Effects and mechanisms of board faultlines on decision quality

Yaowei Zhang, Tiantian Cao, Siqi Liu and Shuqi Chen

American Journal of Business, 2024, vol. 39, issue 2, 96-114

Abstract: Purpose - The inconsistent results shown in previous group faultline research have created a need for investigating the underlying mechanisms of the faultline's effects. This study focuses on clarifying the competing mediating roles of information diversity and team conflict in the nonlinear relationship between board faultlines (BF) and decision quality. Design/methodology/approach - This study is empirically tested with the questionnaire data from 105 Chinese listed companies. Findings - This study finds: (1) an inverted U-shaped curve relationship between BF and board decision quality and (2) that the joint mediating effect of team conflict and information diversity leads to the inverted U-shaped curve relationship between BF and decision quality. Specifically, BF shows a U-shaped curve relationship with team conflict and an inverted U-shaped curve relationship with information diversity. Either too weak or too strong faultlines will inhibit the positive effects of information diversity and amplify the negative effects of team conflicts, leading to low-quality decisions. Originality/value - This study contributes to the research on: (1) board governance as it clarifies the effect of BF on the board decision-making process and its quality, which helps to open the black box of board decision-making and (2) group faultlines as it reveals how information diversity and team conflict can play a joint mediating role in the functioning of team faultlines.

Keywords: Board governance; Group faultlines; Decision quality; Information diversity; Team conflict; Mediating effect (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajbpps:ajb-03-2023-0050

DOI: 10.1108/AJB-03-2023-0050

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