The Interplay of Gender and Cultural Diversity on Board Composition and Capital Structure

Novera Nahar Bhuiyan^1*, Mohammad Zahir Raihan², and Md. Abul Kalam Azad³

¹Department of Finance and Banking, Bangladesh University of Professionals, Mirpur Cantonment, Dhaka-1216, Bangladesh. Email: noveranaharbup@gmail.com

²School of Business, Bangladesh Open University, Gazipur 1705, Bangladesh. Email: raihan_bou@yahoo.com

³Department of Business and Technology Management, Islamic University of Technology, Gazipur, Bangladesh. Email: kalam@iut-dhaka.edu

^* Corresponding Author

Abstract: With the continuous change of cultural dynamics worldwide, its impact particularly on any company boardroom has been shifting. This paper aims to unveil board gender diversity’s influence on capital structure in recent years. This paper examines panel data of 2918 firms from 16 countries during 2013 to 2023. The fixed effect GLS regression model is used to diagnose the impact of board gender diversity on capital structure considering cultural differences. In the analysis, total debt to total asset is the dependent variable. Key variables included the Proportion of women on board, Blau index, Shannon index along with Hofstede cultural dimensions Power Distance, Masculinity), and country-level indices (Global Gender Gap, World Governance Index and its factor. Results reveal a negative relationship at a 5% significance level between board gender diversity and capital structure. This suggest that firms with higher proportions of female directors tend to have lower debt levels. This effect is not robust to the inclusion of cultural factors such as power distance or masculinity are not significantly correlated to capital structure. Therefore, more female board members can reduce the debt load taken by a firm at any cultural surrounding suggesting more efficient decision-making and risk aversion. In addition, the findings reveal that a larger board size, analytic experienced board, and ROA have significantly negative impact on capital structure. Conversely, firm size, CEO duality and ROE are positively significant. Additionally, the global gender gap and world governance index have also been analyzed to be positive.

Keywords: Capital structure, board gender diversity, cultural diversity, country level variables

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References

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