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The effect of economic freedom on board diversity

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  • Lee, Sang Mook
  • Bazel-Shoham, Ofra
  • Tarba, Shlomo Y.
  • Shoham, Amir

Abstract

Drawing on institutional theory and homophily network theory, we argue theoretically and support empirically that higher economic freedom reduces the board of director diversity. Using alarge U.S. sample of 26,142 firm-year pairs for 1996–2015, we find that firms located in the states with higher economic freedom are less likely to foster gender or ethnic diversity on their boards. The results are robust to a battery of variables that capture differences in economic freedom, gender, and ethnic diversity. The results are also robust to various empirical tests, including endogeneity analyses, such as propensity score matching and the instrumental variable approach.

Suggested Citation

  • Lee, Sang Mook & Bazel-Shoham, Ofra & Tarba, Shlomo Y. & Shoham, Amir, 2022. "The effect of economic freedom on board diversity," Journal of Business Research, Elsevier, vol. 149(C), pages 833-849.
    • Handle: RePEc:eee:jbrese:v:149:y:2022:i:c:p:833-849
    DOI: 10.1016/j.jbusres.2022.05.076
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