This week we present articles looking at gender diversity and corporate performance.

Female institutional directors on boards and firm value 
The aim of this research is to examine what impact female institutional directors on boards have on corporate performance. Previous research shows that institutional female directors cannot be considered as a homogeneous group since they represent investors who may or may not maintain business relations with the companies on whose corporate boards they sit.

Thus, it is not only the effect of female institutional directors as a whole on firm value that has been analysed, but also the impact of pressure-resistant female directors, who represent institutional investors (investment, pension and mutual funds) that only invest in the company, and do not maintain a business relation with the firm.

We hypothesise that there is a non-linear association, specifically quadratic, between institutional and pressure-resistant female directors on boards and corporate performance. Our results report that female institutional directors on boards enhance corporate performance, but when they reach a certain threshold on boards (11.72 %), firm value decreases.

In line with female institutional directors, pressure-resistant female directors on boards also increase firm value, but only up to a certain figure (12.71 % on boards), above which they have a negative impact on firm performance. These findings are consistent with an inverted U-shaped relationship between female institutional directors and pressure-resistant female directors and firm performance.

María Consuelo Pucheta-Martínez, Inmaculada Bel-Oms and Gustau Olcina-Sempere. 2018. Female Institutional Directors on Boards and Firm Value.
Journal of Business Ethics, 152(2), 343–363.


Board heterogeneity and organisational performance 
Upper echelons (UE) theory posits that organisational performance reflects the personal values and cognitive frames of the top management team (TMT) and, crucially, that greater heterogeneity in individual backgrounds of senior executives leads to better outcomes. However, often missing from this research is a more developed account of how this relationship between the characteristics of TMTs and performance is also mediated by internal conditions within organisations.

In this paper we begin to address this deficiency focusing on the mediating impact of employee satisfaction and the styles and practices of line managers. Looking at the empirical case of English National Health Services acute care hospital trusts, we use a multiple mediation model to analyse the relationship between board heterogeneity, performance and these two (internal) organisational factors.

A variance-based structural equation modelling approach (partial least square) is applied to a sample of 102 boards of directors. First, the results lend support to the UE hypothesis that there is a positive impact of board heterogeneity and hospital-level performance. Second, the analysis shows that the relationship heterogeneity–performance is positively influenced by: (a) the styles and practices of line managers; (b) the levels of staff satisfaction; and by their mutually reinforcing roles.

A. Blanco-Oliver, G. Veronesi and I. Kirkpatrick. 2018. Board Heterogeneity and Organisational Performance: The Mediating Effects of Line Managers and Staff Satisfaction. 
Journal of Business Ethics, 152(2), 393–407.


IPO firm performance and its link with board officer gender, family-ties and other demographics
Issues of social justice underlie the clamour for greater gender balance in top-management. The present study reveals that pursuit of such social justice is also value-enhancing in relation to the longer-run performance of initial public offerings (IPO) stocks, especially where female board members are unencumbered by family-connection with other directors.

This study examines the economic benefits of board gender diversity for state- and privately controlled firms in the Hong Kong IPO market. Gender board diversity is much less common in state-run IPO firms. Within the subset of privately controlled IPO firms, distinction exists between entities that accommodate family-connected board officers and those that do not.

Specifically, this study focuses on family-ties between board members. This issue allows for finer-grained assessment of family influence on firm performance. Stronger post-listing stock, return-on-assets and sales-on-assets performance arise in (1) privately controlled firms without family-connected board members and in (2) state-run entities.

Gender diversity thus serves as a positive, but only when female director presence is untrammelled by family associations between directors. However, there is little evidence of a link between female board representation and IPO underpricing. Relative to state-backed issuers, privately controlled firm boards accommodate more women, younger officers and a broader mix of nationalities, but appear more-inclined to unify CEO and chair positions.

Board duality, the fraction of independent directors and directors’ age and nationality exhibit little relation with initial and aftermarket stock returns. In prescriptive terms, minority investors gain from the inclusion of female directors, especially when IPO firm directors are unencumbered by family-affiliation with other board members. Results therefore add to the clarion of calls for greater female board presence.

Paul B. McGuinness. 2018. IPO Firm Performance and Its Link with Board Officer Gender, Family-Ties and Other Demographics.
Journal of Business Ethics, 152(2), 499–521.


Political connections and firm value in China 
On 19 October 2013, the Chinese government issued the Opinions on Further Regulation on Party and Political Leaders and Cadres Working Part-Time (Holding Office) in Enterprises, also known as the 18th Decree, to regulate government officials’ employment with businesses. The 18th Decree is widely perceived as having had a significant impact on the use of independent directors with political backgrounds by firms, given the prevalence of this business practice.

This paper examines the market reaction to the 18th Decree to ascertain the value effect of political connections in China. We note a negative relationship between the political connections of independent directors and market reaction. We also note that the negative relationship between political connections and market reaction is moderated by ownership type and state of regional development.

Specifically, we find that the negative relationship holds only for private firms in less developed regions. These results support our prediction that political connections add value to Chinese firms and that the value effect of political connection is contingent on institutional factors.

Feng Liu, Hui Lin and Huiying Wu. 2018. Political Connections and Firm Value in China: An Event Study.
Journal of Business Ethics, 152(2), 551–571.


Effects of outsider’s monitoring on capital structure and corporate growth strategy 
Debt-ridden corporate growth and increased vulnerability was one of the causes of the 1997 financial crisis in Korea. Introduction of the outside director system has been the core part of the board reforms following the crisis.

Our estimation using instruments obtained from a natural experiment illustrates that outside monitoring has (i) improved capital structure of firms even when we control for the leverage regulation effect, (ii) enhanced compliance with leverage regulation and thus reduced business risks, and (iii) reduced excessive growth and excessive investment more consistently for the top 10 largest chaebols than non-chaebol firms and smaller sized chaebol affiliates.

Our results shed some light on why existing studies report the positive effect of outsiders on firm value and add value to existing agency theory by illustrating that the effect of improved governance on capital structure could be non-linear.

Byung S. Min. 2018. Effects of Outsider’s Monitoring on Capital Structure and Corporate Growth Strategy: Evidence from a Natural Experiment.
Journal of Business Ethics, 152(2), 459–475.


Managing organisational gender diversity images on corporate websites 
Although establishing gender equality in board and managerial positions has recently become more important for organisations, companies with low levels of gender diversity seem to perceive an ethical dilemma regarding the ways, in which they attempt to attain it. One way that organisations try to move toward gender equality is through the use of their corporate websites to manage potential applicants’ impressions of their current levels of, and actions to improve, gender diversity.

The dilemma is whether to truthfully communicate their low level of gender diversity, conceal it, or exaggerate it. On the one hand, organisations that are truthful may find it difficult to achieve equality because women are less attracted to companies that lack diversity. On the other hand, organisations that are untruthful risk their moral legitimacy.

The present work investigates gender diversity-related communication on the corporate websites of 99 major German companies. Based on theoretical work on minority attraction, we apply an organisational impression management taxonomy to guide our in-depth content analysis. With this approach, we hope to advance the understanding of how the issue of gender diversity is presented on corporate websites, which is useful for both organisational decision makers as well as diversity researchers.

We found that although gender diversity-related communications on corporate websites contain both assertive and defensive organisational impression management tactics, as well as a third type of tactic we refer to as “acknowledgement,” assertive tactics were used more frequently. We argue the existence of a paradox whereby organisations use assertive impression management tactics to maintain pragmatic legitimacy but compromise their moral legitimacy by doing so. Furthermore, we argue that moral legitimacy can be maintained or restored through the sincere use of defensive impression management tactics and acknowledgement.

Leon Windscheid, Lynn Bowes-Sperry, Karsten Jonsen and Michèle Morner. 2018. Managing Organizational Gender Diversity Images: A Content Analysis of German Corporate Websites.
Journal of Business Ethics, 152(4), 997–1013.