Measuring the impact of board gender and cultural diversity on corporate governance and social performance: evidence from emerging markets

Figures & data

Figure 1. Research framework.

Source: Authors.

Table 1. The sample.

Countries	Number of companies	Country clusters
Argentina	1	Latin America
Brazil	27	Latin America
Chile	16	Latin America
Colombia	5	Latin America
Czech Republic	2	Eastern Europe
Egypt	2	Middle East
Greece	2	Eastern Europe
Hungary	2	Eastern Europe
India	49	Southern Asia
Indonesia	24	Southern Asia
South Korea	41	Confucian Asia
Malaysia	23	Southern Asia
Mexico	20	Latin America
Peru	1	Latin America
Philippines	13	Southern Asia
Poland	3	Eastern Europe
Qatar	3	Middle East
Russia	13	Eastern Europe
Saudi Arabia	4	Middle East
South Africa	30	Anglo
Taiwan	64	Confucian Asia
Thailand	17	Southern Asia
Turkey	10	Middle East
United Arab Emirates	1	Middle East
Total	373

Source: Thomson Reuters (2019).

Table 2. Definitions and measurement of the variables.

Variable	Variable names	Definition	Measurement	Data source
Dependent variables
Corporate governance performance	GPS	It measures the quality of a firm's systems and processes designed by the board. It also reflects a firm's capability through best management practices.	Thomson Reuters’ business classification	Thomson Reuters
Social performance	SPS	It measures a firm’s capability to maintain a supportive business culture with trust and loyalty for its workforce, customers, and society, based on the best management practices. It also shows the firm’s reputation and the health of operational capacity generating long-term shareholder value.	Thomson Reuters’ business classification	Thomson Reuters
Independent variables
Board cultural diversity	BCD	A ratio of board members having a culturally diverse background from the location of the corporate headquarters.	Percentage of board members having a culturally diverse background from the location of the corporate headquarters	Thomson Reuters
Board gender diversity	BGD	Number of female board members	Percentage of female board members	Thomson Reuters
Board-specific controls
Board size	BS	The total number of board members at the end of the fiscal year	The natural logarithms of the total board members	Thomson Reuters
Independent board membership	IBM	Percentage of independent board members as reported by the company	The natural logarithms of the percentage of independent board member	Thomson Reuters
CEO-chairman separation	CCS	CEO simultaneously chairing the board or not	It is a dummy variable. It takes value ‘1’ if CEO is also the chairman, ‘0’ otherwise.	Thomson Reuters
Firm-specific controls
Firm profitability	ROA	Return on asset	Net income to total assets	Thomson Reuters
Firm size	SIZE	Total assets	Total assets	Thomson Reuters
Leverage	LEV	Total liabilities to total assets	Total liabilities to total assets	Thomson Reuters
Broad country of origin	ClusterID	A categorical variable that shows the country cluster groups for firms according to the GLOBE classification.	Anglo Confucian Asia Eastern Europe Latin America Middle East Southern Asia	Globe Database

Source: Authors.

Table 3. Descriptive statistics and correlation matrix.

Variable	Mean	S.D.	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16
1. Corporate governance performance	48.33	23.07	1
2. Social performance	44.95	26.39	0.48*	1
3. Board cultural diversity (%)	7.52	16.49	0.22*	0.11*	1
4. Board gender diversity (%)	9.56	10.92	0.15*	0.13*	−0.02	1
5. Board size	2.27	0.35	0.05*	0.19*	−0.05*	0.08*	1
6. Independent board membership	3.64	0.49	0.17*	0.11*	−0.07*	0.12*	−0.15*	1
7. CEO-chairman separation	0.26	0.44	−0.07*	0.05*	−0.05*	−0.08*	0.02	0.05*	1
8. Firm profitability	0.09	0.08	0.01	0.04	0.08*	0.06*	−0.09*	0.11*	−0.01	1
9. Firm size	22.18	1.32	0.11*	0.23*	−0.00	−0.21*	0.27*	−0.10*	0.07*	−0.29*	1
10. Leverage	0.22	0.16	0.03	0.01	−0.02	0.04*	0.10*	−0.10*	−0.01	−0.35*	0.26*	1
11. Anglo	0.08	0.27	0.11*	0.11*	−0.02	0.37*	0.10*	0.24*	−0.10*	0.05*	−0.26*	−0.08*	1
12. Confucian Asia	0.29	0.46	−0.07*	−0.19*	−0.01	−0.19*	−0.15*	−0.09*	0.06*	−0.12*	−0.02	−0.12*	−0.19*	1
13. Eastern Europe	0.06	0.24	0.02	−0.02	0.02	−0.05*	0.06*	−0.12*	−0.06*	−0.01	0.20*	0.00	−0.07*	−0.16*	1
14. Latin America	0.18	0.38	0.04*	0.08*	0.04*	−0.01	0.08*	−0.14*	0.09*	−0.09*	0.06*	0.15*	−0.13*	−0.29*	−0.12*	1
15. Middle East	0.06	0.23	−0.02	−0.09*	−0.04	−0.12*	0.02	−0.14*	−0.14*	0.01	0.10*	−0.00	−0.07*	−0.15*	−0.06*	−0.11*	1
16. Southern Asia	0.33	0.47	−0.03	0.11*	−0.00	0.07*	−0.02	0.18*	0.02	0.16*	−0.04	0.04*	−0.20*	−0.45*	−0.18*	−0.32*	−0.17*	1

Note: *p < 0.01.

Source: Authors.

Table 4. Variance inflation factors (VIF).

Variables	VIF	1/VIF
SIZE	1.29	0.78
ROA	1.26	0.80
LEV	1.22	0.82
BS	1.13	0.89
BGD	1.11	0.90
IBM	1.07	0.93
BCD	1.03	0.97
CCS	1.02	0.98
Mean VIF	1.14

Source: Authors.

Table 5. Results of panel data analysis.

		Model 1 (Corporate governance performance)			Model 2 (Social performance)
Variables	Variable name	Fixed effect (standard errors)	Fixed effect (Driscoll-Kraay standard errors)	Mixed-effects (REML)	Fixed effect (standard errors)	Fixed effect (Driscoll-Kraay standard errors)	Mixed- effects (REML)
Independent variables
Board cultural diversity	BCD	0.044* (0.03)	0.044* (0.023)	0.099** (0.024)	−0.046 (0.028)	−0.046 (0.034)	0.0025 (0.022)
Board gender diversity	BGD	0.272** (0.038)	0.272** (0.053)	0.280** (0.040)	0.403** (0.042)	0.403** (0.061)	0.047 (0.038)
Board-specific controls
Board size	BS	−4.431** (1.434)	4.431 (2.532)	−2.932** (1.334)	−0.321 (1.594)	−0.321 (1.639)	2.005 (1.265)
Independent board membership	IBM	8.103** (0.83)	8.103** (0.947)	7.074** (0.793)	5.515** (0.922)	5.515** (1.645)	−0.287 (0.749)
CEO-chairman separation	CEO	–		0.643 (3.232)	–		6.861* (3.868)
Firm-specific controls
Firm profitability	ROA	−12.19** (5.177)	−12.19** (3.694)	−5.332 (4.886)	−39.58** (5.755)	−39.58** (3.543)	−4.368 (4.555)
Firm size	SIZE	2.650** (0.84)	2.650** (0.803)	3.207** (0.768)	14.39** (0.934)	14.39** (1.683)	4.712** (0.809)
Leverage	LEV	7.320** (3.582)	7.320** (3.122)	4.338 (3.396)	−8.091** (3.982)	−8.091** (2.87)	−5.316 (3.250)
Year				0.109 (0.240)			2.752** (0.172)
Constant		−32.29* (18.92)	−32.29 (17.84)	−46.18** (17.01)	−290.6** (21.03)	−290.6** (44.81)	−94.81** (18.50)
ICC (Level 3, cluster)	(rhocluster)			0.0358			0.146
ICC (Level 2, firm within cluster)	(rhofirm)			0.8734			0.937
Observations		3,079	3,079	3,079	3,079	3,079	3,079
Number of firms		373	373	373	373	373	373
Number of clusters				6			6
R-squared		0.08	0.08		0.176	0.176

Note: REML, Linear trend model with random intercepts and slopes, country clusters at level 3, firms at level 2, and years at level 1.

Standard errors in parentheses.

*p < 0.05, **p < 0.01.

Source: Authors.

Table 6. Tests of strict exogeneity.

Variables	Variable name	Model 1 (Corporate governance performance)	Model 2 (Social performance)
Board cultural diversity	BCD	0.054* (0.028)	−0.013 (0.030)
Board gender diversity	BGD	0.319** (0.054)	0.182** (0.058)
Board size	BS	−4.836** (1.695)	−0.030 (1.820)
Independent board membership	IBM	6.585** (1.027)	3.750** (1.102)
CEO-chairman separation	CCS
Firm profitability	ROA	−5.535 (5.753)	−29.430** (6.175)
Firm size	SIZE	1.267 (1.423)	7.953** (1.528)
Leverage	LEV	10.122* (4.881)	−10.938* (5.240)
Board cultural diversity	BCDt+1	−0.027 (0.029)	−0.037 (0.031)
Board gender diversity	BGDt+1	0.005 (0.052)	0.281** (0.055)
Board size	BSt+1	0.907 (1.704)	−1.238 (1.829)
Independent board membership	IBMt+1	2.749** (1.056)	3.433** (1.133)
CEO-chairman separation	CCSt+1
Firm profitability	ROAt+1	−14.622* (6.062)	−15.178* (6.507)
Firm size	SIZEt+1	0.199 (1.445)	5.769** (1.551)
Leverage	LEVt+1	−0.393 (4.805)	−0.216 (5.158)
Constant		−11.838 (22.825)	−280.616** (24.501)
F-test		22.67	25.30
R-squared		0.062	0.065

Note: This table presents a fixed-effects estimation of the relationship between future corporate governance structure and the current GPS and SPS. All variables (BCD, BGD, BS, IBM, CCS, ROA, SIZE, and LEV) are one year ahead (future values).

Standard errors in parentheses.

*p < 0.05, **p < 0.01.

Source: Authors.

Table 7. Results of GMM modeling.

		Model 1 (Corporate governance performance)			Model 2 (Social performance)
Variables	Variable names	OLS	Dynamic OLS	System GMM	OLS	Dynamic OLS	System GMM
Independent variables
Corporate governance performancet-1	GPS t-1		0.847** (0.010)	0.625** (0.034)
Corporate governance performancet-2	GPS t-2			0.134** (0.028)
Social performancet-1	SPS t-1					0.928** (0.007)	0.851** (0.033)
Social performancet-2	SPS t-2						0.037 (0.028)
Board cultural diversity	BCD	0.322** (0.024)	0.058** (0.013)	0.099** (0.033)	0.203** (0.027)	0.021* (0.011)	0.016 (0.018)
Board gender diversity	BGD	0.346** (0.037)	0.047* (0.020)	0.182** (0.055)	0.433** (0.042)	0.037* (0.017)	0.021 (0.041)
Board-specific controls
Board size	BS	1.341 (1.171)	−0.093 (0.635)	0.997 (2.237)	9.724** (1.330)	0.642 (0.544)	5.105** (1.683)
Independent board membership	IBM	9.045** (0.814)	1.757** (0.450)	3.283** (1.457)	6.938** (0.924)	0.136 (0.379)	−1.070 (1.096)
CEO-chairman separation	CCS	−3.946** (0.882)	−1.143* (0.474)	−4.398** (2.099)	2.186* (1.001)	−0.114 (0.402)	−2.310 (1.821)
Firm-specific controls
Firm profitability	ROA	14.194** (5.747)	1.939 (3.138)	−0.297 (8.385)	43.484** (6.524)	0.809 (2.688)	2.014 (6.691)
Firm size	SIZE	2.829** (0.328)	0.301 (0.178)	0.248 (0.448)	5.608** (0.372)	0.245 (0.155)	0.480 (0.369)
Leverage	LEV	4.785 (2.630)	1.348 (1.408)	−1.056 (2.755)	−3.783 (2.985)	0.606 (1.195)	−2.802 (2.009)
Constant		−56.536** (7.939)	−5.477 (4.291)	0.000 (0.000)	−135.223** (9.012)	−1.807 (3.756)	−3.883 (8.065)
Observations		3079	2753	2,420	3079	2753	2,420
Number of firms				372			372
R-squared		0.13	0.77		0.15	0.87
F-test (p value)		0.000	0.000		0.000	0.000
Number of instruments				345			345
Arellano–Bond AR(1)				−8.06**			−6.12**
Arellano–Bond AR(2)				0.40			0.82
Hansen test (p value)				0.461			0.423
Difference-in-Hansen for GMM style (p value)				0.692			0.556
Difference-in-Hansen for IV style (p value)				0.899			0.562

Note: Year and cluster dummies are treated as exogenous variables, and they are unreported.

The model is estimated with system GMM, two-step, Windmeijer correction.

Standard errors in parentheses.

*p < 0.05, **p < 0.01.

Source: Authors.

Table 8. Summary of the hypotheses.

Hypothesis	Variable name	Expected sign	Actual sign	Level of support
Corporate governance performance
H1a: There is a positive association between board cultural diversity and corporate governance performance.	BCD	(+)	(+)*	Supported
H2a: There is a positive association between board gender diversity and corporate governance performance.	BGD	(+)	(+)*	Supported
Board size	BS	(+)	(+)
Independent board membership	IBM	(+)	(+)*
CEO-chairman separation	CCS	(-)	(-)*
Firm profitability	ROA	(+/-)	(-)
Firm size	SIZE	(+)	(+)
Leverage	LEV	(+)	(-)
Social performance
H1b: There is a positive association between board cultural diversity and social performance.	BCD	(+)	(+)	Not supported
H2b: There is a positive association between board gender diversity and social performance.	BGD	(+)	(+)	Not supported
Board-specific controls
Board size	BS	(+)	(+)*
Independent board membership	IBM	(+)	(-)
CEO-chairman separation	CCS	(-)	(-)
Firm-specific controls
Firm profitability	ROA	(+/-)	(+)
Firm size	SIZE	(+)	(+)
Leverage	LEV	(+)	(-)

Note: *p < 0.05.

Source: Authors.

Table

Author(s)	Board diversity dimension	Theoretical perspective(s)	Sample/Method	Outcome
Disli et al. (2022)	Gender diversity	Institutional theory, resource dependency theory	439 publicly-listed non-financial companies across 20 emerging countries for the period of 2010-2019.	Board gender diversity has a positive effect on sustainability performance across a broad spectrum of sustainability indicators.
Griffin et al. (2021)	Gender diversity	Agency theory, institutional theory, and stakeholder theory	12,000 firms from 45 countries over 2001-2014; a hierarchical linear model with HLM approach.	Firms with gender-diverse boards have a higher innovative efficiency.
Jiang et al. (2021)	Demographic and gender diversity	Agency theory	Based on 6,029 unbalanced firm observations from non-financial Chinese listed firms at the Shenzhen and Shanghai exchanges for the period of 2010-2019; a fixed-effect panel regression model.	Gender diversity has a positive impact on corporate performance.
Jouber (2021)	Gender and nationality diversity	Stakeholder theory	2,544 non-financial listed firms from 42 countries over the period of 2013–2017; panel GMM.	Board gender and nationality diversity have positive effects on CSR performance.
Kilic and Kuzey (2016)	Gender diversity	Resource dependence theory and agency theory	149 Turkish listed non-financial firms from 2008 to 2012; 2SLS, LIML, GMM.	Gender diversity is positively related to firms' financial performance.
Latif et al. (2020)	Cultural and demographic diversity	Agency and stakeholder theory	100 listed firms in Malaysia from 2013 to 2015; hierarchical Tobit regression with robust standard error.	Board religious diversity has a positive influence on environmental disclosures and sustainability performance.
Low et al. (2015)	Gender diversity	Agency theory	308 observations from Hong Kong, 2941 from South Korea, 1241 from Malaysia, and 1013 from Singapore from 2012 to 2013; OLS regression.	Gender diversity on board has a positive effect on corporate performance.
Naciti (2019)	Gender and nationality diversity	Agency theory and stakeholder theory	362 firms in 46 different countries; system GMM two-step estimator.	Both gender and national board diversity and separation of chairman and CEO roles indicate higher sustainability performance.
Nadeem et al. (2017)	Gender diversity	Stakeholder theory and resource dependency theory	374 Australian listed firms over 2010-2014; system GMM.	Gender diversity has a positive effect on sustainability performance.
Olthuis and van den Oever (2020)	Ideological diversity	Upper echelons theory	372 Dutch municipality boards from 2014 to 2017; fixed effects OLS regression.	A high level of ideological diversity leads to a lower CSR performance.
Prudêncio et al. (2020)	Demographic and gender diversity	Agency and stakeholder theory	194 firm-year observations in Brazil in 2016 and 2017; panel data analysis.	Gender diversity has a positive effect on CSR performance.
Selma et al. (2022)	Demographic diversity	Agency theory, institutional theory, and stakeholder theory	8,367 firm-year observations for listed Chinese firms in Shanghai or Shenzhen Stock Exchange for the 2010-2014 period; panel fixed effect.	Board demographic diversity has a positive effect on corporate giving.
Terjesen et al. (2016)	Gender diversity	Agency theory, resource dependency theory, and upper echelons theory	3,876 public firms in 47 countries in 2010; GMM.	Firms with more female directors have higher corporate performance.
Wasiuzzaman and Wan Mohammad (2020)	Gender diversity	Stakeholder theory	78 listed firms in Malaysia for the years 2005 to 2016; OLS regression.	Gender diversity has a positive effect on ESG scores.
Yarram and Adapa (2021)	Gender diversity	Token theory and the critical mass theory	ASX 300 Index firms over 2011-2016; GMM.	Gender diversity leads to more positive CSR activities.
Zahid et al. (2020)	Gender diversity	Stakeholder theory	878 listed companies in Malaysia from 2011 to 2013; OLS regression.	Gender diversity is positively associated with environmental, social, and economic dimensions of sustainability.
Zaid et al. (2020)	Nationality and gender diversity	Agency theory	34 listed Palestine firms over the 2013-2018 period; two-step system GMM.	Nationality and gender diversity have positive but insignificant effects on corporate sustainability-related actions.

Table

	Obs.	Pr (Skewness)	Pr (Kurtosis)	p-value
1. Corporate governance performance (GPS)	3281	0.75	0.00	0.00
2. Social performance (SPS)	3281	0.97	0.00	0.00
3. Board cultural diversity (BCD %)	3281	0.00	0.00	0.00
4. Board gender diversity (BGD %)	3281	0.00	0.00	0.00
5. Board size (BS)	3278	0.00	0.00	0.00
6. Independent board membership (IBM)	3081	0.00	0.00	0.00
7. CEO-chairman separation (CCS)	3281	0.00	0.00	0.00
8. Firm profitability (ROA)	3279	0.00	0.00	0.00
9. Firm size (SIZE)	3279	0.00	0.05	0.00
10. Leverage (LEV)	3279	0.00	0.00	0.00

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