The effect of economic freedom on board diversity

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

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

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 a large 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.

Original languageEnglish
Pages (from-to)833-849
Number of pages17
JournalJournal of Business Research
Volume149
DOIs
StatePublished - 1 Oct 2022
Externally publishedYes

Keywords

  • Board ethnic diversity
  • Board gender diversity
  • Economic freedom
  • Homophily

ASJC Scopus subject areas

  • Marketing

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