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

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.

Board diversity and systematic risk: evidence from emerging markets

“…These findings indicate that members with specific skills on the board reduce systematic risk. This evidence is consistent with Gallego-Álvarez and Pucheta-Martínez (2022), which suggest that these board characteristics have resulted in decision-making aligned with lower corporate risk. Boards with members with different expertise can more effectively restrict excessive risk-taking (Liu and Sun, 2021).…”

“…One stream of literature finds that board diversity brings valuable resources to the board and improves the monitoring of managers, reducing systematic risk (Arayssi et al. , 2016; Gallego-Álvarez and Pucheta-Martínez, 2022; Nadeem et al. , 2019; Shakil, 2021).…”

CEO attention and sustainable development: An analysis of its influence on firm's sustainability orientation

“…We operationalised sustainability orientation using two types of indicators: one from the official database and the other from content analysis. In research based on secondary data, it is common to rely on convincing indicators to operationalise the constructs (Gallego‐Alvarez & Pucheta‐Martínez, 2022; Martínez‐Ferrero & García‐Meca, 2020).…”

“…For example, individual factors include personal values, self-identity, sustainability conceptions, social orientation, and altruism (Corral-Verdugo et al, 2009;Prados-Peña et al, 2023). Firm-level drivers include the firm's absorptive capacity, top management support and culture, leadership attitudes and behaviours, and innovation characteristics (Gallego-Alvarez & Pucheta-Martínez, 2022;Martínez-Ferrero & García-Meca, 2020). External antecedents include the institutional environment, stakeholder engagement, and firm reputation (Danso et al, 2020;Li et al, 2014).…”

Board structure policy, board diversity and social sustainability in the logistics and transportation sector

“…the overall number of directors). According to earlier studies, board cultural diversity reflects the ratio of board members with different cultural backgrounds rather than the locations of international headquarters [4] (Gallego-Álvarez and Pucheta-Martínez, 2022; Martínez-Ferrero et al. , 2021).…”