Abstract
This study investigates whether corporate social responsibility (CSR) activities and board gender diversity affect bankruptcy. The core issue focuses on the moderating effect between CSR activities and board gender diversity on bankruptcy. Using 4,654 firmyear observations from a sample of 581 non-financial firms listed on the Korean Stock Exchange over the period 2009–2017, we employ the fixed effect estimation and two-way fixed effect estimation of panel analysis to control endogenous. We find firms engaging more in CSR activities reduce the level of bankruptcy, but board gender diversity does not reduce the level of bankruptcy due to tiny portion of female director in the boardroom. The moderating effect on the relationship between CSR activities and board gender diversity reduce the level of bankruptcy. This result indicates that the influence of female directors on the boards of Korean listed firms is not yet strong but board gender diversity with good CSR activities positively operate to reduce the level of bankruptcy.
Highlights
The board of directors is an important governance mechanism, and the effectiveness of board of directors depends upon specific factors such as qualifications, experience, expertise, and skills (Rezaee, 2004; Habbash, 2016). Rao and Tilt (2016) propose that having diversified directors on the boards tend to improve management monitoring and disclosure practices for various shareholders because it brings along additional and/or wider variety of perspectives and professional expertise
Using a panel data set of the listed firms on the Korean Stock Exchange (KSE), this study investigates whether corporate social responsibility (CSR) activities and board gender diversity affect bankruptcy of the firms by expanding previous studies on the composition of the board of directors
We find that only 3.8% of listed Korean firms have female board directors
Summary
The board of directors is an important governance mechanism, and the effectiveness of board of directors (monitors) depends upon specific factors such as qualifications, experience, expertise, and skills (Rezaee, 2004; Habbash, 2016). Rao and Tilt (2016) propose that having diversified directors on the boards tend to improve management monitoring and disclosure practices for various shareholders because it brings along additional and/or wider variety of perspectives and professional expertise. Using a panel data set of the listed firms on the Korean Stock Exchange (KSE), this study investigates whether CSR activities and board gender diversity affect bankruptcy of the firms by expanding previous studies on the composition of the board of directors. This study examines the moderating effect between board gender diversity and CSR activities on bankruptcy. This study provides empirical evidence that the representation of female director as board gender diversity expects to lower the level of bankruptcy under the business environment where men have authority and power over women. Our findings contribute to a good example when female plays a role in defending bankruptcy and is expected to recommend implications that Korean policymakers or regulators need to reform corporate governance practices reflecting board gender diversity. Combining research on CSR activities and board gender diversity, this study offers empirical results on the moderating effect of board gender diversity and CSR activities on firm’s bankruptcy
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