Board diversity, financial flexibility and corporate innovation: evidence from China

Haroon ur Rashid Khan (), Waqas Bin Khidmat () and Sadia Awan ()
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Haroon ur Rashid Khan: Nanjing University of Information Science and Technology
Waqas Bin Khidmat: Air University Islamabad
Sadia Awan: Employees Housing Scheme (EHS)

Eurasian Business Review, 2021, vol. 11, issue 2, No 5, 303-326

Abstract: Abstract In this study, we use a sample of Chinese companies to examine the effect of board diversity on the corporate innovation measured through propensity to patents and patents conversion rate. Our findings show that corporate innovation is significantly positively associated with the female director’s share, as well as the young director’s share on the corporate boards, while we find an insignificant effect of foreign national director share on corporate innovation. Additionally, the association between board diversity and innovation is tested under different financial flexibility choices based on cash and leverage combinations. Interestingly, the positive effect of board diversity on corporate innovation is enhanced with financial flexible firm. This study has importance for the corporate board and policymakers. An increase in diversity in terms of female representation and young directors bring creativity, voice, and strive in the boardroom. The regulators are suggested to enact rules/guidelines to have a mandatory presence of females on board to enhance competition and increase transparency.

Keywords: Board diversity; Innovation; Financial flexibility; Upper echelons theory; Emerging economy (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/s40821-020-00171-9

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