign directors after the rule’s implementation. This increase is concentrated among firms with stronger reputational concerns: those with more gender-diverse boards, headquarters in politically liberal states, and inclusion in Fortune’s “Most Admired Companies” list. The findings suggest that mandatory disclosure can generate voluntary governance changes by activating reputational incentives. The study contributes to corporate governance and disclosure regulation research and offers policy implications for diversity-oriented transparency rules.