IDEAS home Printed from https://ideas.repec.org/a/wly/sustdv/v30y2022i6p1462-1476.html
   My bibliography  Save this article

Sustainable development through the effect of board diversity and CEO duality on corporate risk: Does the state‐owned enterprises matter?

Author

Listed:
  • Isabel Gallego‐Álvarez
  • María Consuelo Pucheta‐Martínez

Abstract

To date, not much research has been devoted to analyzing the impact of some corporate governance mechanisms (board diversity and CEO duality) on corporate risk. Consequently, we believe that it is necessary to study such topic in greater depth. The aim of this research is to provide further evidence of the impact that board diversity, specifically board specific skills, board tenure and board cultural diversity, as well as CEO duality, have on corporate risk. Additionally, our study also examines the moderating role of the state‐owned enterprises (SOEs) on the association between the three characteristics of board diversity and corporate risk, and between CEO duality and corporate risk. The theoretical framework used in this research is based on agency theory and resource dependence theory. The findings show that board specific skills and board cultural diversity have a negative effect on corporate risk, while board tenure does not affect it. On the other hand, CEO duality has a negative effect, which is against the prediction of our hypothesis. Our evidence also reveals a negative moderating effect of SOEs on the impact of board specific skills, board tenure and board cultural diversity on corporate risk. Additionally, SOEs do not moderate the negative impact of CEO duality on corporate risk. Our research contributes to past literature on corporate risk by concluding that some corporate governance mechanisms like board specific skills, board cultural diversity and CEO duality lessen it. The moderating role performed by SOEs with the relationship between board specific skills, board culture diversity, board tenure and corporate risk is also a relevant contribution.

Suggested Citation

  • Isabel Gallego‐Álvarez & María Consuelo Pucheta‐Martínez, 2022. "Sustainable development through the effect of board diversity and CEO duality on corporate risk: Does the state‐owned enterprises matter?," Sustainable Development, John Wiley & Sons, Ltd., vol. 30(6), pages 1462-1476, December.
    • Handle: RePEc:wly:sustdv:v:30:y:2022:i:6:p:1462-1476
    DOI: 10.1002/sd.2321
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/sd.2321
    Download Restriction: no
    File URL: https://libkey.io/10.1002/sd.2321?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Giovanna Michelon & Antonio Parbonetti, 2012. "The effect of corporate governance on sustainability disclosure," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 16(3), pages 477-509, August.
    2. Filippo Vitolla & Nicola Raimo & Michele Rubino, 2020. "Board characteristics and integrated reporting quality: an agency theory perspective," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(2), pages 1152-1163, March.
    3. Ali Uyar & Cemil Kuzey & Merve Kilic & Abdullah S. Karaman, 2021. "Board structure, financial performance, corporate social responsibility performance, CSR committee, and CEO duality: Disentangling the connection in healthcare," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(6), pages 1730-1748, November.
    4. repec:eme:mfppss:v:40:y:2014:i:8:p:787-803 is not listed on IDEAS
    5. Levi, Maurice & Li, Kai & Zhang, Feng, 2014. "Director gender and mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 28(C), pages 185-200.
    6. Amy J. Hillman & Albert A. Cannella & Ramona L. Paetzold, 2000. "The Resource Dependence Role of Corporate Directors: Strategic Adaptation of Board Composition in Response to Environmental Change," Journal of Management Studies, Wiley Blackwell, vol. 37(2), pages 235-256, March.
    7. Jin, Li & Myers, Stewart C., 2006. "R2 around the world: New theory and new tests," Journal of Financial Economics, Elsevier, vol. 79(2), pages 257-292, February.
    8. Hong Zou & Mike B Adams, 2008. "Corporate ownership, equity risk and returns in the People's Republic of China," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 39(7), pages 1149-1168, October.
    9. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    10. Pathan, Shams, 2009. "Strong boards, CEO power and bank risk-taking," Journal of Banking & Finance, Elsevier, vol. 33(7), pages 1340-1350, July.
    11. Nikos Vafeas, 2003. "Length of Board Tenure and Outside Director Independence," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(7‐8), pages 1043-1064, September.
    12. Bernile, Gennaro & Bhagwat, Vineet & Yonker, Scott, 2018. "Board diversity, firm risk, and corporate policies," Journal of Financial Economics, Elsevier, vol. 127(3), pages 588-612.
    13. Francisco Bravo, 2018. "Does board diversity matter in the disclosure process? An analysis of the association between diversity and the disclosure of information on risks," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 15(2), pages 104-114, May.
    14. Na Li & Aida Sijamic Wahid, 2018. "Director Tenure Diversity and Board Monitoring Effectiveness," Contemporary Accounting Research, John Wiley & Sons, vol. 35(3), pages 1363-1394, September.
    15. Junaid Haider & Hong-Xing Fang, 2018. "CEO power, corporate risk taking and role of large shareholders," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 10(1), pages 55-72, April.
    16. Jamie L. Hoelscher & Scott E. Seavey, 2014. "Auditor industry specialization and corporate risk-taking," Managerial Auditing Journal, Emerald Group Publishing, vol. 29(7), pages 596-620, July.
    17. Anthony Moung Yin Chan & Guoping Liu & Jerry Sun, 2013. "Independent audit committee members’ board tenure and audit fees," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(4), pages 1129-1147, December.
    18. Nikos Vafeas, 2003. "Length of Board Tenure and Outside Director Independence," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30, pages 1043-1064.
    19. Nicholas van der Walt & Coral Ingley, 2003. "Board Dynamics and the Influence of Professional Background, Gender and Ethnic Diversity of Directors," Corporate Governance: An International Review, Wiley Blackwell, vol. 11(3), pages 218-234, July.
    20. Wang, Cong & Xie, Fei & Zhu, Min, 2015. "Industry Expertise of Independent Directors and Board Monitoring," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 50(5), pages 929-962, October.
    21. repec:eme:mfppss:mf-09-2018-0443 is not listed on IDEAS
    22. Benjamin E. Hermalin & Michael S. Weisbach, 2003. "Boards of directors as an endogenously determined institution: a survey of the economic literature," Economic Policy Review, Federal Reserve Bank of New York, vol. 9(Apr), pages 7-26.
    23. Brickley, James A. & Coles, Jeffrey L. & Terry, Rory L., 1994. "Outside directors and the adoption of poison pills," Journal of Financial Economics, Elsevier, vol. 35(3), pages 371-390, June.
    24. Perryman, Alexa A. & Fernando, Guy D. & Tripathy, Arindam, 2016. "Do gender differences persist? An examination of gender diversity on firm performance, risk, and executive compensation," Journal of Business Research, Elsevier, vol. 69(2), pages 579-586.
    25. Helen Kang & Mandy Cheng & Sidney J. Gray, 2007. "Corporate Governance and Board Composition: diversity and independence of Australian boards," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(2), pages 194-207, March.
    26. Nooraisah Katmon & Zam Zuriyati Mohamad & Norlia Mat Norwani & Omar Al Farooque, 2019. "Comprehensive Board Diversity and Quality of Corporate Social Responsibility Disclosure: Evidence from an Emerging Market," Journal of Business Ethics, Springer, vol. 157(2), pages 447-481, June.
    27. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    28. repec:eme:maj000:maj-02-2014-1000 is not listed on IDEAS
    29. Fara Azmat & Ruth Rentschler, 2017. "Gender and Ethnic Diversity on Boards and Corporate Responsibility: The Case of the Arts Sector," Journal of Business Ethics, Springer, vol. 141(2), pages 317-336, March.
    30. Jamie L. Hoelscher & Scott E. Seavey, 2014. "Auditor industry specialization and corporate risk-taking," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 29(7), pages 596-620, July.
    31. Wincent, Joakim & Anokhin, Sergey & Örtqvist, Daniel, 2010. "Does network board capital matter? A study of innovative performance in strategic SME networks," Journal of Business Research, Elsevier, vol. 63(3), pages 265-275, March.
    32. Jebran, Khalil & Chen, Shihua & Zhang, Ruibin, 2020. "Board diversity and stock price crash risk," Research in International Business and Finance, Elsevier, vol. 51(C).
    33. repec:eme:mfppss:v:39:y:2013:i:3:p:204-227 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jebran, Khalil & Chen, Shihua & Zhang, Ruibin, 2020. "Board diversity and stock price crash risk," Research in International Business and Finance, Elsevier, vol. 51(C).
    2. Farman Ali & Muhammad Ullah & Syed Tauseef Ali & Zhen Yang & Imran Ali, 2022. "Board Diversity and Corporate Investment Decisions: Evidence from China," SAGE Open, , vol. 12(2), pages 21582440221, June.
    3. Mollah, Sabur & Liljeblom, Eva & Mobarek, Asma, 2021. "Heterogeneity in independent non-executive directors' attributes and risk-taking in large banks," Journal of Corporate Finance, Elsevier, vol. 70(C).
    4. Ding Ning & Irfan-Ullah & Muhammad Ansar Majeed & Aurang Zeb, 2022. "Board diversity and financial statement comparability: evidence from China," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 12(4), pages 743-801, December.
    5. James, Hui Liang & Ngo, Thanh & Wang, Hongxia, 2021. "Independent director tenure and corporate transparency," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    6. Tran Phuong, Thao & Le, Anh-Tuan & Ouyang, Puman, 2022. "Board tenure diversity and investment efficiency: A global analysis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).
    7. Ammar Ali Gull & Ammar Abid & Rashid Latief & Muhammad Usman, 2021. "Women on board and auditors’ assessment of the risk of material misstatement," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(4), pages 679-708, December.
    8. Bowo Setiyono & Amine Tarazi, 2018. "Does Diversity of Bank Board Members Affect Performance and Risk? Evidence from an Emerging Market," CSR, Sustainability, Ethics & Governance, in: Belén Díaz Díaz & Samuel O. Idowu & Philip Molyneux (ed.), Corporate Governance in Banking and Investor Protection, chapter 0, pages 185-218, Springer.
    9. Hisham Farag & Chris Mallin, 2016. "The Impact of the Dual Board Structure and Board Diversity: Evidence from Chinese Initial Public Offerings (IPOs)," Journal of Business Ethics, Springer, vol. 139(2), pages 333-349, December.
    10. Asad, Muhammad & Akbar, Saeed & Li, Jing & Shah, Syed Zulfiqar Ali, 2023. "Board diversity and corporate propensity to R&D spending," International Review of Financial Analysis, Elsevier, vol. 89(C).
    11. Chia-Jane Wang, 2012. "Board size and firm risk-taking," Review of Quantitative Finance and Accounting, Springer, vol. 38(4), pages 519-542, May.
    12. Gilani, Usman & Keasey, Kevin & Vallascas, Francesco, 2021. "Board financial expertise and the capital decisions of US banks," Journal of Corporate Finance, Elsevier, vol. 71(C).
    13. Ahmadi, Ali & Nakaa, Nejia & Bouri, Abdelfettah, 2018. "Chief Executive Officer attributes, board structures, gender diversity and firm performance among French CAC 40 listed firms," Research in International Business and Finance, Elsevier, vol. 44(C), pages 218-226.
    14. Michael R. Janse van Vuuren & Nadia Mans-Kemp & Suzette Viviers, 2023. "Who monitors the monitors? An examination of listed companies in an emerging market context," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 20(3), pages 213-230, September.
    15. Laura Baselga-Pascual & Antonio Trujillo-Ponce & Emilia Vähämaa & Sami Vähämaa, 2018. "Ethical Reputation of Financial Institutions: Do Board Characteristics Matter?," Journal of Business Ethics, Springer, vol. 148(3), pages 489-510, March.
    16. Peter J Baldacchino & Jean Paul Abela & Norbert Tabone & Simon Grima, 2021. "Board of Director Diversity and Its Corporate Governance Implications in Maltese Equity-Listed Companies," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 11(4), pages 37-65.
    17. Md Arafat Hossain & Elaine Yen Nee Oon, 2022. "Board leadership, board meeting frequency and firm performance in two‐tier boards," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(3), pages 862-879, April.
    18. Franco Ernesto Rubino & Paolo Tenuta & Domenico Rocco Cambrea, 2017. "Board characteristics effects on performance in family and non-family business: a multi-theoretical approach," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 21(3), pages 623-658, September.
    19. Nguyen, Thi Tuyet Mai, 2017. "An examination of independent directors in Vietnam," OSF Preprints ay6dv, Center for Open Science.
    20. Bill B. Francis & Iftekhar Hasan & Qiang Wu, 2012. "Do corporate boards matter during the current financial crisis?," Review of Financial Economics, John Wiley & Sons, vol. 21(2), pages 39-52, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:sustdv:v:30:y:2022:i:6:p:1462-1476. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1099-1719 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.