Women on boards, CSR and risk-taking: An investigation of the interaction effects of gender diversity and CSR on business risk

Abstract

Corporate risk has implications for investors, employees and other stakeholders. Previous studies from economics and psychology contend that women take fewer risks than men; therefore, the attempts to increase female representation in corporate boardrooms and improve the corporate social responsibility (CSR) activities of firms across the world for the last two decades raise questions about risk-taking in corporate firms as women start to influence board functioning and help to shape corporate strategy. However, the previous literature provides conflicting evidence on the association between business risk and gender diversity. Similarly, the results of previous investigations of the impact of investments in CSR on business risk are not conclusive. Given the lack of clarity of the outcomes of the interactions between gender diversity, CSR and business risk, the objectives of this article are to scrutinise the effects of diversity and CSR on business risk-taking and to specifically consider the effects of the interaction of CSR and gender diversity on business risk. The unique contribution of this study is to investigate the interaction effects of gender diversity and CSR on business risk-taking. Given the gender diversity initiatives over the last two decades and the increased attention on CSR, this study focuses on the constituent firms from the Australian Securities Exchange (ASX) 300 Index for the study period 2005 to 2019. Empirical investigations that employ the Generalised Method of Moments (GMM) find that gender has a significant negative association and CSR has a significant positive association with business risk. Further, the interaction effect of gender diversity and CSR is negative for business risk, specifically for businesses in the services sector. Similarly, the interaction effect of gender diversity and CSR was negative during the GFC and post-GFC periods. These findings support the view that when performing their roles, women on corporate boards take actions that reduce risk-taking in firms.