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When do shareholders drive changes in board composition?The evolution of boards' gender ratios in restructuring firms

27 November 2018 at 2:30 PM - 4:00 PM

Room 409, Campus on Viale Romania, 32

Speaker: Caterina Moschieri, IE Business School


"Focusing on firm ownership, which is a key dimension of corporate governance, we examine the conditions under which shareholders affect female representation on a firm’s board of directors, specifically around strategic restructuring. We argue that shareholders may exploit firm restructuring as a turnaround opportunity to change board composition, especially in well-performing firms. We hypothesize that shareholders with small ownership may resist changes in the firm’s board composition or even increase the proportion of male directors, while shareholders with large ownership stakes will comply with social expectations, resulting in a greater proportion of women on the board. Using data from all the restructuring activities undertaken in the US between 1999 and 2015 matched with board composition information, we find that the effect of shareholders on a restructuring firm’s board gender ratio (measured as the proportion of women on a board) takes a curvilinear form. As expected, low (high) levels of ownership have a negative (positive) impact on boards’ gender ratios. Additionally, we find that firm performance moderates this relationship: investors in well-performing firms need a lower number of shares to have a positive effect on boards’ gender composition. Our results empirically support the agency theory notion that investors fulfil an important external governance function and suggest that shareholders address governance issues through board composition around strategic restructuring."