Ownership structure, board gender diversity and charitable donation

• Pages: 655-670
• DOI: https://doi.org/10.1108/CG-12-2016-0229
• Date: 05 April 2018
• Published date: 05 April 2018
• Author: Ting-Ling Lin,Heng-Yih Liu,Chi-Jui Huang,Yu-Chiung Chen
• Subject Matter: Corporate governance,Strategy

Ownership structure, board gender

diversity and charitable donation

Ting-Ling Lin, Heng-Yih Liu, Chi-Jui Huang and Yu-Chiung Chen

Abstract

Purpose –This paper aims to examinethe effect of ownership structure andboard gender diversity on

charitabledonations for a group of listed electronicscompanies in Taiwan.

Design/methodology/approach –Using linear regressionanalysis, this paper analyses the ownership

structure, board gender diversity and charitable donations of 380 Taiwanese electronics companies

(2011-2013).

Findings –While domestic institutional investors, such as domestic mutual funds and corporate

investors, take more of agency logic view, it negatively impacts on charitable donations. However, the

empirical findings of this paper indicate that board gender diversity with the critical number of female

directors was positively related to charitable donation. Thus, it is clear that female directors reaching

critical numberswere taking more of a stakeholder view of institutional logic,emphasizing the balance of

interestsof internal and external stakeholders.

Research limitations/implications –This paper is limited to selected Taiwanese electronics

companies over a two-year time frame, and charitable donations are the only proxy of corporatesocial

responsibility (CSR) activity. The paper suggests that, as predicted by stakeholder theory and critical

mass theory, companieswith boards composed of at least three female directors makehigher charitable

donations.

Practical implications –This paper indicates that female directors on the board should have more

voiceson the board regarding the necessity and importanceof CSR.

Originality/value –The paper contributes to existingliterature by looking into the effects of ownership

structureand board gender diversity on charitable donations.

Keywords Corporate social responsibility, Ownership structure, Board gender diversity,

Charitable donation, Critical mass theory

Paper type Research paper

Introduction

The 2008 global financial crisis has led to greater attention towards corporate governance,

in which the board of directors plays a crucial role, especially during times of crisis (Cheng,

2008). Bernardi et al. (2009) found that a higher percentage of women on the board of

directors of Fortune 500 firms was associated with the corporation being included in

Ethisphere Magazine’s list of the World’s Most Ethical Companies. However, a survey by

Corporate Women Directors International (CWDI) in 2015 found that women held an

average of just 9.8 per cent of board seats in 19 Asia-PacificEconomic Cooperation (APEC)

economies. That is, women still hold very few seats on the board, and men dominate in

board positions for top ranking companies in APEC economies. Although the issue of how

board gender diversity affects corporate social responsibility (CSR) has attracted

researchers’ attention in recent years, most empirical data have come from the USA and

from European countries, andthe effect of firm performance on CSR activities has been little

explored in the Asia-Pacific region. Therefore, we have studied how board gender diversity

impacts CSR in the electronics industryin Taiwan. We have selected this particular industry

Ting-Ling Lin is based at

National Taipei University,

Sanxia, Taiwan.

Heng-Yih Liu is based at

the Yuan Ze University

College of Management,

Chung-Li, Taiwan.

Chi-Jui Huang is Associate

Professor at the

Department of Finance and

Cooperative Management,

National Taipei University,

Sanxia, Taiwan.

Yu-Chiung Chen is based

at National Taipei

University, Sanxia, Taiwan.

Received 17 December 2016

Revised 2 July 2017

17 September 2017

12 January 2018

Accepted 26 February 2018

The authors gratefully

acknowledge financial support

from the Ministry of Science

and Technology, Taiwan

(NSC-99-2410-H-305-004-MY2).

DOI 10.1108/CG-12-2016-0229 VOL. 18 NO. 4 2018, pp. 655-670, ©Emerald Publishing Limited, ISSN 1472-0701 jCORPORATE GOVERNANCE jPAGE 655

because of its contribution to Taiwan’seconomic growth in recent decades, and firms in this

industry continue to enjoy tremendous growth. Although there are many forms of CSR

activity, in this study, we focus on charitable donation, which has increasingly been

regarded as an important CSR activity (Wang etal., 2015).

Carrying out CSR activities grants a firm legitimacy, as this act responds to societal

expectations (Coupland, 2005;Palazzo and Scherer, 2006). Gaining legitimacy means that

the firm’s behaviour is socially accepted and that the existence of the firm has fulfilled the

various interests of different stakeholders in the society. CSR can take many forms.

Corporate philanthropy, for example, is widespread not only in large transnational

companies but also in small and medium-sized companies across the world. Firms can

conduct CSR, for example, by voluntarily contributing valuable resources to supporting

public welfare (e.g. financial support for schools and families in remote areas or disaster

relief). CSR refers to cash, materials and time given to help people with whom one has no

specific connection and without expectation of direct reciprocity (Wang et al.,2015). Firms

can contribute valuable resources to charitable organizations or establish their own

foundations in their endeavour to gain competitive advantage (Porter and Kramer,2002). In

doing so, firms that implement philanthropic projects effectively differentiate themselves by

building up a philanthropic image that reflects well on potential customers as well as

societal stakeholders. For instance, one private bank in Taiwan that was a latecomer in

issuing a privileged credit card launched a campaign stating that it would contribute some

of its profits to building libraries in schools in remote areas. This philanthropic move

attracted many wealthy customers, and the bank now has substantial market share as well

as a good reputation among the beneficiaries of its CSR in remote areas. As can be seen,

firms therefore engage in philanthropicinitiatives for legitimacy (Gautier and Pache, 2015).

The study has been contextualized in Taiwan, a newly industrialized Asian economy, and

this article examines the globally important and competitive Taiwanese electronics industry,

giving us the opportunity to investigate the links among gender diversity in the boardroom,

corporate governance, and philanthropic donation in these competitive firms. As the link

between gender diversity and philanthropic donation is an issue of practical global

relevance in the context of CSR research,this study makes a number of contributions to the

relevant literature. First, we open the black box of ownership structure to examine the

impact of major stockholders on CSR. Second, this paper adds to the scarce empirical

evidence on the topic of board gender diversity. Most articles that examine the effect of

board gender composition on governance and CSR use data from Western countries. This

article provides evidence from Taiwan, widening our knowledge of gender diversity in the

boardroom and corporate philanthropy in Asia. Then, we explore the firm-level drivers of

corporate philanthropy. Our resultsshow that the presence of at least three female directors

on a board is positively correlated to CSR because women are more inclined towards

altruism (Kamas et al., 2008; Lipka, 2015). A survey by Bank of America Merrill Lynch also

indicated that, in regard to charity donations, women are more generous than men. The

study found that more women than men contribute financially and volunteer their time to

causes (Lipka, 2015). Our outcome suggests that the interests of female directors are

possibly more aligned with those of otherstakeholders, while domestic institutional investors

are possibly more focusedon the profit maximization of shareholders.

Theoretical background and hypotheses

The firm that ponders whether to engage in CSR activities faces the conflict of interests

among managers, shareholders andstakeholders (Rees and Rodionova, 2015). Managerial

and various other types of ownership result in different concerns and interests. Therefore,

the ownership structure of corporations is an essential factor when investigating corporate

philanthropy.

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