Board Gender Diversity Research Articles

Political connection and firm’s financial performance; the role of corporate governance

Purpose This study aims to analyze the impact of political connection on the firm’s financial performance in presence of corporate governance. Design/methodology/approach The study utilizes panel regression analyses (OLS) and margin and contrast analysis techniques on a data set of Pakistan’s listed companies ranging from 2012 to 2021. For political connection, an aggregate score was calculated from political ties at the central, provincial and local level. Corporate governance was measured through an index using principal component analysis technique capturing its attributes comprised of board size, board tenure, board independence, board gender diversity, CEO duality, audit committee tenure and audit quality. Findings The study finds that politically affiliated individuals can exploit the wealth of firms. It also supports the positive role of corporate governance in augmenting the firm financial performance and further confirms that the presence of robust corporate governance practices can help mitigate the risk posed by the political connection. Practical implications The study provides valuable information to investors and offer insights into the investment opportunities available in nonfinancial sectors and identifies areas where investments may not yield favorable results. It provides solutions to the companies to effectively compose their boards and offset the adverse effect of political connection and capitalize on its potential benefits. Investors can draw upon these insights to inform and facilitate their investment decision-making processes. By gaining a better comprehension of the impact of political associations on corporate governance and performance, regulators and policymakers can better design policies that strike a balance between preventing abuses while still allowing firms to reap the benefits of political connections. Originality/value To the best of the authors’ knowledge, this is the first study that delves into an analysis to mitigate viz-a-viz offset the adverse effect of political affiliations by implementing robust practices of corporate governance. Further, in lieu of a binary indicator variable of political connection, this study applies a different approach to quantify the varying intensities of the political connections, which is a nascent method. It further undertakes margin & contrast analysis and also analyzes effect of different levels of political connections as well as the role of various attributes of corporate governance, which offer a novel contribution.

Evaluating ESG performance: The influence of firm size and gender diversity

This study examines the relationship between firm size and Environmental, Social, and Governance (ESG) scores, with a focus on the growing importance of sustainability and corporate social responsibility (CSR). Drawing on data from 4,525 U.S. companies, an Ordinary Least Squares (OLS) regression analysis reveals a significant positive association between firm size and ESG performance, suggesting that larger firms are better positioned to allocate resources toward sustainability initiatives. Furthermore, the findings indicate that board gender diversity has a positive impact on ESG scores, underscoring the importance of diverse perspectives in corporate governance. The results highlight the need for standardized ESG reporting and provide insights into how firm characteristics shape sustainability outcomes. This research offers practical guidance for corporate leaders and policymakers seeking to advance sustainability practices across organizations.

Women in the Boardroom: A Catalyst for Tax Avoidance?

Tax is pivotal in a country’s economy because it is a nation’s largest source of income, However, taxpayers and the government have contrasting viewpoints regarding taxation. Taxpayers perceive taxation as a financial “burden” whereas the government considers tax as their source of revenue “revenue.” Due to the differing perspectives on taxation, taxpayers, especially firms, tend to resort to tax avoidance strategies to reduce their tax expenses. Therefore, the intent of this empirical study is to examine the effect of board gender diversity on corporate tax avoidance practices in the financial sector from 2021 to 2023 using the panel data regression approach. The results of this research study show that board gender diversity is associated with increased corporate tax avoidance practices. The controlled variables, firm size and leverage, do not significantly affect tax avoidance practices, whereas profitability has a significant positive effect. This result aligns with the critical mass theory in which a small proportion of female directors on the board cannot influence the decision-making process of a firm since they will just be ignored.

Does corporate board gender diversity influence shareholder value?

This study investigates the influence of board gender diversity on the shareholder value of South African-listed non-financial companies on the JSE from 2013 to 2022. The study used a quantitative quasi-experimental method to examine the influence of board gender diversity on shareholder value creation measures from a multi-theoretical perspective. The board gender diversity measures include the proportion of women directors on the board, the Blau index for board gender diversity, and dummy variables indicating the presence of one, two, three, or more women directors on the board, as well as skewed board, tilted board, and balanced board. Shareholder value creation is proxied using standardised market value added, market-to-book ratio, and Tobin’s Q. The study utilises fixed effects models based on linear and curvilinear models to test the hypotheses. According to linear models, all board gender diversity measures demonstrate a significant positive, negative, or no effect on shareholder value creation measures, aligning with the multi-theoretical perspective of corporate governance research. However, curvilinear quadratic models suggest that the Blau index for board gender diversity and the proportion of women directors on board positively and negatively affect shareholder value creation, highlighting an inverted U-shaped effect. The results recognise the "too much- of- a -good- thing” effect and a possible optimal(or worse) level of board gender diversity as crucial. In conclusion, this study demonstrates that the claim of the ‘‘one size fits all’’ board gender diversity mechanism in creating and maximising shareholder value, often implicitly stated by regulators and advisors, may be misleading.

Sustainability reporting quality and firm value in ASEAN+3: A series moderation model

AbstractResearch on sustainability and firm value has increased recently. However, there is little evidence in this context from ASEAN+3 (i.e., three major Asian economies [South Korea, Japan, and China] and six dynamic economies in the ASEAN region [Indonesia, Malaysia, Singapore, the Philippines, Thailand, and Vietnam]). Therefore, this study explores the impact of sustainability reporting quality on firm value in the ASEAN+3 context. The study also explores the moderating role of environmental, social, and governance (ESG) practices, board gender diversity, board size, and the number of board meetings on the “sustainability reporting quality—firm value nexus.” Data collected from Thomson Reuters Asset4 with a sample size of 923 firms during the period 2019–2023 (4615 firm‐year observations). Regression analysis techniques used include pooled ordinary least squares, fixed effects, and random effects models. The analysis results show new and unique discoveries from ASEAN+3. First, sustainability reporting quality has a positive impact on firm value. Second, ESG practices negatively moderate the “sustainability reporting quality—firm value nexus.” Third, the higher number of board members reduces the “sustainability reporting quality—firm value nexus”; however, the negative level of major economies is lower than that of ASEAN countries. Finally, the firm with more independent female directors strengthens the “sustainability reporting quality—firm value nexus.” This study enriches signaling theory and agency theory by highlighting the complex relationship between components and firm value. To enhance firm value within ASEAN+3, policymakers should prioritize standardized ESG reporting regulations and transparent communication channels; stakeholders must hold managers accountable for genuine ESG implementation and high‐quality reporting; and businesses should prioritize board diversity, particularly independent female directors, alongside sustainability training.

The gender gap in executive promotions

This paper examines whether there is a gender promotion gap among executives. Using a comprehensive dataset of executives, I find that women’s promotion probability is 16% lower than men’s after controlling for educational and employment background, age, function, rank, and firm characteristics. The gap occurs partially because women are clustered in positions that support the business rather than positions with profit-and-loss responsibilities. Additionally, my analysis shows that product market competition, public attention on gender diversity, a respectful corporate culture, and board gender diversity alleviate the gender promotion gap. These findings support the notion that demand-side factors continue to hinder women’s advancement to leadership positions.

The Relationship Between Board Gender Diversity and Real Earnings Management in U.S. Companies

In the realm of corporate finance, real earnings management (REM) is crucial for maintaining the transparency and integrity of financial reporting. Unlike accrual-based management, REM involves strategic decisions impacting cash flow and operations, drawing significant attention after the Enron scandal and the Sarbanes-Oxley Act. Recently, the importance of board gender diversity in corporate governance has been increasingly recognized. This study explores the relationship between board gender diversity and REM in U.S. public companies from 2021 to 2023. Using data from BoardEx and Compustat, and employing regression analysis, the research examines how gender diversity influences REM, controlling for variables such as company size and industry type. The findings reveal a significant negative correlation between board gender diversity and REM, indicating that more diverse boards tend to adopt transparent and responsible financial reporting strategies. This study underscores the importance of promoting gender diversity in corporate leadership to enhance ethical and transparent financial reporting, providing valuable insights for corporate governance, policymaking, and business practices.

Impact of ESG performance on financial risk in energy firms: evidence from developing countries

Purpose This study aims to examine the impact of ESG performance on financial risk (FR) in energy firms from developing countries. It also explores the moderating roles of ESG controversies and board gender diversity (BGD) on this relationship. Design/methodology/approach The research uses a panel data set of 218 energy firms from 20 developing countries from 2019 to 2024, using two-stage least squares regression to address potential endogeneity. Robustness checks are conducted using fixed-effects estimation and pooled ordinary least squares. Findings The results indicate that superior ESG performance significantly reduces both total and systemic risk. ESG controversies positively moderate the relationship between ESG performance and FR, suggesting that controversies may weaken the risk-reducing benefits of strong ESG practices. Additionally, BGD significantly strengthens the negative relationship between ESG performance and FR. Robustness checks confirm the consistency of these findings across different estimation methods. Originality/value This study contributes to the growing body of literature by examining the role of ESG performance in FR mitigation, specifically within the energy sector in developing countries. To the best of the authors’ knowledge, this is the first research to explore these dynamics in this specific context. This study uniquely illustrates how ESG controversies and BGD significantly moderate the ESG–risk relationship, offering fresh insights that extend stakeholder, risk management and legitimacy theories. The findings highlight the importance of integrating ESG factors into corporate governance and risk management, particularly for firms operating in high-risk, high-impact industries such as energy.

Institutional Shareholders, Board Gender Diversity, and Firm Performance

ABSTRACTMy research examines the relationship between two important methods of governance, specifically, institutional ownership and the presence of women on the board of directors. I examine two hypotheses, namely, the stealth‐trading and political attention hypotheses, by employing fractional logit models and zero‐inflated Poisson models. The analysis is conducted on a dataset consisting of 480,780 observations from 2000 to 2018. I find a negative relation between the shares held by institutions and the number of female directors on the board. This supports the stealth‐trading hypothesis. Moreover, I find that public pension funds have a beneficial influence on the presence of female directors, which aligns with the political attention hypothesis. Public pension funds may promote their political agenda by endorsing board gender diversity. Institutional investors with long‐term investment strategies, such as dedicated institutions and quasi‐indexed funds, play a beneficial role in increasing the representation of women on corporate boards. These institutions are expected to appeal to investors that prioritise social responsibility. Female directorships favourably influence the return on assets and Tobin's Q, but an unfavourable influence on market‐adjusted stock return and excess asset return. I find a positive relation between institutional ownership and firm performance when there are few female directors, but a negative relation when there are more female directors, consistent with the critical mass theory in that having more female directors in the firm leads to a greater amount of information being shared, in line with the stealth‐trading hypothesis.

The Impact of Board Gender Diversity Commitment on Firm Performance Moderated by Board Characteristics: Evidence From Sustainable European Firms and Financial Orientation

ABSTRACTThe main goal of this study is to explore the moderating role of board gender diversity on the relationship between CEO duality, board size, board meetings, and firm performance in sustainable companies. This study examines the 120 most sustainable European firms listed in the EuroNext Vigeo Europe 120 Index from 2012 to 2021, with the findings showing that board gender diversity negatively moderates the relationship between CEO duality and firm performance, while positively moderating board meetings' impact. Furthermore, in banking‐oriented countries, board gender diversity positively moderates the relationship between board meetings and firm performance, while these effects are not significant in market‐oriented countries. The paper highlights that despite progress in increasing representation, mechanisms to ensure effective female participation in board decision‐making are required. This study is the first to examine how board gender diversity moderates the impact of board characteristics and CEO duality on sustainable firm performance in different financial orientations.

The Role of Gender Diversity on Debt Policy

This study aims to evaluate the effect of gender diversity in the board of directors on debt policy in the Indonesian banking sector. Using balanced panel data analysis, this study examines the impact of gender diversity, firm size, profitability, and current ratio on debt policy. The results show that gender diversity does not have a significant influence on debt policy. Meanwhile, firm size is shown to have a positive influence, and profitability has a negative influence on debt policy. The current ratio does not show a significant influence. This study contributes to the existing literature by highlighting the factors that influence debt policy in the banking sector, particularly in the context of a modernizing economy and gender diversity in debt policy decision-making. It also provides a reference for other academic studies exploring the relationship between board gender diversity, capital structure, financial performance, and corporate governance across different industries and regions.

The Role of Gender Diversity on Debt Policy

This study aims to evaluate the effect of gender diversity in the board of directors on debt policy in the Indonesian banking sector. Using balanced panel data analysis, this study examines the impact of gender diversity, firm size, profitability, and current ratio on debt policy. The results show that gender diversity does not have a significant influence on debt policy. Meanwhile, firm size is shown to have a positive influence, and profitability has a negative influence on debt policy. The current ratio does not show a significant influence. This study contributes to the existing literature by highlighting the factors that influence debt policy in the banking sector, particularly in the context of a modernizing economy and gender diversity in debt policy decision-making. It also provides a reference for other academic studies exploring the relationship between board gender diversity, capital structure, financial performance, and corporate governance across different industries and regions.

The Influence of Risk, Leverage, Board Gender Diversity, Moderated by Firm Size on Profitability of Banking Sector

The economic growth has been propelled by substantial changes in the monetary framework, the relaxation of financial limitations, and the incorporation into the international market. Various factors influence how companies operate to gain profits. The theory underpinning this research is risk management theory, focusing on how credit risk and market risk affect company profitability. Credit risk refers to potential losses from parties failing to meet their financial obligations, while market risk relates to asset value fluctuations due to market factors. Leverage (debt usage) represents financial theory innovation, addressing how a company's capital structure impacts profitability. Board diversity represents corporate governance theory innovation, examining the influence of female board representation on profitability. This study aims to determine the influence of credit risk, market risk, leverage, and board gender diversity on profitability, considering the moderating effects of business size. The data employed in this study was acquired from the annual financial reports of banking firms listed on the Indonesia Stock Exchange (IDX), covering the period from 2018 to 2023. Purposive sampling identified a sample of 38 banks. The results show that credit risk and market risk significantly positively influence profitability. Credit risk and market risk moderated by firm size significantly negatively affect profitability. Leverage significantly negatively influences profitability, moderated by firm size. Board gender diversity does not affect profitability, and its moderation by firm size also does not affect profitability. Leverage, credit risk, and market risk have the potential to enhance profitability and attract investors, who can consider these factors for better risk-based investment decisions

Board Gender Diversity and Tax Avoidance in Pakistan: A Comparison of Shariah Compliant and Non-Shariah Compliant Firms

Corporate tax avoidance has merged an important regulatory issue around the globe, where the issue seems to be more severe for developing countries like Pakistan due to poor regulatory and institutional controls. Literature on the determination of corporate tax avoidance highlights the role of board gender diversity to curtail corporate tax avoidance. Considering these notions, this study investigates whether board gender diversity could improve corporate tax avoidance or not. Considering data from 231 Shariah Compliant and 33 Non-Shariah Compliant firms for six years, this study find that board gender diversity has negative influence on the corporate tax avoidance for only Shariah Compliant firm in Pakistan, whereas variables of audit committee size, and board independence had a negative but weak influence on corporate tax avoidance in Non-Shariah Compliant firms of Pakistan. This study argues that improving gender diversity in the board of Shariah Compliant firms could force these firms to lower their tax avoidance.

Corporate governance and SME performance: Is technological capability a missing link?

Purpose This paper aims to examine the role of technological capability in the relationship between corporate governance and small and medium-sized enterprise (SME) performance. Design/methodology/approach Using panel data comprising 1,357 European SMEs from 2014 to 2020, this paper examines how technological capability acts as a mediator and moderator within the governance-performance nexus. Findings The results show a positive and significant link between corporate governance mechanisms and SME performance, as well as between technological capability and SME performance. In addition, this paper show that technological capability plays a crucial role in moderating and mediating the governance-performance relationship. Specifically, technological capability accentuates the positive effects of board size, the presence of outside directors and concentrated ownership on SME performance. Conversely, it attenuates the positive impacts of CEO duality and board gender diversity on SME performance. These results highlight corporate governance mechanisms and technological capability’s crucial role in significantly influencing SME performance. Practical implications The results suggest that SMEs should prioritize not only the implementation of effective corporate governance mechanisms but also the strategic utilization of technological innovations to boost performance. European policymakers are encouraged to enact supportive policies on technological innovation to strengthen the governance-performance dynamic. Originality/value This study contributes to the governance-performance literature by offering new insights into the critical role of technological capability, which has been previously explored in partial and fragmented ways.

Does Corporate Governance Moderate the Relationship Between Earnings Management and Financial Performance?

Motivation: This study aims to fill the gap in the corporate governance literature by examining the moderating role of corporate governance on earnings management and financial performance. Idea: The research is conducted in the light of agency and legitimacy theories, looking through how corporate governance practices moderate the relationship between earnings management and financial performance. Data: The database consists of an international sample of non-financial companies, for the time frame between 2020 and 2023. The data are collected from Thomson Reuters Eikon, and the analysed period responds to a thorough approach of the topic under problematic circumstances. In line with prior literature, this analysis includes several corporate governance mechanisms such as number of board meetings, board gender diversity, board size, CEO duality, independent board members, and audit committee independence. Among the control variables could be mentioned firm size, financial leverage, and profit or loss. Corporate governance is examined as a key driver in achieving financial performance, maximising the value created by companies and strengthening their connections with stakeholders. Tools: To test the research hypotheses, investigation is performed through frequency and descriptive statistics, parametric correlations, complemented with panel regression analysis with random effects performed in STATA 18 software. Findings: According to the results, there is strong evidence that financial performance is impacted by earnings management, at the corporate level. Notably, the main findings suggest that board meetings, board size, and board independence may be underlying factors in reducing the adverse effects of earnings management reflected in financial performance. Likewise, corporate governance may contribute to an effective monitoring of earnings management. Muchmore, the findings are in line with the agency theory, which asserts that corporate governance practices lessen managerial resource exploitation necessary for sustainable development and financial performance. Contribution: Relevance of the study resides in grounding a comprehensive overview in the earnings management and sustainability literature, examining corporate governance patterns. This research contributes to the debate of influence exerted by earnings management practices on financial performance extended towards a better understanding of corporate governance outcomes.

Does gender diversity in corporate boards and executive management teams influence carbon performance? Evidence from Europe

ABSTRACT We examine how gender diversity in both corporate boards and executive management teams influence both procedure-oriented carbon management performance (PCMP) and real carbon emission reduction performance (RCRP) of European listed firms. Drawing on multiple theoretical perspectives, our empirical models employ firm fixed-effects estimators to analyse a large dataset, consisting of 5327 firm-year observations, covering a period of fifteen years. Our findings are three-fold. First, our primary evidence suggests that gender diversity in both corporate boards and executive management teams has a statistically significant positive association with PCMP and RCRP. Second, we provide robust evidence on the link between female directors’ cognitive attributes and PCMP, as well as RCRP. Third, we find that board gender diversity reinforces the positive influence of gender-diverse executive management teams on PCMP and RCRP. Overall, our study results suggest that female directors and executives play complementary roles in influencing and shaping a company's response to global climate risk. Our results are generally robust to controlling for governance mechanisms, alternative measures/estimations and endogeneities. Our findings have implications for policies relating to gender-responsive governance reforms, as well as the integration of gender diversity into firm-level, country-specific and regional frameworks for climate change policies and reforms.

Board gender diversity (BGD): compelling evidence in support for the critical mass theory

PurposeThe paper aims to identify the level of support and expand on the issues recently raised in the literature concerning critical mass theory and board gender diversity (BGD).Design/methodology/approachThe authors systematically searched relevant articles on the Scopus database in March 2024, identifying 132 articles. After removing book chapters, conference papers and reviews, the number was reduced to 122. An additional 16 were discarded as they were irrelevant (e.g. political, theoretical or conceptual) to the current study, leaving a final sample of 106 articles. This longitudinal study covers the period from 2016 to 2024.FindingsThe paper finds compelling evidence supporting the critical mass theory and underscores the importance of corporate BGD in today’s society. It also offers explanations for the few cases where critical mass theory may not be fully supported. It highlights that the performance benefits of corporate BGD, in many cases, only exist when there is a critical mass of female directors on the board.Practical implicationsIt lends support to policymakers in pursuing corporate BGD through quotas, provided that the incentive is not just to fill the numbers.Originality/valueThe paper offers a unique perspective on the level of support for the critical mass theory. It is believed to be the first paper to conduct a longitudinal study to investigate the support for the critical mass theory.

The impact of board gender diversity on green building practices: Moving beyond traditional linear and logistic specifications

AbstractThis article examines the relationship between sustainability and gender equality by analyzing how the percentage of women on the board of directors (still less than 50% in most cases) influences a company's commitment to green building practices. For this analysis, we estimate 30 competing multivariate pooled and panel data logistic specifications, including the gender diversity factor in both its traditional and polynomial forms. This methodological innovation (the polynomial form) allows for the examination of gender diversity's relationship with other variables beyond conventional models that assume constant effects, thus enabling a more realistic depiction of impacts that vary with the degree of diversity. Our dataset includes companies listed on the Euro Stoxx 300 and Standard & Poor's 500 for the period 2010–2021. The findings indicate that, in both indices, an increased percentage of women on the board (and a higher Blau diversity index) correlates with a greater propensity for sustainable building practices, up to a threshold nearing parity. The impacts are more significant in Europe than in the U.S., where board gender diversity appears to have a lesser influence on green building initiatives. The specification that best models the relationship between sustainable building practices and gender diversity, along with other relevant factors, is a multivariate panel data logistic model with the gender diversity factor included as a cubic polynomial for companies listed on the Euro Stoxx 300. A similar model, but with the gender factor in a quadratic polynomial form, was selected for companies listed on the Standard & Poor's 500. Therefore, the impact function of gender diversity on sustainable building practices is not constant but depends on the existing degree of board gender diversity, with the shape of the impact function differing between Europe and the U.S. Additionally, the study finds that other board characteristics—larger boards, longer tenures of directors, and higher compensation for senior executives—are associated with an increased propensity towards green practices in both the European and U.S. contexts. Conversely, linking CEO compensation to shareholder returns reduces this propensity. Moreover, the number of non‐executive directors and the overlap between the Chairperson and CEO positions do not significantly impact this propensity.

Does Board Gender Diversity Moderate the Relationship between Institutional Ownership and ESG Performance? Evidence from China

Does Board Gender Diversity Moderate the Relationship between Institutional Ownership and ESG Performance? Evidence from China