Female board director and corporate social performance:
The moderating effect of national culture dimensions
Yuan Wu1
International Financial Management (IFM) University of Groningen
Supervisor: Prof. Dr. C.L.M. Hermes Co-assessor: Dr. W.Westerman
9 June 2017
ABSTRACT
This paper extends the research of board diversity on corporate governance by investigating the relationship between female board diversity and corporate social performance. Also, to analyze the contingent effect of country-level institutions in this relationship, the moderating effect of Hofstede’s Masculinity/Femininity dimension variables and Power Distance dimension variables are explored. Using information from 4700 firms in 44 countries over the year from 2006 to 2015, this research reports a positively significant relationship between female board directors and corporate social performance when the female board dummy is using as the proxy of gender diversity. Furthermore, the Masculinity/Femininity dimension variables and Power distance dimension variables do not moderate this relationship.
Field Key Words: Board Gender Diversity, corporate social performance, national
cultural, social role theory, resource-based theory
JEL Classification: G30, M14, J16
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1. Introduction
An increasing number of corporate scandals in the past several decades, with such companies as Enron, Parmalat, and WorldCom involved, have shaken public confidence (Boulouta, 2013), and revealed the insufficiency of corporate governance in large enterprises. The public expectation for corporations to not only care about profit maximization but also shoulder more social responsibility is getting higher. Therefore, corporate social responsibility is getting increasing attention and causing extensive discussion in both business and academic fields. In particular, because of the critical role of corporate directors in corporate decision-making and corporate performance (Singh et al., 2008; Byron and Post, 2015), some researchers are trying to gain new insight from the possible association between board composition and corporate social responsibility.
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country-level institution is a relevant angle to investigate the association between board gender diversity and corporate social responsibility.
Therefore, in this research, based on the institutional theory, social role theory, resource-based theory, two related questions will be explored. First, are gender-diverse boards perform better in social responsibility? If so what are the real reasons for their better performance? Second, how the national level institutions, specifically country’s masculinity level, and power distance level, influence the association across different national contexts?
To answer these two questions. Firstly, the theoretical link between board representations’ features and corporate decision-making will be built by drawing on upper echelon theory. It is assumed in this research that director’s decision and reaction to certain circumstance is highly related to their backgrounds. For example, directors with more sympathetic personality are more likely to be socially sensitive, thus performing more proactively to ethical issues, while directors with more masculine traits are more likely to sacrifice corporate social reputation to achieve the profit maximation. Secondly, gender role theory and resource-based theory will be adopted to illuminate female directors’ special contributions to corporate performance and board decision-making. These particular contributions determine their different roles in corporate social performance. Finally, I hypothesize that the association between board gender diversity and corporate social responsibility is influenced by countries’ masculinity level and power distance.
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score will be used to be a proxy of national cultural dimension variables. The interaction effects of national cultural dimension (e,g. masculinity, power distance) will be tested in the similar fixed-effect model. Additionally, according to abundant prior research, corporate governance studies always face endogeneity issues, such as omitted variables and reverse causality. Therefore, cross-sectional and time-fixed effect model on panel data will be adopted to avoid the omitted variables bias and then all the independent variables and control variables are lagged for one year to control the reverse causality. Finally, two robustness tests will be conducted in specific models to check the reliability of the empirical results.
The remaining structure of the paper is as follows. The second section consists of relevant theory and literature review. The full theoretical framework and hypotheses. Section three explains the sample selection, variables, and endogeneity issues. Section four displays the main regression models and descriptive statistics. Section four includes empirical analysis results. Finally, the robustness tests and conclusion are discussed in section five and six.
2. Theory development and hypotheses
For the theory development, upper echelons theory, social role theory, and resource-based theory will be adopted to explain the theoretical link between board gender diversity and corporate better performance in social responsibility issues. The moderating effect of two country-level moderators namely masculinity and power distance level will also be explored, in the association between board gender diversity and corporate social performance.
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practice. As suggested by Matten and Moon (2008), CSR can be deemed as an umbrella term that reflects relations between business and society, with the aim to balance economic, social, and environmental responsibilities. Byron and Post (2016) defined CSP as “encompassing principles, processes, and outcomes that relate to an organization’s societal relationships”. Although researchers’ definitions toward CSR differ from one another, the general interpretation of CSR is that responsibility should be shouldered to care about people, society, and the environment in a way which are beyond the legal requirements for a firm (Barnea and Rubin, 2010). However, CSR covers a broad scope and is hard to measure, so that previous scholars always use corporate social performance(hereafter CSP), as the proxy of CSR, to measure the performance of corporations in social responsibility and ethical issues. Boulouta (2013) indicated that corporate social performance is a combined score composed of certain metrics which represent corporate economic, social and environmental influence through business operations. In general, the display of social performance of a company can be seen in its involvement in socially responsible business practices and attempt to fulfill more social responsibility (e.g., environmental protection).
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2.1 Board Gender Diversity and Corporate Social Performance
Prior researchers usually treated boards as decision-making groups (Forbes and Milliken, 1999, Boulouta, 2013), in which female directors can contribute to better decision-making by providing unique resources and different professional experiences (Hillman et al.,2002; Daily et al.,2003; Singh et al.,2008). However, extant research regarding to the influence of female board directors mainly focuses on corporate financial performance (e.g., Erhardt et al., 2003; Campbell and Minguez-Vera, 2007; Carter et al., 2010), and there has been a dearth of studies exploring the association between female directors on boards and corporate overall social performance. According to Post and Byron’s (2016), the special experience, knowledge, and values of female directors were more directly related to corporate social responsibility. Hence, following their ideas, in this research, the investigation of the association between board gender diversity and CSP will be carried out.
Based on existing research, there are two mechanisms through which female directors in the boardroom may influence CSP. The first mechanism can be supported by social role theory that female boards are more likely to have traits or personalities which are congruent with CSP (Boulouta, 2013; Byron and Post, 2016; Cumming et al., 2015). The second one is supported by resource-based theory, and the related assumption is that female boards can bring diverse experience and knowledge to the boardroom. When their voice is valued, they help board members to broaden viewpoints and incorporate the interests of broader stakeholders (Byron and Post, 2016; Bear et al., 2010). In next sections, these two mechanisms will be discussed in more details.
2.2 Social Role Theory
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role theory provides an explanation for gender differences in corporate ethical decision-making.
First of all, it is widely accepted that diverse cognitions and behaviors between male and female directors are not caused solely by biological differences. Also, social, and environmental variables need to be taken into consideration (McCabe et al.,2006). In social role theory, the role of gender represents the societal and cultural diversities in human behaviors (A. H. Eagly, 1993). For example, in most cultural contexts, women are expected to be the children caregivers in the family while men are supposed to be breadwinners. The most commonly accepted gender stereotype is introduced by Bakan (1966), he proposed that masculine traits are more “agentic-instrumental”, such as active, aggressive, and ambitious, while feminine traits are more “communal-expressive”, such as caring, emotional and sympathetic. Bem (1982) found that human society has ingrained cognition that gender cause differences in every aspect of human life. Thus human being always be classified based on their gender first instead of his/her professional roles. For instance, even in the workplace, within the same organization, the recognitions of different employees are always based on gender first and then their function or position, such as secretaries or top leaders. Finally, male and females’ behaviors are also evaluated in term of their roles, norms, values and beliefs which are deemed as appropriate for their gender (Case, 1993; Ryan and Haslam 2007).
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display different leadership characteristics. Particularly, compared to men, women are suggested to have more distinctive feminine traits such as sympathy, benevolence, and caring, thus tend to be more sensitive to socially issues and are more likely to treat problematic social issues as unethical (Gilligan, 1992; Boulouta, 2013; Adams and Funk, 2012). These differences in beliefs, and, cognition have a significant influence on how directors manage their business (Galaskiewicz, 1991). Thus, researchers can assume that by complying with their social role, female directors can improve corporate social performance.
2.3 Resource-based theory
The second mechanism through which female directors in boardroom may influence CSP is that female directors can bring different knowledge and experience in the boardroom, which helps organizations to have more diverse perspectives (Cumming et al.,2015). Firstly, Bear et al.,(2010) proposed that a broader perspective helps the board to better understand the demands of a wider range of stakeholders and to take not the only the majority but also the minority stakeholders into consideration. Secondly, Boulouta (2013) indicated that diverse values and professional experience enable firms to achieve superior decision-making and perform better in corporate tasks, including CSR tasks. Thus increasing board diversity may let corporation to be more sensitive to CSR issues.
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and Dittmar, 2012; Terjesen et. al.,2009). Due to these differences in career, education, and experience backgrounds, female directors are believed to have different perspectives compared to their male counterparties (Cumming et al.,2015), and contribute to boards’ better decision-making. Furthermore, researchers suggest that female board’s different backgrounds and “less-profit” orientations may lead them to care more about other stakeholders (Wang and Coffey, 2017). Hence one can argue that the existence of female board directors can stimulate corporations to react more proactively toward CSR related issues.
To summarize, on the one hand, female directors enable the board to get access to the different resources and professional experiences which improve corporate decision-making and promote corporate to react proactively to ethical issues (Boulouta, 2013). On the other hand, the feminine traits brought by female boards are an important catalyst for the corporate to show more social sensitive behaviors. Hence in this research, I hypothesize that female board representations contribute to better corporate social performance. The first hypothesis of this paper is therefore formulated as follows:
H1: There is a positive relationship between female director on the board and corporate social performance
2.4 The moderating effect of national cultural dimension
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the presence of female in boardroom and CSP. Some national-level institutions, for example, gender equality and board power distribution determine female directors’ degree of involvement in board’s decision-making progress, and the extent to which the resources brought by female could be used (Peng et al., 2009; Byron and Post, 2016). In this research, I will focus on the moderating effect of national cultural dimensions on the relationship between board gender diversity and CSP.
The role of cultural dimensions in CSR has triggered interest in many scholars in past decade. For example, Waldman et al., (2006) proposed that individual’s behaviors towards managing organizations were influenced by their norm and beliefs which are shaped in specific cultural contexts. Similarly, Trevino (1986) indicated that corporate culture had an impact on individuals’ cognitive moral development which determined their reaction to the ethical problems. Vitell et al.,(1993) developed hypotheses regarding cultural dimensions and ethical decision-making by adopting Hofstede’s cultural typology. This research will follow their framework, using Hofstede’s national cultural typology to define cultural dimensions.
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2.4.1 Masculinity
Social role theory indicates that male and female directors are expected to perform consistently with culturally defined roles (Eagly et al., 1995). In addition, since the decision-making process of executives is highly related to their gender and sexual roles, one can assume that the connection between female board directors and corporate social performance is remarkably influenced by societal and cultural attitudes toward gender roles.
Based on Hofstede (2001)’s theory, masculine society and feminine society can be distinguished clearly. Masculinity-femininity dimension evaluates the extent to which distinct gender roles are accepted by the society. In general, masculinity refers to the tendency of the society to value achievement, heroism, assertiveness and financial-based rewards for success. People in the masculine society admire stronger, more powerful and achievers. On the contrary, the femininity refers to the tendency to value cooperation, modesty and care for the weak and quality of life (Hofstede, 1983). Furthermore, in masculine society, social gender roles between female and male are clearly distinguished: men are expected to be more assertive, aggressive and ambitious; female, on the contrary, should be modest, soft and caring. On the other hand, in the feminist societies, there are few disparities between different genders: both female and male are expected to be caring and modest, and the society show more sympathy to the weak and the minority. For example, Nordic countries show under-average masculinity level (Sweden scores 5; Norway scores 8; Denmark scores 16; Finland scores 26), which means biological gender differences do not have a significant influence on individual’s beliefs and behaviors. In addition, because feminine beliefs dominate the society, both male and female directors are expected to show equally positive attitude towards CSR issues.
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directors will face equal pressure to perform sympathetically or assertively. The expectation of female boards’ distinct role in ethical decision-making will decline. Hence I argue that a country’s masculinity level can moderate the relationship between board gender diversity and corporate social performance. In a low masculinity country, since the gender differences are not distinct, the presence of female directors in the boardroom is no longer a signal for more feminine traits in the boardroom. As the first hypothesis is formulated based on the opinion that feminine traits are an important catalyst for directors to react proactively to moral issues (Brown and Gilligan, 1993; Boulouta, 2013), one can assume that in a highly masculine country, the positive association between board gender diversity and CSP will be strengthened. Therefore the hypothesize is:
H2a: The positive effect of director on the board and corporate social performance increases when the country’s masculinity level is higher.
2.4.2 Power distance
Post and Byron (2016) indicated that the association between board gender diversity and CSP was highly related to the degree of board’ usage of all directors’ knowledge, experience, and value. Taking the aforementioned resource-based theory into consideration, as female directors enhance corporate decision-making by providing diverse knowledge and aspects, one may argue that the relationship between board gender diversity and CSP is affected by the extent to which female boards’ opinions can be valued, and the resource brought by female boards can be used.
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are less likely to be questioned by stakeholders (Vitell et al.,1993, Waldman et al.,2006). Overall, in high power distance countries, powerful board members are inclined to be in control of board action, making it more difficult for other opinions to be heard (Finkelstein and Mooney, 2003).
Compared to women, men are more likely to supervise others and hold more executive experiences (Gutek and Morash 1982; Terjesen, Singh and Vinnicombe, 2008; Byron and Post, 2016). In a high power distance country, intra-board power distribution is harder to be distributed equally between men and female directors, as female members are often the minority in the boardroom (Byron and Post, 2014). Since one of the main contributions of female directors to the boardroom is to provide diverse resource and opinions, high power distance will decrease female boards’ positive influence on corporate decision-making. The strength of possible positive association between female board directors and CSR therefore weaken. In addition, based on the research by Carl et al., (2004), in high power distance societies, minorities and women experienced more difficulties in acquiring equal opportunities in top positions and exerted less power in the board room. Thus, I propose that high power distance will decrease the positive influence of female board diversity on CSP. The hypothesis is formulated as follows:
H2b: The positive effect of female director on the board and corporate social performance decreases when the country’s power distance level is higher
3. Methodology
3.1 Variable measurement and data collection
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performance score and three pillars (environmental, social and governance) for each company based on more than 250 key performance indicators (KPIs) and more than 750 data points. As CSR is commonly deemed as a long-term strategic challenge (Keys et al., 2009), this research includes ten years data, covering from 2006 to 2015. In addition, since the contingent influence of national-level institution is an important research aspect of this paper, a large sample of corporation from various continents and countries is preferred. Thus all companies in Asset4 ESG database are included in my initial research sample. However, since some corporate’ registration places such as the Cayman Islands and the Virgin Islands do not have comparable cultural dimension scores, these corporation are deleted from initial sample. My final sample incorporates information from 44 countries and 4700 individual firms. All the yearly firm level data is gathered from Asset4 database, and culture dimension scores are from Hofstede’s website. Then a cross-sectional multivariate OLS regression on panel data will be conducted.
3.1.1 Board gender diversity
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3.1.2 Corporate Social Performance (CSP)
Currently, constructing a representative measurement for CSP is a quite challenging task, as the multidimensional aspects are involved (Waddock and Graves,1997). Extant research measured CSP in various ways, such as Kinder Lydenberg Domini, Inc. (KLD) rating, case study and content analysis of CSR reporting. In this research, due to the data source limitation, secondary data from ASSET 4 ESG database will be used to measure the sample firms’ social performance. In ASSET 4 ESG database, apart from the overall performance score, each firm is graded by separate pillars, namely, environmental pillar score, social pillar score and corporate governance pillar score. In this research, the average value of social score and environmental score is calculated to measure each company’s CSP, which is consistent with Ioannou and Serafeim’s (2012) research. In addition, the relationship between board gender diversity and separate pillar score will also be estimated in robustness test.
3.1.3 Masculinity and power distance
To measure the moderating effect of national cultural dimension between board gender diversity and corporate social performance, the interaction terms of masculinity and power distance dimension variables with board gender diversity will be added to the model separately. The score of national cultural dimensions collected from Geert Hofstede’s website will be measured on a scale from 0 to 100.
3.1.4 Control variables
Since the variation in nation-level institutions is not the only factor affecting the association between board gender diversity and CSP, this research also includes control variables in both national and firm levels.
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organizations need to perform more actively towards social issues to meet broader stakeholders’ expectation (Waddock and Graves, 1997). Firm size will be measured by the natural logarithm of the total number of employees at the end of year for each firm.
Board independence: Wang and Coffey (1992) suggested that appropriate board structure contributed to reducing agency problem and enhancing board decision-making, implicating that agent was more likely to perform complying with stakeholders’ benefits. Board independence is measured by the number of the independent board directors divided by the total number of board directors. A higher percentage of independent board members represents a higher level of board independence.
ROE: Financial performance is an important control variable for CSP research. Some research found a positive relationship between CSP and corporate financial performance(CFP), such as Campbell’s, 2007; Waddock and Graves’, 1997. In this research, ROE will be regarded as the proxy of CFP. Boulouta (2013) proposed that compared to return on sales (ROS) and return on asset (ROA), return on equity (ROE) was a more commonly used indicator for CFP in CSP research. ROE is measured by annual net income divided by the average of last year's and current year’s common equity.
Board size: Esa and Ghazali (2010) argued that larger board size enabled corporations to achieve wider exchange of ideas and experience, which could lead better corporate decision-making, and promote corporation to pay more attention and be involved in corporate social activities. Thus board size is controlled in this research. Board size is measured by the number of board members.
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legislation. In some ways, gender quota rules have the similar influence as human rights laws, which can regulate corporate behaviors to show more ethical behaviors. The dummy variable will equal to 1 if the company is under explicit legislation toward female quota, and 0 otherwise.
Firm Leverage: Several researchers found a negative relationship between firm risk and CSP. For example, Orlitzky and Benjamin (2001) proposed that low-risk firms tend to invest more in CSR projects, compared to high-risk firms as the future cash flows of low-risk firms are more certain. Therefore managers in the low-risk firm are facing less pressure from firm’s economic survival and commit more capital to social issues. In this research, corporate risk is measured by firm leverage, which equals to total firm liability to total assets.
Percentage of Closely Held Share: Ioannou and Serafeim (2012) found that wide dispersion of equity ownership was associated with better CSP. Thus the corporate equity ownership structure is controlled and measured by the percentage of closely held share. Following Ioannou and Serafeim (2012), closely held share was defined in this research as the shares held by investors who hold more than 5% of the outstanding shares. The percentage of closely held share is measured by the number of closely held shares divided by common share outstanding. Therefore, a corporation with high percentage of closely held share means it has more centralized equity ownership structure.
3.2 Empirical Analysis
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3.2.1 Endogeneity
Endogeneity is an important and common issue when conducting empirical corporate governance research. A commonly accepted assumption in previous research is that board characteristics are not exogenous random variables, but are endogenously chosen by firms. Roberts and Whited (2012) proposed that some qualitative inference could overturn if endogeneity was severe enough in some cases. Thus endogeneity issue should be cautiously taken into consideration when conducting corporate governance research. According to Boulouta (2013), two main endogeneity problems existed in the relationship between board gender diversity and corporate social performance, namely omitted variable bias and reverse causality.
Omitted variables refer to the variables “which are supposed to be included in the explanatory variables, but for several reasons are not” (Roberts and Whited, 2012). In general, omitted variables bias is particularly important in corporate governance research in which the related factors of research objections are from different dimensions, and most of these variables are hard to be observed or quantified (Roberts and Whited, 2012, Zyglidopoulos and Georgiadis 2006). In this research, omitted variable bias may be attributed to unobserved variables which may be related to board decision-making and CSP, such as corporate culture, corporate strategy, and directors’ abilities. In previous research, the most commonly used way to deal with this issue is to use fixed effect model in panel data. Compared to normal cross-sectional regressions, panel data enables one to take into consideration individual differences among companies and control over variables which we cannot observe or measure.
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variables are time-variant. Hausman-test will be conducted to check whether random or fixed effect model should be used in this research.
Reverse causality is the second endogeneity issue which is possible to influence the reliability of the empirical results. In this case, CSP may not only be influenced by female representation but also affect the possibility of female appointed by corporate board. For example, Boulouta (2013) argued that firms with high CSP score could be more likely to hire female board directors. One of the commonly used treatments for this issue is to use instrumental variables (IV). An efficient instrumental variable should be correlated to board gender diversity while uncorrelated with CSP, however, in practice, appropriate instrumental variables are difficult to find. Ferreira (2010) pointed out that “[i]nstrumental variables (IV) methods identify causality only under very strong and usually unrealistic assumptions”. Thus when causality is detected by IV method, the results should be taken cautiously. In this research, due to the data limitation, I could not find an efficient instrumental variable to deal with reverse causality. So alternative treatments to deal with this issue are conducted in the robustness test section. Finally, since new directors need time to influence corporate decision making and corporate performance, lagged independent variables and control variables will be used to reduce reverse causality problem.
3.2.2 Estimation model for hypothesis 1
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effect model is chosen to test hypothesis 1. The dependent variable in this model is CSP score, which is a proxy of corporate social performance. The independent variable is board gender diversity, which is measured by both female board ratio (FBR) and female board dummy (FBD). The control variables include board independence (BI), board size (BS), corporate return on equity (ROE), the natural logarithm of the number of firm employees (FS), the ratio of closely held share (CHS), corporate financial leverage (LEV) and gender quota legislation dummy (GQD). In addition, in order to control reverse causality, all the explanation variables are lagged for one year. The fixed effect model also includes time fixed effect for hypothesis 1 as follows:
𝐶𝑆𝑃 𝑠𝑐𝑜𝑟𝑒𝑖𝑡 = α + β1FBR𝑖𝑡t or FBD𝑖𝑡+ β2BI𝑖𝑡+ β3BS𝑖𝑡+ β4ROE𝑖𝑡+ β5FS𝑖𝑡+ β6CHS𝑖𝑡+ β7LEV𝑖𝑡+ β8GQD𝑖𝑡+ 𝜑𝑖 + λ𝑡+ ε𝑖𝑡 (1)
Where i represents firms, t represents year, 𝜑𝑖 is firm-fixed effect, λ𝑡is time-fixed effects and ε𝑖𝑡 are idiosyncratic errors which are changing over i and t. In addition, the two independent variables, female board ratio (FBR) and female board dummy (FBD) will be test separately.
3.2.3 Estimation model for hypothesis 2a and Hypothesis 2b
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hypothesis 2a and hypothesis 2b are therefore as follows:
𝐶𝑆𝑃 𝑠𝑐𝑜𝑟𝑒𝑖𝑡 = α + β1FBR𝑖𝑡or FBD𝑖𝑡+ β2BI𝑖𝑡+ β3BS𝑖𝑡+ β4ROE𝑖𝑡+ β5FS𝑖𝑡+ β6CHS𝑖𝑡+ β7LEV𝑖𝑡+ β8GQD𝑖𝑡+ β9MAS𝑖 ∗ FBR𝑖𝑡or FBD𝑖𝑡+ 𝜑𝑖+ λ𝑡+ ε𝑖𝑡 (2) 𝐶𝑆𝑃 𝑠𝑐𝑜𝑟𝑒𝑖𝑡= α + β1FBR𝑖𝑡or FBD𝑖𝑡+ β2BI𝑖𝑡+ β3BS𝑖𝑡+ β4ROE𝑖𝑡+ β5FS𝑖𝑡+ β6CHS𝑖𝑡+ β7LEV𝑖𝑡+ β8GQD𝑖𝑡+ β9PD𝑖∗ FBR𝑖𝑡or FBD𝑖𝑡+ 𝜑𝑖+ λ𝑡+ ε𝑖𝑡 (3)
Similarly, i represents firms, t represents year, 𝜑𝑖 is firm-fixed effect, λ𝑡is time-
fixed effect and ε𝑖𝑡 are idiosyncratic errors which are changing over i and t.
Specifically, MASi *FBRit or FBDit is the interaction term between Masculinity and board gender diversity. PDi *FBRit or FBDit is the interaction term between Power Distance and board gender diversity.
3.3 Descriptive statistics and Person correlation
In this session, an overview of variables in this research and Person correlation matrix to check the possible correlation between variables will be displayed. To avoid the influence of outliers and fault data, I winsorized variables ROE and Leverage at 5% level on both sides. According to Table 1, the average ratio of the female board is quite low, with only 11.3%. However, as for female board dummy, more than 60% boards in this study have at least one female board director. In addition, the average value of gender quota dummy is only 0.053, which means few firms in this study are under mandatory gender quota legislation. Finally, when considering national cultural score, both Power Distance and Masculinity show pretty wide range, with 11 to 100 and 5 to 95 respectively. Theses obvious differences provide this research more space to investigate the moderating effect of national cultural dimension on the relationship between board gender diversity and corporate social performance.
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are under 0.7, there are no signs of multicollinearity (Brooks, 2008). The results show that the highest correlation exists between female board ratio and female board dummy (0.761), which can be explained by the similar measurement of these two variables. Besides the correlation between these two variables, all the coefficients are under 0.5, indicating that the problem of multicollinearity is not a big issue in this research.
Table 1:
This table reports the mean, median, maximum, minimum, standard deviation and the number of observations, the independent variables board gender diversity and explanation variables for the full sample. The sample comprises 4700 corporations between 2006 and 2015. A description of the variables is presented in Table 1. A description of the variables is presented in Appendix A.
Variable Observations Mean Std. Dev. Min Max
Board Variables
Female board ratio 29973 0.113 0.113 0.000 0.750
Female board dummy 29973 0.629 0.483 0.000 1.000
Board Independence 28320 0.563 0.282 0.000 1.000 Board Size 29953 10.376 3.646 1.000 44.000 Firm Variables CSP Score 30046 51.484 30.119 5.945 97.885 ROE 43140 0.114 0.161 -0.277 0.443 Firm Size(ln) 39857 8.466 2.062 0.000 14.604
Closely held share ratio 39058 0.258 0.252 0.000 1.000
Leverage 44000 0.563 0.228 0.144 0.941
Gender Quota Dummy 47000 0.053 0.224 0.000 1.000
Country Variables
Power Distance 47000 46.672 15.630 11.000 100.000
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Table 2:
This table shows the Pair-wise correlation between the dependent variables, independent variables, and the control variables. A description of the variables is presented in Appendix A.
FBR FBD CSP score BI BS ROE FS(ln) CHS FL GQD PD MAS 1. FBR 1.000 2. FBD 0.761 1.000 3. CSP score 0.194 0.168 1.000 4. BI 0.276 0.322 -0.054 1.000 5. BS 0.118 0.235 0.309 -0.137 1.000 6. ROE 0.068 0.078 0.090 0.043 0.036 1.000 7. FS(ln) 0.162 0.195 0.493 -0.029 0.408 0.148 1.000 8. CHS -0.118 -0.115 0.051 -0.275 0.091 0.033 0.063 1.000 9. FL 0.148 0.176 0.148 0.035 0.281 0.005 0.304 0.012 1.000 10. GQD 0.209 0.138 0.143 -0.084 0.110 0.007 0.040 0.154 0.066 1.000 11. PD -0.225 -0.199 0.041 -0.354 0.177 0.045 0.156 0.421 0.030 0.149 1.000 12. MAS -0.274 -0.216 -0.063 -0.259 0.040 -0.074 0.051 -0.121 -0.043 -0.259 -0.036 1.000
4. Empirical Analysis Results
The results section is composed of three parts. Firstly, the results for hypothesis 1 will be displayed, indicating that to what extent the board gender diversity influences corporate social performance. Then, the results for moderating effect of masculinity and power distance on this relationship will be explained in second part. Finally, the robustness tests for all the hypotheses will also be included.
4.1 Fixed effect result for hypothesis 1
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According to the results, only female board dummy shows significant result at 1 percentage (β=0.967, p<0.01). These results suggest that the existence of female board directors can motivate corporations to perform better in social issues and get higher CSP score. When controlling for all the control variables, corporations which have at least one female directors represent in their boardrooms, get 0.967 points higher in CSP score than corporations which don’t have female members in their boardrooms. However, these results fail to prove the assumption that high percentage of female board directors will lead to better corporate social performance. This result is inconsistent with most of the previous results related to female board directors (e.g., Boulouta, 2012; Zhang et al.,2012; Bernardi and Threadgill, 2010; Seto-Pamies). Based on the theoretical framework in this research, female members can benefit the corporation by bringing different leadership styles (Galaskiewicz, 1991) and knowledge to the boardroom (Cumming et al.,2015). However, according to findings from Terjesen et al., (2009), most of the female directors tended to have similar backgrounds and career paths, for example, advanced degree and non-business working experience. Thus one can assume that the quantity increase of female board directors cannot contribute to a broader aspect to the boardroom when the new appointed female directors have the similar backgrounds as the existing female board members. Regarding the control variables, board independence, board size, and firm size show significant positive results to both female board ratio and female board dummy, which are in line with previous research. The coefficients for other controls are all insignificant.
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Table 3:
This table presents the results of the fixed effects estimations on the relationship between board gender diversity and corporate social performance. All models include year dummy variables, and robust standard errors are presented in parentheses. *, ** and *** denote the statistical significance at the 10%. 5% and 1% level respectively.
Independent Variable CSP Score
(1) (2)
Female board ratio -0.420
[1.872]
Female board dummy 0.967***
[0.366] Board independence 2.405*** 2.323*** [0.812] [0.814] Board size 0.299*** 0.271*** [0.073] [0.073] ROE 3.048*** 3.095 [0.803] [0.801] Firm size (ln) 2.079*** 2.065*** [0.318] [0.318]
Closely heled share ratio 0.357 0.310
[0.739] [0.738]
Leverage -0.700 -0.566
[1.424] [1.427]
Gender quota Dummy 0.798 0.681
[0.656] [0.657]
Time Fixed effects Yes Yes
Individual Fixed effect Yes Yes
Number of observations 19359 19359
Number of Firms 3440 3440
R2 (within) 0.252 0.253
4.2 Results for Hypothesis 2a and 2b
26
Column 3 and 4 show results of CSP Score on female board ratio and female board dummy and display the moderating effect of Power Distance (PD*FBR or FBD). Hypothesis 2a propose that the positive relationship between female board director and CSR will increase if the company is based in a more masculine country. However, as can be observed in column 1 and 2, the results show no significant effect on board gender diversity and CSP score. The results of the interaction terms (MAS* FBR, MAS*FBD) are also insignificant when using both female board ratio and female board dummy as proxies of board gender diversity. In other words, the positive moderating effect of country’s masculinity level on the relationship between board gender diversity and CSP cannot be validated. These results are likely to relate to different intracorporate attitudes towards female directors and feminine leadership. For example, in some cases, male directors are reported to alleviate their masculinity when females are presenting in the boardroom (Singh, 2008); however, in some boardrooms, feminine traits are not appreciated by the top leader. Thus female directors are forced to only show masculine leadership (Sheridan and Milgate, 2005). In short, these results fail to support hypothesis 2a.
27
Table 4
This table presents the results of the fixed effects estimator regarding the moderating effect of national cultural dimensions on the relationship between board gender diversity and corporate social performance. All models include year dummy variables, and robust standard errors are presented in parentheses. *, ** and *** denote the statistical significance at the 10%. 5% and 1% level respectively.
Independent variables CSP Score
1.FBR*MAS 2.FBD*MAS 3.FBR*PD 4.FBD*PD
Female board ratio -0.091 5.655
[5.891] [5.292]
Female board dummy 0.651 2.363**
[1.436] [1.042] MAS* BGD -0.006 0.005 [0.101] [0.023] PD*BGD -0.132 -0.029 [0.106] [0.020] Board independence 2.407*** 2.318*** 2.446*** 2.366*** [0.815] [0.815] [0.812] [0.811] Board size 0.299*** 0.271*** 0.301*** 0.272*** [0.073] [0.073] [0.073] [0.073] ROE 3.049*** 3.093*** 3.044*** 3.091*** [0.803] [0.802] [0.804] [0.801] Firm size (ln) 2.079*** 2.066*** 2.080*** 2.066*** [0.318] [0.318] [0.318] [0.316]
Closely held share 0.357 0.310 0.363 0.306
[0.739] [0.738] [0.739] [0.738]
Leverage -0.699 -0.568 -0.699 -0.569
[1.425] [1.427] [1.424] [1.427]
Gender quota dummy 0.795 0.690 0.951 0.777
[0.653] [0.658] [0.656] [0.658]
Time Fixed effects Yes Yes Yes Yes
Individual Fixed effect Yes Yes Yes Yes
Number of observation 19359 19359 19359 19359
R2 (within) 0.252 0.253 0.252 0.249
5. Robustness test
28
effects and country effects will be added separately to equation 2 and 3 to see if the moderating effect of national cultural dimensions is still significant when industry and country characteristics are controlled.
5.1 Separate pillars for CSP scores
29
Table 5:
This table presents the results of the fixed effects estimator regarding the moderating effect of masculinity on the relationship between board gender diversity and corporate social performance. The corporate social performance is measured by social score and environmental score separately. All models include year dummy variables, and robust standard errors are presented in parentheses. *, ** and *** denote the statistical significance at the 10%. 5% and 1% level respectively.
Independent variables Social Score Environmental score
1. FBR*MAS 2. FBD*MAS 3. FBR*MAS 4. FBD*MAS
Female board ratio 3.148 -3.330
[6.440] [7.493]
Female board dummy 1.694 -0.392
[1.678] [1.589] MAS* BGD -0.057 -0.004 0.045 0.015 [0.112] [0.027] [0.128] [0.026] Board Independence 2.849*** 2.718*** 1.965* 1.918* [0.907] [0.908] [1.008] [1.007] Board Size 0.281*** 0.240*** 0.317*** 0.303*** [0.078] [0.079] [0.084] [0.085] ROE 3.051*** 3.112*** 3.046*** 3.073*** [0.909] [0.908] [0.975] [0.973] Firm size (ln) 2.204*** 2.183*** 1.953*** 1.948*** [0.336] [0.335] [0.392] [0.392]
Closely held share -0.132 -0.196 0.847 0.815
[0.833] [0.831] [0.882] [0.882]
Leverage -0.945 -0.770 -0.453 -0.367
[1.609] [1.610] [1.798] [1.798]
Gender quota dummy 0.428 0.308 1.162 1.072
[0.732] [0.734] [0.773] [0.780]
Time Fixed effects Yes Yes Yes Yes
Individual Fixed effect No No No No
Country Fixed effect No No No No
Industry Fixed effect Yes Yes Yes Yes
Number of observation 19359 19359 19359 19359
30
Table 6:
This table presents the results of the fixed effects estimator regarding the moderating effect of power distance on the relationship between board gender diversity and corporate social performance. The corporate social performance is measured by social score and environmental score separately. All models include year dummy variables, and robust standard errors are presented in parentheses. *, ** and *** denote the statistical significance at the 10%. 5% and 1% level respectively.
Independent variables Social Score Environmental score
1. FBR*PD 2. FBD*PD 3. FBR*PD 4. FBD*PD
Female board ratio 5.291 6.019
[6.000] [6.555]
Female board dummy 2.433** 2.292**
[1.231] [1.244] PD*BGD -0.115 -0.021 -0.150 -0.038 [0.123] [0.024] [0.128] [0.023] Board Independence 2.864*** 2.744*** 2.028** 1.989** [0.906] [0.907] [1.004] [1.003] Board Size 0.282*** 0.241*** 0.320*** 0.304*** [0.078] [0.079] [0.084] [0.085] ROE 3.043*** 3.107*** 3.046*** 3.075*** [0.910] [0.908] [0.975] [0.972] Firm size (ln) 2.206*** 2.185*** 1.953*** 1.948*** [0.336] [0.334] [0.391] [0.390]
Closely held share -0.127 -0.199 0.853 0.811
[0.834] [0.831] [0.883] [0.881]
Leverage -0.951 -0.773 -0.447 -0.365
[1.609] [1.610] [1.796] [1.797]
Gender quota dummy 0.593 0.383 1.309* 1.171
[0.740] [0.736] [0.788] [0.781]
Time Fixed effects Yes Yes Yes Yes
Individual Fixed effect No No No No
Country Fixed effect No No No No
Industry Fixed effect Yes Yes Yes Yes
Number of observation 19359 19359 19359 19359
R2 (within) 0.217 0.218 0.180 0.180
5.2 Industry effects and country effects
31
(Li et al., 2010) on CSP research. Previous researchers found that corporations in different industries might face social pressure from various aspects (Grinffin and Mahon, 1997). For example, Bear et al. (2010) proposed that health-care industry was facing increasing pressure because of public’s stronger reaction to rising health care cost. Similarly, as to country effects, it has been suggested that corporations in different countries were also facing various social pressure in terms of their social duty. In the light of the present situation, developed countries and developing countries have different expectations for CSP (Dobers and Minna, 2009).
Since industry and country are time-invariant variables, it is impossible to include both firm-fixed effects and industry or country effects in the fixed effect model. Hereby in this section, industry fixed effects and country effects were added separately to pooled OLS regression models, in order to test if the moderating effects are significant when individual effects are replaced. For industry effects, industries based on four-digit SIC codes were categorized. The sample includes 15 industries. Thus 14 dummy variables were created to control the industry effects. The pooled OLS regression with industry fixed effect is displayed in Table 7. Similarly, 43 dummy variables were created to control the country effects. The regression results with country fixed effects are displayed in Table 8.
32
distinct compared to male directors in masculine countries. The possible reason for this reverse results can be explained by resource-based theory. For example, Hofstede (2003) also proposed that women were treated more equally in feminine countries. Thus their voice was more likely to be valued in board decision-making. Although gender role difference is smaller in feminine countries, female directors still contribute to board decision making through bringing in more resources. Hence, the moderating effect of masculinity mainly makes a difference through increasing the likelihood of females’ views being taken seriously.
33
Table 7:
This table presents the results of the OLS estimator regarding the moderating effect of national cultural dimensions on the relationship between board gender diversity and corporate social performance. All models include year dummy variables and industry dummy variables, and robust standard errors are presented in parentheses. *, ** and *** denote the statistical significance at the 10%. 5% and 1% level respectively.
Independent variables CSP Score
1.FBR*MAS 2.FBD*MAS 3.FBR*PD 4.FBD*PD
Female board ratio 38.630*** 52.472***
[9.621] [10.112]
Female board dummy 12.214*** 11.135***
[2.912] [2.400] Masculinity -0.089*** -0.060 [0.034] [0.038] MAS* BGD -0.293* -0.153*** [0.165] [0.046] Power Distance -0.098** -0.079* [0.039] [0.044] PD* BGD -0.669*** -0.171*** [0.212] [0.047] Board Independence -3.926** -2.853** -4.216*** -3.753** [1.548] [1.559] [1.527] [1.553] Board Size 0.910*** 0.870*** 0.975*** 0.950*** [0.124] [0.127] [0.126] [0.128] ROE 7.054** 7.439** 8.309*** 8.617*** [2.009] [2.014] [2.008] [2.016] Firm size (ln) 6.295*** 6.346*** 6.331*** 6.383*** [0.249] [0.249] [0.251] [0.252]
Closely held share -1.959 -2.186 2.404 2.622
[1.557] [1.562] [1.615] [1.621]
Leverage -2.689 -2.305 -2.881 -2.858
[2.090] [2.089] [2.092] [2.092] Gender quota dummy 7.189*** 7.513*** 10.197*** 11.278***
[1.419] [1.402] [1.431] [1.421]
Time Fixed effects Yes Yes Yes Yes
Individual Fixed effect No No No No
Country Fixed effect No No No No
Industry Fixed effect Yes Yes Yes Yes
Number of observation 19359 19359 19359 19359
34
Table 8
This table presents the results of the OLS estimator regarding the moderating effect of national cultural dimensions on the relationship between board gender diversity and corporate social performance. All models include year dummy variables and industry dummy variables, and robust standard errors are presented in parentheses. *, ** and *** denote the statistical significance at the 10%. 5% and 1% level respectively.
Independent variables CSP Score
1.FBR*MAS 2.FBD*MAS 3.FBR*PD 4.FBD*PD
Female board ratio -1.658 66.582***
[11.013] [9.872]
Female board dummy 4.361 13.879***
[3.163] [2.182] Masculinity -0.260** -0.199* [0.117] [0.113] MAS* FBR or FBD 0.457 0.008 [0.192] [0.051] Power Distance 0.180 0.201 [0.200] [0.203] PD*FBR or FBD -0.948*** -0.187*** [0.205] [0.043] Board Independence 16.727*** 16.934*** 16.836*** 16.746*** [1.935] [1.962] [1.922] [1.949] Board Size 1.212*** 1.137*** 1.219*** 1.142*** [0.126] [0.128] [0.126] [0.128] ROE 6.325*** 6.601*** 6.200** 6.352*** [1.830] [1.837] [1.823] [1.827] Firm size (ln) 6.744*** 6.794*** 6.711*** 6.722*** [0.238] [0.238] [0.239] [0.239]
Closely held share -1.225 -1.257 -1.179 -1.183
[1.495] [1.501] [1.491] [1.496]
Leverage -6.001*** -5.778*** -6.239*** -5.989***
[1.869] [1.866] [1.869] [1.866]
Gender quota dummy 0.978 1.252 1.783** 1.856*
[1.026] [1.013] [1.030] [1.004]
Time Fixed effects Yes Yes Yes Yes
Individual Fixed effect No No No No
Country Fixed effect Yes Yes Yes Yes
Industry Fixed effect No No No No
Number of observation 19359 19359 19359 19359
35
6. Conclusion and limitation
This research was based on the work of Boulouta (2013) and Byron and Post (2015) by exploring the relationship between board gender diversity and corporate social performance (CSP). In addition, since the extant research show conflicting results when exploring this relationship in single country or region, the moderating effect of national culture, i.e., masculinity and power distance, on the relation between BGD and CSP are also focused in this research.
36
For the second research question, there is no significant result found. However, it still offers researchers inspirations for future studies. The possible origin for the insignificant moderating effects is the measurement of national cultural dimension. Even if Hofstede’s national cultural score is the most common used and authoritative proxy for cultural dimension, doubts were expressed in some other studies. For example, Harrison and McKinnon (1999) argued that relying too much on Hofstede’s national cultural score might cause simplistic treatment of culture. They proposed that the greater depth, richness and complexity of culture and cultural diversity were difficult to be captured by those cultural dimensions. Thus when companies from different cultural clots are observed, it is possible that the measurement for cultural dimension in this research fails to capture the real cultural differences among corporations. Thus future research could go further to investigate more proper classifications of cultural dimensions. However, since the robustness tests do not show consistent results with prior tests, the results should be interpreted cautiously.
37
38
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Appendix A:
A1
Hausman-test:The Chi-squared statistic for the cross-section random effects is reported *, ** and *** denote the statistical significance at the 10%, 5% and 1% level respectively.
CSP Score
Female board ratio Female board dummy
45
A2
Variable lists:
Definition and Source of variables
Definition Abbreviation Source
CSP score CSP Score Average of pillar score on the environmental, social performance score from Asset4 database
ASSET4
Female board ratio
FBR Number of female members om the board divided by the total number of board members at the end of year t
ASSET4
Female board dummy
FBD Dichotomous variable which equal to 1 if there is at least 1 female member in the board, equal to 0 otherwise at the end of year
ASSET4
Board Size BS Number of board members ASSET4
Ratio of Closely Held Share
CHS Percentage of closely held share
Firm Leverage Lev Total debt to total asset ASSET4
Firm size FS Natural logarithm of the total number of employees
ASSET4
Board
independency
BI Total number of independent board member divided by the total number of board number at the end of year t
ASSET4
Return on equity
ROE Total return on equity of the firm at the end of year t
ASSET4
Gender quota dummy
GQD Dichotomous variable which equal to 1 if there is explicit gender quota legislation for boardroom, equal to 0 otherwise at the end of year
Deloitte (2015)
Power distance PD Hofstede's masculinity scores of countries, measuring on a scale from 0 to 100.
Hofstede’s website
Masculinity MAS Hofstede's masculinity scores of countries, measuring on a scale from 0 to 100.
