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Board diversity, financial flexibility and corporate innovation: evidence from China

Author

Listed:
  • Haroon ur Rashid Khan

    (Nanjing University of Information Science and Technology)

  • Waqas Bin Khidmat

    (Air University Islamabad)

  • Sadia Awan

    (Employees Housing Scheme (EHS))

Abstract

In this study, we use a sample of Chinese companies to examine the effect of board diversity on the corporate innovation measured through propensity to patents and patents conversion rate. Our findings show that corporate innovation is significantly positively associated with the female director’s share, as well as the young director’s share on the corporate boards, while we find an insignificant effect of foreign national director share on corporate innovation. Additionally, the association between board diversity and innovation is tested under different financial flexibility choices based on cash and leverage combinations. Interestingly, the positive effect of board diversity on corporate innovation is enhanced with financial flexible firm. This study has importance for the corporate board and policymakers. An increase in diversity in terms of female representation and young directors bring creativity, voice, and strive in the boardroom. The regulators are suggested to enact rules/guidelines to have a mandatory presence of females on board to enhance competition and increase transparency.

Suggested Citation

  • Haroon ur Rashid Khan & Waqas Bin Khidmat & Sadia Awan, 2021. "Board diversity, financial flexibility and corporate innovation: evidence from China," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(2), pages 303-326, June.
    • Handle: RePEc:spr:eurasi:v:11:y:2021:i:2:d:10.1007_s40821-020-00171-9
    DOI: 10.1007/s40821-020-00171-9
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    Cited by:

    1. Shoukat Ali & Ramiz ur Rehman & Wang Yuan & Muhammad Ishfaq Ahmad & Rizwan Ali, 2022. "Does foreign institutional ownership mediate the nexus between board diversity and the risk of financial distress? A case of an emerging economy of China," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 12(3), pages 553-581, September.
    2. Alfonso Expósito & Amparo Sanchis-Llopis & Juan A. Sanchis-Llopis, 2022. "Manager gender, entrepreneurial orientation and SMEs export and import propensities: evidence for Spanish businesses," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 12(2), pages 315-347, June.
    3. Yang, Hanping & Xue, Kunkun, 2023. "Board diversity and the marginal value of corporate cash holdings," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).

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