Financial misconduct and female director appointment: An impression management perspective

• In Event: Open Refereed Roundtables
  In Refereed Roundtable (90 minute): Table 3: Economic and Organizational Sociology

Abstract

Our study introduces financial misconduct as a novel explanation for the formation of endogenously chosen boards and the subsequent changes in both female board representation and overall board composition. Employing an impression management framework, we explore the likelihood of female directors being appointed to boards in the wake of financial misconduct, both within firms and across industry peers. Firms directly or indirectly implicated in financial misconduct may strategically appoint female directors as part of a broader effort to enhance their public image and restore their tarnished reputation. Furthermore, we posit that in industries where fraudulent practices are more prevalent, the fraudulent firm experiences a “safety-in-numbers” effect, reducing the incentive to appoint female directors. Analyzing a sample of publicly traded firms in the U.S. from 2007 to 2021, we find strong support for our hypotheses.

Authors

• Runqian Liu, University of Calgary

• Heechun Kim, University of Calgary