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Journal of Management and Governance

Erschienen in:

08.11.2019

The impact of board diversity on strategic change: a stakeholder perspective

verfasst von: Laura Padilla-Angulo

Erschienen in: Journal of Management and Governance | Ausgabe 4/2020

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Abstract

This article uses the US freight railroads, which underwent enforced restructuring due to increased competition following deregulation, to study the impact of board diversity on strategic change, where board diversity is measured from a stakeholder perspective. CEO human capital is also taken into account. By analyzing with panel data methodology a sample including 15 US Class I railroads covering a 20-year period from 1984 to 2004 and representing more than 90% of the railroad market, with a total of 190 observations, we find that strategic decisions are significantly influenced by both board composition and CEO human capital, but that boards exercise more influence in determining firms strategies. We find significant differences in the way directors influence restructuring decisions depending on their stakeholder status. Results indicate the importance of including measures of board composition reflecting diversity of interests in board research.

Vorheriger Artikel Legal origin, financial development, and innovation: evidence from large public and private firms in the U.S. and Europe

Nächster Artikel Private equity firms and management control: the framing of shareholder-oriented practices

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The introduction of double-stacks dramatically reduced rail haul costs, making intermodal type of traffic competitive at distances of 500 miles or so, whereas previously rail could compete with trucks only at distances of about 700 miles.

Note that over the entire span of observation, the variable of labor downsizing is, on average, equal to 0.03 and takes average negative values for the years 1984 and 2004. This should not be a surprise, for despite the fact that most of the firms downsized their labor forces during these years, some firms increased their labor forces due to mergers in 1984 and there were some first waves of hiring people back in 2004. These mergers also explain the average negative value obtained for abandonment of lines in 1984.

Results from an unreported regression, where directors are classified by industry, indicate that this effect especially relates to directors from the natural gas sector, which obtains a highly significant positive coefficient. Cost reductions following deregulation in the natural gas sector come, in part, from important reductions in the scale of operations.

Additionally, for insight on what shapes the composition of the board, unreported analysis was conducted using regressions where the endogenous variable was the proportion of the different type of directors considered in this study and the explanatory variable was the lagged value of financial performance, taken as the ratio of operating revenue over operating costs. Results show that the proportion of consulting directors and the proportion of labor mediators increased with performance while the opposite result occurred with the proportion of employees, especially those with finance and economic backgrounds. This last finding may occur because poor financial performance may motivate firms to appoint directors with finance and economic background.

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Titel: The impact of board diversity on strategic change: a stakeholder perspective
verfasst von: Laura Padilla-Angulo
Publikationsdatum: 08.11.2019
Verlag: Springer US
Erschienen in: Journal of Management and Governance / Ausgabe 4/2020
Print ISSN: 1385-3457
Elektronische ISSN: 1572-963X
DOI: https://doi.org/10.1007/s10997-019-09492-y

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