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Social Trust and Female Board Representation: Evidence from China

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Abstract

The underrepresentation of females on corporate boards is an important ethical issue that raises serious concerns about gender equality in senior management teams. Relying on a large sample of public firms from the Chinese market, we examine how social trust affects female board representation. We find that female board representation has a positive and significant relation with social trust. The effect is more pronounced in regions with a higher male-to-female sex ratio at birth, lower levels of education, lower GDP per capita, and in nonfamily firms. We also find that higher social trust is more likely to increase the number of non-independent female directors rather than independent ones. Further analyses show that increased female board representation is an important channel through which social trust improves corporate ESG ratings. Overall, our study suggests that social trust contributes positively to gender diversity in corporate management.

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Notes

  1. Source: https://www.ibe.org.uk/resource/business-ethics-and-board-diversity.html.

  2. Source: https://www.catalyst.org/research/women-on-corporate-boards/.

  3. Brieger et al. (2019) provides an excellent review of this literature.

  4. All-China Women’s Federation is the largest women’s organization in China. It aims to represent and safeguard the rights and interests of women and promote equality between men and women in China.

  5. Our sample begins with the year 2007 when the revised Enterprise Accounting Norms & Basic Norms came into force on January 1st, 2007.

  6. The purpose of the survey is to examine the perceived provincial-level trustworthiness of companies located in 31 provinces of China. The main question in the survey related to trust is: “According to your experience, which five provinces have the most trustworthy enterprises?” The questionnaires were sent to over 15,000 managers of companies located in the 31 provinces, and more than 5000 valid responses were received.

  7. We were unable to apply province fixed effects for the reason that social trust is a time-invariant variable.

  8. Source: https://www.catalyst.org/research/2014-catalyst-census-women-board-directors/.

  9. Statistics come from GMI Ratings’ 2013 Women on Boards Survey as reported by Kimberly Gladman, Director of Research and Risk Analytics at Governance Metrics International.

  10. We exclude the firms that have changed their headquarters twice in a row in three years, because they are unlikely to be affected by the local social trust in such a short time period.

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Funding

This work was supported by the National Philosophy and Social Science Foundation of China (Grant/Award numbers: 20FGLB062) and Shanghai Pujiang Program (No.2019PJC013).

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Authors and Affiliations

  1. School of Accounting, Hangzhou Dianzi University, Hangzhou, China

    Baoyin Qiu

  2. School of Management, Fudan University, Shanghai, China

    Haohan Ren

  3. Business School, University of International Business and Economics, Beijing, China

    Jingjing Zuo

  4. School of Accountancy, Nanjing Audit University, Nanjing, China

    Bo Cheng

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  1. Baoyin Qiu
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Correspondence to Jingjing Zuo.

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Appendix

Appendix

Variables

Measurement

Female board presentation

Female_Ratio

The percentage of female directors on the board

Blau

1-Female_Ratio2- (1-Female_Ratio)2

Female_Exe

The proportion of females in the board of directors, the board of supervisors and top executives

Blau_Exe

1-Female_Exe2- (1-Female_Exe)2

Female_Exe1

The proportion of females in top executives

Blau_Exe1

1-Female_Exe12- (1-Female_Exe1)2

FemaleCritical

A dummy variable, which equals 1 if the firm has three or more female directors, and 0 otherwise

Social trust

Trust

Enterprise trustworthiness at the provincial level, from a survey conducted by the “Chinese Enterprise Survey System” in 2000 that measures the trustworthiness of enterprises in China, where a higher index value suggests a more trustworthy enterprise business community in the province

Blood

Citizen trustworthiness at the provincial level, which is the milliliters of blood donated on a purely voluntary basis in 2010 in a province divided by the population in the province

NGOs

The number of NGOs in a province divided by the million population

CEI

The citizen trustworthiness at the city-level, from the City Commercial Credit Environment Index in China (CEI)

Trust1

A city-level index that captures the degree to which residents trust strangers, measured as the average score of trust in strangers according to CGSS. The main information related to social trust in these surveys is the following question: generally, do you agree that most people in this society can be trusted? The respondent could select one of five choices: strongly agree, quite agree, neural, quite disagree, and strongly disagree. Following previous studies (Li et al., 2017; Wu et al., 2014), we rank these five choices with a score of 5–1, and a higher value denotes a higher degree of identification with the social trustworthiness. Then, the city-level average score of these respondents’ choices is used to measure social trust

Control variables

First

Shareholding ratio of the largest shareholder

ExeShare

The percentage of outstanding shares owned by a firm’s top management

Board

The natural logarithm of the number of directors

DUAL

A dummy variable, which equals 1 if the company's CEO is the chairman of the board and 0 otherwise

PAY3

Natural logarithm of the total remuneration of the top three directors

Analyst

Natural logarithm of the number of analysts following the firm

Institution

The percentage of outstanding shares owned by institutional investors

SIZE

Natural logarithm of the total assets

LEV

The book value of all liabilities scaled by the book value of assets

ROA

The income before extraordinary items divided by total assets

Tobin’s Q

The ratio of market value of common equity divided by the book value of total assets

Return

Annual firm stock returns (with cash dividend reinvested)

Female_Industry

Proportion of female directors in the same industry

Sex_Ratio

The ratio of male to female at the province-level, from the Sixth Census

Traffic

The natural logarithm of total freight volume in each province each year

Education

The ratio of the high education population of province over the province’s total population

Confusion

The natural logarithm of the number of schools in each city in the Ming and Qing Dynasties

Religion

The natural logarithm of the number of temples within 100 km of the location of the firm

Clan

The natural logarithm of the number of genealogies in each city

Other variables

Diversity

We use the dialect differentiation index (Diversity) developed by Xu et al. (2015) to measure dialect diversity

Treatpost

If the firm moves from a low social trust area to a high social trust area, the value of Treatpostin the year of change and subsequent years is 1, otherwise 0

SexRatio_Birth

A dummy variable, which equals 1 when the ratio of male to female of newborns is higher than the median, otherwise 0

LowFemaleEdu

A dummy variable, which equals 1 if the education level of men relative to women in province j is higher than the median, and 0 otherwise

GDP

Natural logarithm of provincial per capita GDP

Family

A dummy variable, which equals 1 if firm is a family firm, and 0 otherwise

Female_NonInd

The percentage of female non independent directors on the board

Female_Ind

The percentage of female independent directors on the board

ESG

We obtain the ESG score (ESG) of the firms from the Wind database

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Qiu, B., Ren, H., Zuo, J. et al. Social Trust and Female Board Representation: Evidence from China. J Bus Ethics 188, 187–204 (2023). https://doi.org/10.1007/s10551-022-05298-5

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