Women Directors: An Empirical Test of Critical Mass Hypothesis

Abstract

This paper offers integrated theoretical-based empirical evidence regarding the role of female directors in promoting corporate common good using resource dependency model built on critical mass hypothesis. Using panel regression involving 220 firm-year observations from 2011 to 2021, the paper empirically assesses the moderating impacts of diversity and social inclusion policy, and gender-based power separation in determining the direction of causality between composition of female directors and foreign capital importation by the top 20 commercial banks in Nigeria. With approximately 30 per cent female director representation in the sampled banks (i.e., optimal gender threshold), the paper offers support to critical mass hypothesis and validates intrinsic benefits of women in corporate boardroom. The empirical result shows that female director representation in boards with strong diversity and social inclusion policy and greater independent non-executive directors, is positively linked to resource dependency role of foreign capital importation. Diversity of power separation is found to be detrimental to such board tasks due to overwhelming tokenism effect that surrounds gender-based power delineation. These key findings are statistically significant and robust to a series of iterated sensitivity tests. In addition to offering emerging market contributions to the growing literature on critical mass theory application, findings from this study demonstrate the inherent value of combining multiple governance theories (such as resource dependency and critical mass models) and the dynamic research framework opportunities it offers for robust empirical testing.