Board gender diversity, firm performance and risk-taking in developing countries: The moderating effect of culture

Abstract

We examine the moderating effects of culture on the relationship between board gender diversity and corporate risk-taking and firm performance in 27 developing countries and find that board gender diversity is negatively related to both operating and financial risk and positively related to firm performance. We also document a moderating effect of culture on the board gender diversity - risk-taking relationship. In countries that rank high on masculinity, individualism, and long-term orientation and therefore, are prone to taking higher risk, culture attenuates the risk reduction effect of board gender diversity. Uncertainty avoidance reinforces the risk reduction impact of board gender diversity. The years following the financial crisis have witnessed an increase in the number of women on corporate boards and the increase coincides with a moderation in the risk reduction effect of gender-diverse boards. This finding is consistent with prior literature (e.g., Adams and Funk, 2012) that shows that female’s degree of risk aversion may reduce once they have broken through the glass ceiling and have adapted to a male-denominated culture. Our results are robust to the use of different measures of risk and to the correction of endogeneity issues.