Board gender diversity, firm risk, and the intermediate mechanisms: A meta‐analysis

• Published date: 01 November 2024
• Author: Sylvia Maxfield,Liu Wang
• Date: 01 November 2024
• DOI: http://doi.org/10.1111/corg.12572

SPECIAL ISSUE ARTICLE

Board gender diversity, firm risk, and the intermediate

mechanisms: A meta-analysis

Sylvia Maxfield

1

| Liu Wang

2

1

Professor of Finance, School of Business,

Providence College, Providence, Rhode Island,

USA

2

Department of Finance, School of Business,

Providence College, Providence, Rhode Island,

USA

Correspondence

Liu Wang, Department of Finance, School of

Business, Providence College, Providence, RI

02918, USA.

Email: lwang@providence.edu

Funding information

No funding was received for this manuscript.

Abstract

Research question: The primary focus of this meta-analysis is to synthesize previ-

ously discordant findings on the relationship between board gender diversity (BGD)

and different types of firm risk and to explore potential moderating and mediating

mechanisms underlying these relationships.

Research findings: We statistically combine the results from 193 studies and find a

negative association between BGD and firm risk. Further investigation indicates that

different measures of risk lead to systematically different effect sizes. Our meta-

analysis structural equation modeling (MASEM) analysis reveals that BGD's impact on

risk operates primarily through the monitoring rather than advising function of the

board. Regarding the moderating role of national institutions, we find that several

aspects of the national institutional context (e.g., investor protection, gender equality,

and national culture) influence the relationship between BGD and different types

of risk.

Theoretical implications: Overall, our results suggest that agency theory has more

explanatory power than resource dependence theory for understanding the associa-

tion between BGD and risk, and women's board representation is more likely to

reduce downside risk than upside risk. Our moderating effect analysis also highlights

interesting avenues for further research on the interplay of BGD and different risks

in national environments with varying institutional attributes.

Practitioner/policy implications: Our meta-analysis offers important practical impli-

cations for corporate risk management, suggesting that BGD significantly mitigates

downside risks associated with poor corporate transparency without stifling board

support for corporate decisions shaping future growth potential. In an era of rising

board vulnerability to litigation for insufficient transparency, this study contributes

evidence supporting trends toward greater gender diversity.

KEYWORDS

corporate governance, board gender diversity, firm risk, meta-analysis

1|INTRODUCTION

Meta-analysis advances theory through the synthesis of previously

discordant findings and has the potential to be highly influential. Com-

prehensive meta-analysis has already been published covering the

extensive literature on board gender diversity (BGD) and corporate

performance in general (Post & Byron, 2015) and on BGD and corpo-

rate social performance (Byron & Post, 2016). As a component of cor-

porate performance, published work exploring gender diversity and

risk is less extensive but growing. As the quantity of research on

Received: 1 May 2022 Revised: 17 December 2023 Accepted: 21 December 2023

DOI: 10.1111/corg.12572

934 © 2024 John Wiley & Sons Ltd. Corp Govern Int Rev. 2024;32:934–953.wileyonlinelibrary.com/journal/corg

corporate risk expands, it continues to produce contradictory findings

that women's board representation increases risk (Berger et al., 2014;

Safiullah et al., 2022), decreases risk (Adams & Ferreira, 2009; Chen,

Ni, & Tong, 2016; Mohsni et al., 2021; Muller-Kahle &

Lewellyn, 2011), or is not related at all (Sila et al., 2016). Beyond one

qualitative literature review (Teodosio et al., 2021), to our knowledge,

there has been no application of meta-analytic tools to help clarify

what the aggregate body of empirical research reveals about the cor-

relation between BGD and corporate risk.

The aim of the meta-analysis presented here is to help reconcile

conflicting findings by addressing gaps in the existing literature and

building on new behavioral research about women's cognitive framing

of risk. We do not simply ask what meta-analysis can tell us about

whether BGD has positive, negative, or no correlation with corporate

risk; we disaggregate risk to see if this can explain discordant empirical

results in the existing literature. Furthermore, to explore how BGD

might shape corporate risk, we look at the mediating role of two dif-

ferent critical board responsibilities, monitoring and strategic advising,

in relation to BGD and different types of risk. We also leverage the

broad geographic expanse of existing studies to assess how national

institutional context shapes the relationship between BGD and risk in

light of risk distinctions and cognitive gender differences.

Despite decades of extensive research, no widely accepted defini-

tion of “risk”exists. Bloom and Milkovich (1998,p.285)defineriskas

“uncertaintyabout outcomes and events.”Sanders and Hambrick(2007,

p. 1057) define riskas “the degree to which potential outcomes associ-

ated with a decision are consequential, vary widely, and include the

possibility of extreme loss.”The International Organization for Stan-

dardization (ISO) defines risk as the “effect of uncertainty on objec-

tives.”Because both risk and uncertainty are complex concepts,

understandingtheir antecedents and consequences in corporateperfor-

mance requiresdisaggregation and specification. To elaborate,risk man-

agement practitioners commonly separate risk evaluation into impact-

based and behavior-based assessments, and some corporate gover-

nance scholars further disaggregate risk by focusing on the size of the

resource outlay, the variance of potential outcomes, and the likelihood

of extreme loss(Sanders & Hambrick, 2007). Building on this conceptu-

alization and following Ali, Liu, and Su (2022)and Comeig et al. (2022),

we make a distinction between downside risk where the focus is on

preventing loss,as well as upside risk where the focus is on investment

for uncertain gain. This distinctionaligns with the International Finance

Corporation'sdiscussion of corporate governance andrisk that empha-

sizes that risk management is about minimizing exposure to downside

risks and increasingexposure to upside gains (Roggi et al., 2012). At its

simplest, this is a distinction between board actions that directors

would typically frame as preventing loss, such as poor/fraudulent dis-

closure, and those thatare more likely to involve considerationof how

uncertainty plays into investment of firm resources for potential gain,

such as venturing risk. To explore the relationship between risk-

influencing board decisions and corporate risk outcomes, we make a

further distinction by extending the concept of outcome-based versus

activity-basedperformance measuresfrom the literature on contracting

under information asymmetry (e.g., Anderson & Oliver, 1987;

Chennamaneni & Desiraju, 2011) to distinguish between outcome-

based versus activity-based risk measures. In this study, we overlay

these two distinguishing traitson existing risk types to createnew cate-

gorizations. In particular, we apply the criteria of upside-

versus-downside and activity-versus-outcome distinctions to the con-

ventional risk categories of (1) operational risk, (2) stock market risk,

(3) venturing risk (e.g., R&D, M&A, and other risk-taking activities), and

(4) disclosure and misconduct risk. Commonly measured by the volatil-

ity of performance outcomes or the deviation from optimal outcomes,

operational risk and stock market risk are clearly outcome-based mea-

sures. Evaluated from the perspective of causal proximity to board deci-

sion making, venturing risk and disclosure risk are activity-based

measures, whereventuring risk is considered upside riskand disclosure

risk is considered downside riskin the upside/downside riskframework

(Ali et al., 2022;Comeig et al., 2022).

This meta-analysis offers important theoretical and practical

implications. First, it synthesizes previously discordant findings in the

extensive literature on BGD and risk propensities and offers a recon-

ciliation of the conflicting findings in past scholarship by disaggregat-

ing among various types of risk. Overall, we find that BGD plays an

important role in shaping corporate risk. However, different measures

of corporate risk lead to systematically different effect sizes across

empirical studies. Specifically, we find that women's board representa-

tion largely reduces the firm's stock market risk and improves corpo-

rate disclosure. However, BGD has no evident impact on operational

risk and venturing risk. These findings are consistent with the conten-

tion that the gender dynamics of risk aversion are sensitive to the def-

inition and context of risk.

Second, our study addresses “missing l inks”(Ahrens, 2022)in

the connection between board char acteristics and firm performance

by using advanced meta-analysi s tools to examine the intermediary

mechanisms linking women's rep resentation on boards and firm risk.

There is considerable distance in the causal chain between boa rd

traits, board effectiveness, an d corporate outcomes

(Pettigrew, 1992), with some scholars even doubting whet her direc-

tors can be effective monitors (Boivi e et al., 2016) and others simply

pointing to the importance of under standing how board inputs are

linked to board outputs (Hambrick et al., 2015). Drawing on our

novel differentiation among risks and advance d meta-analysis meth-

odology such as meta-analysis structur al equation modeling

(MASEM), our study provides evidence for new ideas about how and

why BGD affects firm risk. In particular, we find that BGD miti gates

downside risk, as evidenced by the sig nificant mediating role it plays

in enhancing corporate disclosure an d preventing corporate miscon-

duct. However, BGD does not have an y material impact on upside

risk, as indicated by the insig nificant mediating role it plays in shaping

the firm's strategic involve ment in venturing activities. Because our

findings suggest that BGD affect s firm risk primarily through the

monitoring rather than the advisi ng function of the board, our results

highlight the role of agency theo ry in explaining the relationship

between BGD and corporate risk. The fi ndings presented here pro-

vide little support for resour ce dependence theory, at least in the

context of BGD and corporate risk manag ement.

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