Board Openness During an Economic Crisis
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Does a board with greater gender diversity make better investment decisions? Drawing on Austrian economic cycle theory and work groups theory, we argue that such board openness will help male board members to overcome gender biases, discrimination, and conflicts; integrate different perspectives under the economic cycle and crisis; and foster an environment in which better decisions are made. The results of an empirical study of 14,609 firm-quarter observations from 1,555 listed firms in China between 2007 and 2009 strongly support our arguments. We find that a Chinese board is more likely to accept female directorship during an economic crisis than during an economic prosperity stage. Boards with greater gender diversity are more likely to make tough, counter-cyclical investments to improve firm performance during a crisis. Our study enriches the board decision-making literature by exploring the impacts of board gender diversity on firm performance within the context of an economic crisis. The results of our study also carry significant managerial implications for overcoming gender stereotypes, biases, and prejudices on a board.
KeywordsGender biases Female directors Board decision making Economic crisis
We thank Rong Ma, Luc D. R. Renneboog, Lisa Song, and Eric Tsang for their helpful comments. This study was supported in part by the Bloch Summer Research Grants of UMKC and National Natural Science Foundation of China (Approval No. 71072145, 71102077, 71132004), the Fundamental Research Funds for the Central Universities (Approval No. 10XNK141), Beijing Social Science Foundation (Approval No. 11JGC122), and the Program for Young Excellent Talents, UIBE (Approval No. 12YQ04). All views expressed are those of the authors and not necessarily those of the sponsors.
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