Women directors’ propensity towards risk in technology firms

• Pages: 353-367
• Published date: 03 April 2018
• DOI: https://doi.org/10.1108/CG-09-2017-0213
• Date: 03 April 2018
• Author: Syed Shafqat Mukarram,Tahira Ajmal,Abubakr Saeed
• Subject Matter: Strategy,Corporate governance

Women directors’propensity towards risk

in technology firms

Syed Shafqat Mukarram, Tahira Ajmal and Abubakr Saeed

Abstract

Purpose –This study aims to investigate theimpact of the presence of women directors on firm’s risk-

taking behavior in industries where innovation is pivotal and how this impact varies across ownership

structure.

Design/methodology/approach –A sample of 71 listed technology firms on the National Stock

Exchange of India for the periodof 2008 to 2013 was used. Generalized method of moment estimation

techniquewas used for data analysis.

Findings –Resultsreveal a positive impact of the presence of women directorson technology firms’ risk-

taking behavior measured in terms of R&D spending, which is in contrast to the traditional notion that

women are risk-averse.Further, results also reveal that family ownership negatively affectsthe impact of

the presenceof women directors on risk takingin technology firms.

Practical implications –The findings of the studysuggest that females are risk takers in the contextof

R&D-intensive technologyfirms, thus providing new insight for policymakersto formulate more effective

board genderdiversity policies.

Originality/value –Based on the integration of agency and behavioral theories, it is suggested that

female executivesmay be risk-averse or risk-takers depending on contextualfactors such as innovation

and ownership,which drive the impact of the presenceof women directors on firms’ risk-takingbehavior.

Keywords Innovation, Women directors, Ownership, Risk-taking

Paper type Research paper

1. Introduction

Debate on gender diversity at the corporate board level is growing in the board literature

that spells out various functions of board room gender diversity. Gender-diverse boards are

more efficient in monitoring of agents and ensure that firms maintain the ethical standards,

thus minimizing the ineffective use of shareholders’ funds that can be misused (Galbreath,

2011). In the same vein, Adams and Ferreira (2009) suggested that women directors are

not from the “old boys club” and it closely relates to the idea of independent directors.

Another important feature is thatwomen on board create value by bringing different opinion,

perspective and experience to the table (Mathisen et al., 2013) which leads to better

decision-making (Davies,2011). In addition, self-evident social justice view is that a gender-

diverse board is a step toward equal opportunities for females at the upper echelons of the

firm (Dowling and Aribi, 2013).

Financial decisions and economic interactions involve some sort of risk-return trade-off that

requires proper assessment and accordingly execution of these decisions (Shim and

Siegel, 1987). Risk choices of board members are likely to shape such decisions and

actions. Corporate board members have different characteristics like beliefs, personalities,

gender, ethnicity, qualification, etc. These characteristics, particularly gender, may be able

to explain different risk-taking choices of firms (Sila et al.,2016). The influence of women

directors on firm decision-making and outcomes including firm’s risk-taking both deserve

Syed Shafqat Mukarram is

PhD Scholar at the

Department of

Management Sciences,

COMSATS Institute of

Information Technology,

Islamabad, Pakistan.

Tahira Ajmal and

Abubakr Saeed are both

based at the Department of

Management Sciences,

COMSATS Institute of

Information Technology,

Islamabad, Pakistan.

Received 10 September 2017

Revised 15 November 2017

Accepted 30 November 2017

DOI 10.1108/CG-09-2017-0213 VOL. 18 NO. 2 2018, pp. 353-367, ©Emerald Publishing Limited, ISSN 1472-0701 jCORPORATE GOVERNANCE jPAGE 353