The role of national culture in the impact of board gender diversity on firm performance: Evidence from a multi-country study. More specifically, the current study aims to investigate whether the effect of board gender diversity on firm performance is dependent on macro factors of national cultures. While the results of several studies have shown that board gender diversity improves firm performance (Vietnam: Nguyen et al. 2018);.
The results of meta-analysis studies suggest that the effect of board diversity on company performance depends on the context (Johnson et al., 2013, Pletzer et al., 2015). Therefore, we hypothesize that the effect of board gender diversity on firm performance depends on the national culture in which the firm operates. The effects of board diversity on firm performance tend to be presented as either positive or negative.
Data and Methodology
The final sample includes 255 companies in 46 countries with different cultural environments, including Australia, Austria, Belgium, Bermuda, Brazil, Canada, Chile, China, Colombia, Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Luxembourg, Malaysia, Mexico, Netherlands, Norway, Philippines, Poland, Portugal, Qatar, Russia, Saudi Arabia, Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Arab Emirates, United Kingdom and United States which were operational in 2008-2017. The countries represented in the sample also varied significantly in Hofstede's national cultural dimensions. Therefore, there is considerable heterogeneity in the sample in terms of both cultural environment and industry type.
Board size is measured as the total number of directors on the board (bsize), while firm size is measured as the logarithm of total sales (firmsize). Variable acronyms and their definitions are summarized in Table 1, while pooled sample descriptive statistics for the main variables used in the empirical analysis are presented in Table 2. There has been a long debate in the empirical literature on the endogeneity between table diversity and financial performance and their causal relationship.
This assumption is criticized for its unreliability (Adams and Ferreira, 2009, Nguyen et al., 2015, Wintoki et al., 2012), when concurrency and dynamic heterogeneity in the board structure–performance relationship are likely to occur. Although there is strong evidence in the literature suggesting such an influence (Wintoki et al., 2012), in many cases the authors of these studies did not control for all the main sources of endogeneity in the board structure–performance relationship. The System Generalized Method of Moment (GMM) model reduces the effect of heterogeneity (by including a first-order difference equation in the estimated system.
Equality, Diversity and Inclusion. of equations), simultaneity and dynamic endogeneity by taking into account the difference equation of the first order and the lagged values of the dependent variable in the main equation. (2) the presence of women on the board of directors may be related to the general culture of the countries and the acceptance of women as key players in the corporate world (for example, whether the company is male or female or how power distance is accepted in that country). ); and (3) if within-firm gender diversity differences are small, controlling for time-invariant firm effects in the performance equation tends to compensate for the effect of women on boards.
Results
Therefore, the results obtained support the first hypothesis that the positive impact of board diversity on firm performance is mitigated in high power distance countries applying only the Tobin's Q index. The moderating role of power distance on the relationship between board diversity and firm performance was not supported by other indices of firm performance. Like power distance, the masculinity dimension failed to provide a clear conclusion about its impact on firm performance.
It shows that the potential positive impact of board diversity on firm performance turns negative in a masculine society. Therefore, the results supported the second hypothesis that masculinity moderates the positive impact of board gender diversity on firm performance. Likewise, the results provided did not provide any clear evidence on the impact of individualism on firm performance.
The findings showed that having women on boards in countries characterized by highly individualistic values has a negative effect on company performance. It can be deduced from this that board diversity in societies with a highly individualistic culture can reduce corporate performance. Therefore, the third hypothesis, which discusses the attenuating impact of individualism on the impact of board diversity on firm performance, is supported.
This means that the fourth hypothesis, which claims that uncertainty avoidance enhances the positive effect of board diversity on firm performance, is supported. In other words, in societies with high levels of uncertainty avoidance where tolerance for ambiguity is negligible, having women on the board of directors increases firm performance.
Discussion
The impact of gender diversity on the board of directors on company performance using different indices of company performance was mixed. This could explain the dampening effect of this cultural dimension on the relationship between gender diversity on the board of directors and company performance. In other words, the results obtained show that in a masculine society that is highly competitive and assertiveness in achieving success is a norm, gender diversity in the board can have a negative impact on company performance.
Having women on the board who may challenge such a highly competitive strategy in favor of a more consensus-oriented environment may harm firm performance. Therefore, it can be interpreted that women on the board in a masculine culture are unlikely to be effective in improving firm performance. The statistically significant coefficient of individualism reveals a negative relationship between this dimension and firm performance.
In other words, in collective cultures where kinship, family, and community are extremely important, a woman's caring personality matches the needs of society and enhances firm performance. In countries with less tolerance for ambiguity, the presence of women on the board, who ensure close monitoring of their duties, will contribute positively to firm performance. To summarize, the observed success of the culture-specific variables in explaining the impact of corporate governance mechanisms on firm performance provides strong support for the argument that institutional norms, guided by cultural norms, influence the effectiveness of corporate governance- the structure.
Second, in examining the impact of board diversity on firm performance in 46 countries, the countries' governance dimensions can also be taken into account. Moreover, in future studies it would be of interest to consider the industry-specific characteristics as described in Song et al. 2020) that the effect of board diversity on firm performance is dependent on operating characteristics.
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