Board gender diversity, firm performance and corporate financial distress risk: international evidence from tourism industry

• DOI: https://doi.org/10.1108/EDI-11-2021-0283
• Published date: 30 June 2022
• Date: 30 June 2022
• Pages: 530-550
• Subject Matter: HR & organizational behaviour,Employment law,Diversity,equality,inclusion
• Author: Kin Wai Lee,Tiong Yang Thong

Board gender diversity, firm

performance and corporate

financial distress risk:

international evidence from

tourism industry

Kin Wai Lee

Nanyang Technological University, Singapore, Singapore, and

Tiong Yang Thong

James Cook University Australia–Singapore Campus, Singapore, Singapore

Abstract

Purpose –This paper examines contextual factors that affect the association between board gender diversity

and firm performance.

Design/methodology/approach –The authors use a global sample of listed firms in the tourism industry in

30 countries from 2015 to 2020.

Findings –First, firm performance is positively associated with the proportion of female directors on a board.

Second, the positive association between firm performance and the proportion of female directors on the board

is higher in (1) countries with stronger shareholder rights, (2) countries with stronger securities law regulation

stipulating disclosure of board diversity, (3) countries with stronger economic empowerment of women, and (4)

during the COVID-19 crisis. Third, corporate financial distress risk is lower in firms with higher proportion of

femaledirectors on the board. Fourth, the negative association between corporate financial distressrisk and the

proportion of female directors on the board is more pronounced in (1) countries with stronger securities law

regulations stipulatin g disclosure of board gender d iversity, (2) countries wi th stronger economic

empowerment of women, and (3) during the COVID-19 crisis.

Originality/value –The results indicate that contextual factors (comprising country-level corporate

governance structures, economic empowerment of women and economic crisis) can affect the association

between board gender diversity and firm performance.

Keywords Board gender diversity, Firm performance, Corporate governance

Paper type Research paper

1. Introduction

In recent years, corporate board gender diversity has gained significant attention among

regulators, politicians and media. As a result, several countries have instituted mandatory

quotas to increase the gender diversity of boards while other countries have implemented

voluntary (non-binding) quotas [1]. Despite that, only 4.8% of large US firms are run by

female CEOs in 2014 [2]. This pattern is also prevalent in other countries. For example, Ho

et al. (2015) report that only 3.2% of large firms in Europe are helmed by female CEOs in 2012,

and there were no large firms in Europe helmed by female CEOs in 15 out of the 27 European

members in 2011. Using a sample of firms across 45 countries, Griffin et al. (2021) document

that the average proportion of female directors on the board is 8.5%.

A central theme underpinning the call for greater gender diversity in corporate boards is

the proposition that board gender diversity promotes better decision making and hence

increases firm performance. There are considerable prior studies on the effect of gender

EDI

42,4

530

The authors gratefully acknowledge the constructive suggestions and insightful comments by the

editors and two anonymous referees.

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/2040-7149.htm

Received 1 November 2021

Revised 6 February 2022

6 May 2022

31 May 2022

Accepted 6 June 2022

Equality, Diversity and Inclusion:

An International Journal

Vol. 42 No. 4, 2023

pp. 530-550

© Emerald Publishing Limited

2040-7149

DOI 10.1108/EDI-11-2021-0283

diversity on corporate performance. However, the evidence is mixed. Some studies find

corporate performance is positively associated with board gender diversity (Campbell and

Minguez-Vera, 2008;Liu et al., 2014;Terjesen et al., 2016), whereas other studies report a

negative association between corporate performance and board gender diversity (Adams and

Ferreira, 2009,[3];Garcia-Meca et al., 2015;Bennouri et al., 2018). In fact, some studies find no

significant relationship between corporate performance and board gender diversity (Carter

et al., 2010;Chapple and Humphrey, 2014).

Prior studies document that female directors can differ significantly from male directors

with respect to leadership style (Terjesen et al., 2016), work ethics (Adams and Ferreira, 2009),

risk aversion (Croson and Gneezy, 2009) and decision making (details in section 2). In general,

these prior studies show that gender-diverse boards can increase board effectiveness (Adams

and Ferreira, 2009), reduce agency costs (Karavitis et al., 2021), improve the corporate

information environment and transparency (Gul et al., 2011;Li and Zeng, 2019), and promote

innovation (Griffin et al., 2021). Another stream of studies provides evidence that board

gender diversity enhances the quality of financial reporting (Francis et al., 2015;Srinidhi et al.,

2011), decreases corporate-risk taking (Faccio et al., 2016;Huang and Kisgen, 2013;Bernile

et al., 2018) and reduces the propensity for committing fraud (Gupta et al., 2020).

In this study, we examine the association between firm performance and board gender

diversity in the hotel and tourism industry. Our primary research questions are: (1) What is

the association between firm performance and board gender diversity? (2) How do country-

level institutional features affect the association between firm performance and board gender

diversity? (3) Does board gender diversity affect corporate financial distress risk? (4) How do

country-level institutional features affect the association between corporate financial distress

risk and board gender diversity? (5) Does board gender diversity affect firm performance and

financial distress risk during the COVID-19 crisis?

We examine board gender diversity in the hotel and tourism industry for several reasons.

First, women represent over 60%–70% of the global hotel and tourism workforce

(International Labour Organization, 2020). However, a different picture emerges at the

upper echelons of the tourism industry. The composition of women in executive-level

positions drops to 25% in tourism firms and female representation further declines to 16% in

the middle management positions (American Hotel and Lodging Educational Foundation,

2020). At senior leadership level, there seems to be a glass ceiling between senior management

and the C-Suite (World Tourism Organization, 2020). In a study of 100 listed firms in the

global tourism industry, about 19% of C-level roles are filled by women and only 5% of firms

have a female CEO (World Tourism Forum, 2021). Second, even if women made it to the top of

the organizational hierarchy, they still face considerable barriers. Field et al. (2020) find that

female and minority directors are significantly less likely to serve in leadership positions

despite possessing stronger qualifications than other non-diverse directors. Third, tourism

firms have distinctive sector characteristics, which require different monitoring needs from

the board of directors. Tourism is a fast-pace industry, in which customers preferences

change rapidly (World Tourism Forum, 2021). Hence, boards need to formulate effective

strategies in ensuring tourism firms respond to changing customer needs. Fourth, the Global

Gender Gap Report (2021) documents that in many countries, a substantial gender gap

remains and based on its current trajectory, it is estimated that it will take 135 years to close

the gender gap worldwide [4]. In the context of the managerial pay gender gap, using a

sample of executives of listed companies in 18 countries from 2002 to 2015, Homroy and

Mukherjee (2021) find that female executive directors receive 34% less compared to

equivalent males from the same cohort, which falls by half over tenure within the company

but remains systematically throughout. Fifth, tourism is an important economic sector for

many countries. In 2016, the tourism sector’s overall contribution to GDP was around 10%

and is foreseen to rise by 3.9% annually to reach 11.4% of GDP in 2027 (International Labour

Board gender

diversity in the

tourism

industry

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