Board diversity and risk-taking of family firms: Evidence from China

Cheng Zhang and Le Luo ()
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Cheng Zhang: Nanjing University of Finance and Economics
Le Luo: Hubei University of Arts and Science

International Entrepreneurship and Management Journal, 2021, vol. 17, issue 4, No 3, 1569-1590

Abstract: Abstract Using a sample of more than 1,500 Chinese listed firms over four years of observation (2015–2018), this study examines the effects of family ownership and certain features of board diversity (gender diversity, age diversity, and education diversity) on the risk-taking of Chinese listed firms. First, a two-way fixed effects regression model is proposed. Then, this study finds that the examined Chinese family firms’ risk-taking, which is measured by their Z-scores and innovation intensity, is lower than that of the nonfamily firms. This result confirms the prediction of social-emotional wealth theory. Second, a diversity index is formulated to summarize the above three dimensions of board diversity. By regressing risk-taking measures on these board diversity features, this study finds that firms with less-diverse boards take more risks. Finally, the effects of the interaction between family ownership and board diversity are explored. The results reveal that the examined dimensions of board diversity have significant influences on risk-taking: family firms with lower levels of board diversity generally take more risks than those with higher levels of board diversity. Our study contributes to the literature on risk-taking of family business and has important practical implications for motivating family business innovation in China.

Keywords: Risk-taking; Socioemotional wealth; Board diversity; Chinese family firms (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s11365-021-00769-z

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