Women Directors’ Turnover Following Financial Misconduct: What's Social Environment Got to Do with It?

Abstract

Abstract In this study, we consider the role of social environment in boards’ decisions whether to replace women directors or not following corporate financial misconduct. To explain the board's decision, two competing hypotheses are presented. The immunity perspective suggests that women directors benefit from growing social pressures to increase women's representation on boards, resulting in a lower turnover, while the susceptibility perspective proposes that societal gender stereotypes that give rise to biased boards’ decisions result in a higher turnover. Using a sample of Chinese firms involved in financial misconduct during 2011–2019, we find strong support for the susceptibility perspective and show a higher turnover of women directors following financial wrongdoing. Further, we find that board gender diversity and a firm's belonging to male‐dominated industries increase women directors’ turnover. Our findings make important contributions to directors’ turnover literature and practice.

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