Abstract
Purpose
Examining the role of women on board (WoB) toward corporate sustainable growth (CSG) through leverage policy (LP). This research also investigates the interaction effect of WoB and LP on improving CSG.
Design/methodology/approach
This study uses a moderated mediation model to examine the impact of WoB on CSG, mediated by LP. Data from 48 KEHATI IDX ESG Sector Leaders Index companies observed from 2015 to 2021 were analyzed using the structural equation model partial least square (SEM-PLS) Warp.PLS 8.0. The research applies instrumental variables (IV) to test and control endogeneity due to nonrandom sample selection.
Findings
We found evidence that LP acts as a full mediator between the presence of WoB and CSG. The presence of WoB plays a moderate role by slightly weakening the influence of LP on CSG. Furthermore, we obtained evidence showing that the relationship between WoB and CSG is J-curve-shaped, a nonlinear relationship related to critical mass. Where the WoB ratio is at least 8.35% or higher, it will increase CSG in companies that have implemented the concept of environment social governance (ESG) in Indonesia.
Originality/value
This model uses a moderated mediation model and J-curve analysis; there is an interaction between WoB and LP on different paths of the mediator to CSG. This model examines the role of WoB as a moderator of the effect of LP on CSG. A nonlinear J-curve test was conducted to determine the minimum level of WoB that can influence the increase of CSG.
Keywords
Citation
Lestari, R.I., Indarto, I. and Budiati, Y. (2024), "Do women have a say? A moderated mediation model's influence on the leverage policy toward corporate sustainable growth", Journal of Asian Business and Economic Studies, Vol. 31 No. 3, pp. 233-245. https://doi.org/10.1108/JABES-02-2023-0049
Publisher
:Emerald Publishing Limited
Copyright © 2024, Rohmini Indah Lestari, Indarto Indarto and Yuli Budiati
License
Published in Journal of Asian Business and Economic Studies. Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode
1. Introduction
Gender serves as the primary dividing line where development is unevenly distributed (Chakraborty and Sengupta, 2023). Sustainable Development Goal (SDG) 5 on Gender Equality aims to attain gender equality and empower all women, as proclaimed in the 2030 Agenda. SDG 5 strives to guarantee that women can fully and effectively participate, with equal opportunities for leadership at all levels of decision-making in political, economic, and public life (WEF, 2015). Subsequent studies have acknowledged the importance of women's financial independence for economic development and gender equality (Roy and Xiaoling, 2022).
The lack of gender diversity in senior management stands out as a significant challenge for contemporary companies (Garcia-Blandon et al., 2022). A key benchmark for the success of SDG 5 targets is the proportion of women in managerial positions, contributing to gender diversity in corporate governance and the sustainable growth of the company (Binder, 2019; Paoloni et al., 2019). The SDGs advocate for changes in business strategy, urging companies aiming at long-term sustainability to integrate a human-centric approach (Kelan and Wratil, 2021). Sustainable growth involves aligning corporate growth goals with internal and external resources to formulate a cohesive strategic plan (Patel et al., 2020). Corporate governance geared towards sustainable growth can ensure alignment of interests among companies, shareholders, managers, and stakeholders (Ludwig and Sassen, 2022).
Women are figures who respect competitiveness, organizational skills, and teamwork (Nicolò et al., 2021). Women have superior skills in terms of internal monitoring mechanisms and improving the quality of financial reporting (Gull et al., 2018; Usman et al., 2021). The female leadership style will ultimately improve business and corporate culture, and a more prosperous and peaceful work environment (Akkaya and Üstgörül, 2020). Women are a unique resource regarding ideas, business solutions and corporate decision-making (Javaid et al., 2021). Female directors are also more sensitive to social, environmental and ethical issues and pay more attention to stakeholder interests than male directors. For this reason, the presence of women on the board of directors can become agents of change and sustainability (Kelan and Wratil, 2021).
Women often bring backgrounds more closely tied to nonfinancial matters, displaying a heightened ethical inclination and a tendency to steer clear of breaches in social and environmental policies, rendering them more effective (Li et al., 2022). The presence of gender diversity encourages companies to embrace socially responsible behavior and sustainable practices, positively influencing accountability and transparency (Paoloni et al., 2019). The inclusion of women on corporate boards aims to bridge the gender gap in economic sector participation and foster the advancement of women within organizations (Neschen and Hügelschäfer, 2021).
The correlation between female directors and financial performance remains a topic of debate (Ciappei et al., 2023). Women continue to face diverse challenges in pursuing a career and attaining leadership roles. The underrepresentation of women in leadership positions perpetuates the perception of their perceived lack of capability (Öberg, 2021). The presence of women in managerial roles can serve as an indication that they are capable of full participation and have equal leadership opportunities in the workplace (Martínez-Jiménez et al., 2020). On average, only 20.2% of women occupy board seats in the top 100 companies listed on the leading stock exchanges in G20 member countries.
The background of this research conducted in Indonesia is shaped by several phenomena. According to data from the Ministry of Women's Empowerment and Child Protection 2022, the proportion of women in managerial positions is projected to reach only 25.84% between 2021 and 2022, marking a significant decrease of 40.54% from 2020. Data from the World Economic Forum Global Gender Gap (WEFGG) in 2022 revealed that Indonesia scored 69.7 on the Social Institutions and Gender Index, ranking 92nd among 146 countries. This score is below the global average for Economic Participation and Opportunity in East Asia and the Pacific at 72.2%, with Indonesia securing the 9th position. The share of women in senior managerial roles in the professional sphere stands at 32.4% (World Economic Forum, 2022).
Regulation Number 33/POJK.04/2014 from the Financial Services Authority regarding Directors and Board of Commissioners of Issuers or Public Companies in Indonesia does not address the proportion of women on company boards. This stands in contrast to several European Union countries like Spain, Italy, France, Belgium, Sweden, Austria, and the Netherlands, which have established a 40% threshold as the highest level to achieve gender diversity on boards, often referred to as a “critical mass” (Lefley and Janeček, 2023; Sousa and Santos, 2022; Tapver et al., 2020). A gender-balanced configuration, where the proportion of women in boardrooms ranges between 40 and 60%, is noted to impact economic and risk-oriented performance in financial firms (Lafuente and Vaillant, 2019).
Evidence indicates a connection between Corporate Governance's internal control mechanisms led by women's boards and capital structure in developed countries, with these efforts still relatively minimal in developing markets (Zaid et al., 2020). Women directors' influence extends to social performance (Öberg, 2021), with positive impacts noted in family companies in France (Mnif and Cherif, 2020), Japanese companies (Kubo and Nguyen, 2021), Italian banking firms (Mazzotta and Ferraro, 2020), China (Alkebsee et al., 2021), and Korea (Kim and Kim, 2023). Sraieb and Akin (2021) find evidence linking female directors to positive correlations with corporate environmental performance. The board of directors serves as an internal oversight mechanism for corporate governance, acting as a source of sustainable competitive advantage, particularly in monitoring financial policy reporting (Bhardwaj, 2022). Women on the board positively impact sustainable company performance (Guizani and Abdalkrim, 2022). The positive effect of women on board extends to leverage policy (Fernandes et al., 2023; Schopohl et al., 2021). Board effectiveness in overseeing management performance increases with women on board (Nicolò et al., 2021).
Results from a contrary study indicate that the impact of women on board has a negative effect on the sustainable performance of Malaysian companies (Ahmad et al., 2020) and those in West Africa (Boubacar, 2020). The presence of female directors is associated with a negative and significant relationship between board gender diversity and earnings management (Yami et al., 2023). Women's boards do not have a direct impact on corporate sustainability. The optimal proportion of women on a company's board of directors, necessary for maximizing sustainable performance, remains unidentified (Bhardwaj, 2022; Conde-Ruiz et al., 2020). The relationship between leverage and corporate sustainability, analyzed by Ludwig and Sassen (2022), highlights that capital structure is not extensively discussed, and there remains insufficient research information about its relationship with corporate sustainability.
This research proposal focuses on the impact of women's representation on corporate boards in Indonesia, aligned with SDG 5 on gender equality. It examines how women on boards influence funding policies and sustainable growth. This study is crucial as Indonesia lacks regulations specifying female board representation. By using a unique research design, including moderated mediation analysis, the research reveals that companies in Indonesia implementing ESG need at least 8.35% female board members for sustainable growth. The findings also emphasize the positive interaction between women on boards, leverage policies, and sustainable growth. This research contributes to the literature by exploring the internal control mechanism of corporate governance and highlighting the WoB quota's moderate role as a decision-maker for ESG-oriented companies, promoting sustainable growth.
Given the premise above, this research is presented in the following order: Section 2 discusses the theoretical background regarding the relevance of women's presence on boards and the continued growth of corporations that implement ESG. As part of a literature review, this research develops hypotheses to answer research questions. Section 3 presents information about data sources, measurements, descriptive statistics and statistical models. Section 4 discusses the main empirical findings based on panel data regression. In the end, section 5 conveys the conclusions of the research results, complemented by practical implications and future research.
2. Literature review and hypothesis development
2.1 The critical mass, shareholders theory and sustainable growth
The critical mass theory, initially introduced by (Granovetter, 1978), posits that a certain quantity of women on company boards can lead to a turning point, affecting group interactions and behavior. This theory suggests a nonlinear relationship between the number of women on boards and board gender diversity impact (Torchia et al., 2011). The shift typically occurs when women exceed 30% representation in decision-making positions (Lafuente and Vaillant, 2019; Lefley and Janeček, 2023). Women are assuming leadership roles based on merit and internal control mechanisms, enhancing corporate control for long-term financial and nonfinancial goals, including environmental and social governance (Husted and Sousa-Filho, 2019). Improved corporate governance quality, influenced by the board of directors, reduces financial leverage (Yosra and Sioud, 2011). Shareholder theory emphasizes the role of generating profits for sustainable company growth, requiring a stable operating environment. Economic policy changes create uncertainty and increase risk (Ahsan et al., 2021). Female directors enhance investment efficiency, mitigate agency problems, and reduce conflicts of interest (Shaheen et al., 2022). Agency problems can be addressed by increasing control over the company, often achieved through debt financing as a bonding mechanism (Indah Lestari et al., 2020). Evidence suggests that female directors or gender diversity on boards are associated with lower self-esteem and increased risk aversion (Menicucci and Paolucci, 2022; Nadeem et al., 2019).
Sustainable growth refers to a company's ability to maintain a growth rate over time. The company's Sustainable Growth Rate (SGR) serves as a key indicator, integrating growth objectives with internal and external resource empowerment to formulate a consistent strategic plan. SGR gauges the alignment between internal resources and inherent industry growth opportunities, aiming for higher returns. This method estimates a firm's earnings growth rate, with a faster SGR being advantageous in high-return industries. SGR is equivalent to Return on Equity (ROE), where ROE represents the Net Income to Equity ratio (Escalante et al., 2009; Patel et al., 2020). SGR breaks down the return on equity into four components (Higgins, 1981): profit margin (income/sales), retention (1 − owner withdrawals), asset turnover (sales/assets), and leverage (1 + debt/equity). This model, closely linked to DuPont analysis, combines these factors to determine ROE. A decrease in any of these ratios diminishes sustainable growth and increases the likelihood of requiring financial leverage to sustain the company. The board of directors, as strategic planners, considers these components to adjust and achieve a higher or lower ROE.
2.2 Hypothesis development
Female directors play a significant role in predicting sustainability, contributing to the reduction of agency conflicts between shareholders and managers through enhanced monitoring (Amin et al., 2021; Fernandes et al., 2023). Internal corporate governance mechanisms, including diverse boards, guide companies toward sustainability and integrated success. Implementing robust internal corporate governance mechanisms is essential for supporting effective and sustainable management within organizations (Franczak and Margolis, 2022). Board gender diversity is recognized as a positive contributor to sustainable growth. Gender diversity, measured by the percentage of women on the board, including female independent directors, is acknowledged as crucial for effective governance (Guizani and Abdalkrim, 2022).
The existence of Women on Board as a manifestation of SDG 5 has a positive effect on the corporate sustainable growth
The sustainable growth rate represents a company's long-term target growth rate, aligning with internal resources to avoid straining limited assets. Both excessively fast and slow growth pose challenges, affecting investor confidence and creating missed opportunities. Faster growth makes the capital structure riskier. Warmana et al. (2020) introduces the “dynamic trade-off theory,” evaluating trade-off theory and pecking order theory simultaneously in capital structure decisions. Leverage structure choices significantly impact a company's profitability, even without an ideal leverage ratio. Optimal leverage decisions contribute to sustainability by reducing agency problems and default risk, with managerial perspectives focusing on stakeholders and the company's capabilities (Zhou et al., 2021).
The board of directors, as a relevant internal corporate governance mechanism, plays a crucial role in financial reporting through the advisory and monitoring roles of female directors. Female characteristics are often associated with risk aversion, conservative attitudes, and financial caution, and tend to reduce excess funds based on the percentage of female directors and female independent directors. Companies led by female boards with greater cash holdings prefer leveraging, calculated as the total debt-to-total assets ratio. Women are inclined to avoid risk, making them less likely to choose risky policy options. Gender diversity and cash holdings depend on the role of female directors in the board. An increased number of female directors significantly and positively influences leverage risk (Birindelli et al., 2020). Specifically, evidence suggests that women in supervisory roles, led by female directors, lead to a decrease in cash reserves (Cambrea et al., 2020).
The existence of women on the board has a positive effect on increasing leverage policies
Appropriate debt policies can enhance a company's financial efficiency, thereby supporting sustainable growth. The Sustainable Growth Rate (SGR) calculation requires companies to maximize Return on Equity (ROE) and income to improve leverage ratios (Adams et al., 2015). Companies consistently manage debt financing to achieve sustainable growth and use equity financing for long-term sustainable growth. Leverage is the total liabilities-to-total assets ratio used as a measure of debt policy.
Leverage policies can increase the corporate sustainable growth
Mediating variables are dependent variables expected to be influenced by independent variables. Applying mediating variables aims to demonstrate their role in the causal relationship between independent and dependent variables. Mediating variable depict conditions, such as activities, behaviors, or processes in progress (Wu and Zumbo, 2008). Sound debt policies can positively contribute to a company's financial performance, thereby supporting sustainable growth. The presence of female directors actively involved in designing and overseeing debt policies can be a crucial factor in achieving sustainable growth.
Leverage policies may mediate the effect of women on board presence on firm corporate sustainable growth.
The application of moderating variables is employed to test whether the strength of the causal relationship between independent and dependent variables depends on the moderator variable. The WoB variable may alter the strength of the relationship between the leverage policy variable and a company's sustainable growth from strong to moderate or eliminate the connection altogether. In this study, we suspect that there is an interaction between WoB and LP concerning CSG, providing a reason to investigate its role as a moderating variable. A moderating variable possesses inherent characteristics and attributes (Wu and Zumbo, 2008), prompting us to test the role of WoB as a moderating variable.
The existence of women on the board can moderate the effect of leverage policies on the corporate sustainable growth.
The research model displayed in Figure A1 [1] connects the hypotheses that have been generated and indicates how the research has been conceptualized.
3. Methodology
The study covers all companies listed on the Indonesia Stock Exchange, totaling 833 issuers. Among these, 48 are part of the KEHATI IDX ESG Sector Leaders Index. Focused on examining the role of women on boards, the sample included companies with female representation on both boards of commissioners and directors. Out of the 48 issuers in the IDX KEHATI ESG Sector Leaders Index, only 36 have women on boards. The study utilizes secondary data from https://www.idx.co.id/id, collecting 252 pooled data points from these 36 issuers over a 7-year observation period. The IDX KEHATI ESG Sector Leaders Index, introduced on December 20, 2021, is based on ESG criteria with the assessment base year being 2015.
The moderated mediation model, based on Wu and Zumbo (2008) explanation, focuses on the moderating effect's timing or influence on an independent variable's strength or weakness, impacting the dependent variable. The moderator adjusts the strength or direction of the causal relationship. Mediation, explaining the “why” and “how” of cause and effect, seeks to identify intermediate processes between the independent and dependent variables. So, we examine the variable funding policy with debt as a mediating effect of the presence of women's councils on corporate sustainable growth. For this reason, we apply a moderated mediation model to test which variables influence corporate sustainable growth most.
The paragraph presents equations related to regression analysis. It outlines the coefficients and terms used, such as intercepts
The PLS-SEM method was applied using the WarpPLS Version 8.0 software to perform the analysis. Recent methodological research has been conducted to accommodate more complex model structures or address data deficiencies such as heterogeneity in indicator variables and structural paths without imposing normal distribution assumptions on the data. The indicator approach to mediation is moderated using the PLS structural equation model (Kock, 2021). The primary challenge in using the PLS method for SEM equations lies in its inadequate consideration of measurement errors, leading to underestimated path coefficient estimates.
Recent research emphasizes the importance of addressing endogeneity issues in econometrics by proposing the use of instrumental variables (IV) for causal relationship estimation with observational data. The Two-Step Heckman procedure is a suitable method, accompanied by various tests, techniques, and considerations outlined by researchers when employing IV (Bascle, 2008). Non-random sample selection introduces specific endogeneity challenges (Antonakis et al., 2010). Endogeneity arises when researchers misidentify the causal relationship between independent and dependent variables, attributing the observed relationship to a third factor (mediating or moderating variables). IV is instrumental in testing and controlling endogeneity, especially when structural error terms for an endogenous variable correlate with predictor variables. IV selectively shares variability with another variable. Utilizing the “Explore analytic composites and instrumental variables” menu in WarpPLS 8.0 with the “Single stochastic variation sharing” sub-option facilitates the creation and testing of IV for endogeneity control (Kock and Sexton, 2017). If the IV-link's path coefficient to the dependent variable is small and nonsignificant, it indicates successful implementation of the Heckman procedure, signifying no significant endogeneity in the model (Certo et al., 2016).
4. Result
4.1 Result
Table A1 [1] presents the descriptive statistics for the research variables. The WoB variable has an average of 0.176 with a standard deviation of 0.147, indicating that the presence of women on boards in ESG Sector Leaders IDX KEHATI is 17.6%, still below the G20 average of 20.2%. The LP Variable, measured by Loan to Total Assets, has an average of 0.617, and the CSG variable has an average of 15.073, indicating a Return on Equity ratio of 15.073x. Construct variables LP and CSG, use formative indicators, and Table A2 [1] displays Cronbach's Alpha, Composite Reliability (CR), and Average Variance Extract (AVE) results. Both Cronbach's alpha and CR values are satisfactory, exceeding 0.7, indicating internal consistency. The AVE surpasses 0.50, meeting convergent validity requirements and explaining at least 50% of item variance. Table A3[1] presents the correlation among latent variables with the square root of AVEs for assessing discriminant validity. The values on the table's diagonal containing the correlations are between the latent variables. Table A4 [1] confirms the absence of vertical multicollinearity in the latent variable block, as the VIF block is lower than 3.3. Table A5 [1] indicates an acceptable fit model size, with the Standardized Root Mean Square Residual (SRMR) below 0.08, and the Chi-square (X2) being significant at 5%.
4.2 Findings and discussion
Figure A2 [1] presents the results of hypothesis testing, and Table A6 [1] displays path coefficients, standard errors, effect sizes, p-values, and decisions regarding hypothesis acceptance or rejection. The R Square value is 0.10, indicating that WoB and LP collectively account for a 10% variation in CSG, while the remaining 90% is explained by unexamined variables. The R-Square value implies that CSG is entirely dependent on WoB and LP. In comparison, the effect of WoB on LP is 0.04, suggesting that variations in WoB contribute to a 4% variation in LP. Consequently, the influence of WoB is more substantial on LP. The R-squared coefficient or adjusted R-squared coefficient above 0.02 signifies reasonable explanatory power within the sub-model.
The path coefficient values presented in Table A6 [1] are divided into two sections. Part A indicates the direct effect of each variable. WoB does not have a significant effect on CSG (β = 0.066, p = 0.148), thus rejecting hypothesis 1. WoB has a positive and significant impact on LP (β = 0.193, p-value = 0.005), supporting the acceptance of hypothesis 2. Furthermore, another direct product reveals that LP significantly and positively influences CSG (β = 0.226, p-value <0.001), confirming hypothesis 3. To reinforce these findings, we conducted a robust test, dividing the sample into two based on the number of WoB. Table A6 [1] displays two subsamples: companies with only one WoB and companies with at least 2 or more WoB. The results indicate that when there is only one WoB, the impact of WoB on LP shows a significant negative result (β = −0.255, p-value = 0.022). Adding another WoB can change the direction of the relationship to a significant positive one (β = 0.459, p-value = 0.019). The study aligns with research by Gull et al. (2023), asserting the need for two or more female directors to impact corporate decisions. These findings are consistent with Uddin (2021), who stated that implementing corporate governance and increasing the number of female directors decides to manage more debt in leverage structure decisions and enhance profitability.
In this study, no direct influence was found between the presence of WoB and the enhancement of CSG for both the entire sample and the subsample. These results differ from previous research by Gold and Taib (2022), stating that gender diversity on the board plays a role in guiding companies towards sustainability and achieving sustainable integration. Table A6[1] Part B illustrates a positive and significant indirect effect of WoB on CSG after being mediated by LP. These results are sufficient to accept hypothesis 4. Full mediation occurs because the coefficient of the direct influence of the independent variable on the dependent variable, initially nonsignificant (β = 0.066, p-value = 0.148), becomes significantly positive (β = 0.044, p-value = 0.020) after going through the mediating variable LP for all samples. Thus, LP acts as a full mediator in the relationship between the influence of WoB and CSG.
Moderation testing was applied in this study to interpret whether the determinants of WoB weaken or strengthen the relationship between LP and CSG. WoB interacts significantly with CSG (β = 0.193, p-value <0.001), meaning WoB acts as a quasi-moderator. This occurs because the moderator variable also acts as an independent variable. The weakening role of WoB as a moderator is indicated by a slight decrease in the coefficient value of the direct relationship between LP and CSG (β = 0.226, p-value <0.001). Thus, hypothesis 5 is accepted. This study aligns with Alkebsee et al. (2021), stating that the presence of women in the “board composition” of corporate governance results in an effective monitoring mechanism.
There is no direct influence from the WoB variable on the CSG variable; thus, WoB affects CSG only indirectly through LP. In this study, the relationship between latent variables becomes WoB → LP → CSG, with LP serving as the mediating variable. This model presents endogeneity concerning CSG, as the variation flows from WoB to CSG through LP, causing bias in the path estimation for the LP → CSG link through ordinary least squares regression. Figure A2[1] presents the solution to this issue, which involves creating the instrumental variable iCSG, which only incorporates the WoB variation that ends in CSG and nothing else, and revising the model to have the following relationships: WoB → LP, LP → CSG, and iCSG → CSG. The iCSG → CSG link can be used to test endogeneity through p-value and its effect size. The link can also be utilized to control endogeneity, eliminating bias when estimating the path coefficient for the LP → CSG link through ordinary least squares regression. This is addressed by including the instrumental variable iCSG (iWoM), which incorporates variations from WoM that end in CSG. IV is a variable that selectively shares its variance with another variable, exclusively with that variable. Instrumental variables can be used to test and control endogeneity, a situation where the structural error term for an endogenous variable is correlated with one or more predictor variables. The path coefficient for the iWoM → CSG link is small, at 0.098, and not significant (p-value 0.57). As an implementation of the Heckman procedure for assessing and controlling endogeneity (Bascle, 2008; Certo et al., 2016), this indicates no significant endogeneity to CGS in our model.
Figure A3 [1] shows evidence that there is a J-curve graph for the relationship between WoB and CSG, indicating that WoB levels above 8.35% will increase CSG. The results indicate that the average WoB level in 36 companies listed on the KEHATI IDX ESG Sector Leaders Index observed for seven years from 2015 to 2021 is 17.6%, positioning it to the right of the minimum point at 8.35%. This means that WoB has a positive influence and can enhance CSG. These results differ from studies in the European Union and critical mass theory, which state that there is a change when companies have between 30 and 40% women on the board of directors.
The moderating effect is evident in the hypothesis that Women on Board (WoB) moderates the relationship between Leverage Policy (LP) and corporate sustainable growth (CSG). Figure A4 [1], a three-dimensional (3D) graph Kock (2021), illustrates this moderating relationship, connecting WoB, LP, and CSG through a direct link. As the path for the direct relationship traverses the range of the moderating variable from low to high, the path coefficient's sign becomes positive, and its magnitude increases. This indicates that WoB slightly weakens the direct relationship between LP and CSG, and the effect is statistically significant. The study establishes a dynamic interaction between the moderator variable (WoB) and the mediator variable (LP), demonstrating changes in the indirect effect based on the varying values of the moderator, highlighting the occurrence of moderation in the mediation process.
4.3 Implication
The managerial implications of this research suggest that WoB has a positive and significant impact on LP when there are two or more WoB in companies that have implemented ESG in Indonesia. This finding indicates that the critical point is at a WoB level of 8.5%, which can enhance CSG, contrasting with suggestions from some previous studies that proposed levels above 30%. Specifically, the author supports recommendations regarding the need to increase the number of WoB to improve CSG.
The social implications of this paper highlight the importance of considering the presence of WoB when analyzing their influence on LP and CSG. The presence of WoB will affect CSG through LP, meaning that an increasing number of WoB constituents will enhance CSG by implementing LP. With their tendency to be more compliant with regulations, cautious, vigilant, and risk-averse compared to men, WoB will effectively manage financing derived from debt.
5. Conclusion and limitation
The research findings reveal that WoB significantly and positively impacts LP when there are two or more individuals in the company. However, WoB had no direct effect on CSG in both overall samples and sub-samples. The J-curve graph illustrates the relationship between WoB and CSG, indicating that a WoB level above 8.35% contributes to increased CSG. The mediation test shows that LP fully mediates the influence of WoB on CSG, demonstrating a positive and significant indirect effect. This suggests that the company's debt policy plays a crucial role in determining the effectiveness of WoB's presence. The cautious approach of WoB, prioritizing internal funding sources, has been proven to reduce company risk. The interaction between WoB and LP slightly weakens the impact of LP on CSG. WoB's cautious funding decisions limit access to external funding, impacting profit generation and, consequently, CSG. A limitation of the study is that CSG measurement could consider financial performance and governance, leaving room for future research on the influence of WoB on CSG using environmental and social proxies.
Notes
Please see it on the Online Appendix.
Supplementary material for this article can be found online.
References
Adams, R.B., de Haan, J., Terjesen, S. and van Ees, H. (2015), “Board diversity: moving the field forward”, Corporate Governance: An International Review, Vol. 23 No. 2, pp. 77-82, doi: 10.1111/corg.12106.
Ahmad, M., Raja Kamaruzaman, R.N.S., Hamdan, H. and Annuar, H.A. (2020), “Women directors and firm performance: Malaysian evidence post policy announcement”, Journal of Economic and Administrative Sciences, Vol. 36 No. 2, pp. 97-110, doi: 10.1108/JEAS-04-2017-0022.
Ahsan, T., Mirza, S.S., Al-Gamrh, B., Bin-Feng, C. and Rao, Z.U.R. (2021), “How to deal with policy uncertainty to attain sustainable growth: the role of corporate governance”, Corporate Governance (Bingley), Vol. 21 No. 1, pp. 78-91, doi: 10.1108/CG-04-2020-0121.
Akkaya, B. and Üstgörül, S. (2020), “Leadership styles and female managers in perspective of agile leadership”, in Akkaya, B. (Ed.), Agile Business Leadership Methods for Industry 4.0, Emerald Publishing, pp. 121-137, doi: 10.1108/978-1-80043-380-920201008.
Alkebsee, R.H., Tian, G.-L., Usman, M., Siddique, M.A. and Alhebry, A.A. (2021), “Gender diversity in audit committees and audit fees: evidence from China”, Managerial Auditing Journal, Vol. 36 No. 1, pp. 72-104, doi: 10.1108/MAJ-06-2019-2326.
Amin, A., Ur Rehman, R., Ali, R. and Ntim, C.G. (2021), “Does gender diversity on the board reduce agency cost? Evidence from Pakistan”, Gender in Management: An International Journal, Vol. 37 No. 2, pp. 164-181, doi: 10.1108/GM-10-2020-0303.
Antonakis, J., Bendahan, S., Jacquart, P. and Lalive, R. (2010), “On making causal claims: a review and recommendations”, Leadership Quarterly, Vol. 21 No. 6, pp. 1086-1120, doi: 10.1016/j.leaqua.2010.10.010.
Bascle, G. (2008), “Controlling for endogeneity with instrumental variables in strategic management research”, Strategic Organization, Vol. 6 No. 3, pp. 285-327, doi: 10.1177/1476127008094339.
Bhardwaj, S. (2022), “Decision-making in the recruitment of women on corporate boards: does gender matter?”, Equality, Diversity and Inclusion, Vol. 41 No. 6, pp. 813-830, doi: 10.1108/EDI-08-2021-0188.
Binder, B.C.K. (2019), “Can a high women quota in supervisory boards influence enterprise success?”, in Weber, Y., Vrontis, D., Tsoukatos, E. and Shams, S.M.R. (Eds), The Cross-Disciplinary Perspectives of Management: Challenges and Opportunities, Emerald Publishing, pp. 71-82, doi: 10.1108/978-1-83867-249-220191007.
Birindelli, G., Chiappini, H. and Savioli, M. (2020), “When do women on board of directors reduce bank risk?”, Corporate Governance: The International Journal of Business in Society, Vol. 20 No. 7, pp. 1307-1327, doi: 10.1108/CG-03-2020-0089.
Boubacar, H. (2020), “Women's presence in top management and the performance of microfinance institutions in West Africa”, International Journal of Social Economics, Vol. 47 No. 2, pp. 207-222, doi: 10.1108/IJSE-06-2019-0365.
Cambrea, D.R., Tenuta, P. and Vastola, V. (2020), “Female directors and corporate cash holdings: monitoring vs executive roles”, Management Decision, Vol. 58 No. 2, pp. 295-312, doi: 10.1108/MD-11-2018-1289.
Certo, S.T., Busenbark, J.R., Woo, H.-S. and Semadeni, M. (2016), “Sample selection bias and Heckman models in strategic management research”, Strategic Management Journal, Vol. 37 No. 13, pp. 2639-2657, doi: 10.1002/smj.2475.
Chakraborty, A. and Sengupta, S. (2023), “Equitable pathways for a sustainable future: the case for mainstreaming gender across sustainable development goals (SDGs)”, in Gender Inequality and Its Implications on Education and Health, pp. 83753-84201, doi: 10.1108/978-1-83753-180-620231017.
Ciappei, C., Liberatore, G. and Manetti, G. (2023), “A systematic literature review of studies on women at the top of firm hierarchies: critique, gap analysis and future research directions”, Sustainability Accounting, Management and Policy Journal, Vol. 14 No. 7, pp. 202-231, doi: 10.1108/SAMPJ-10-2022-0557.
Conde-Ruiz, J.I., García, M. and Yáñez, M. (2020), “Does a ‘soft’ board gender quotas policy work?”, Applied Economic Analysis, Vol. 28 No. 82, pp. 46-68, doi: 10.1108/AEA-09-2019-0029.
Escalante, C.L., Turvey, C.G. and Barry, P.J. (2009), “Farm business decisions and the sustainable growth challenge paradigm”, Agricultural Finance Review, Vol. 69 No. 2, pp. 228-247, doi: 10.1108/00021460910978706.
Fernandes, V., Kuzey, C., Uyar, A. and Karaman, A.S. (2023), “Board structure policy, board diversity and social sustainability in the logistics and transportation sector”, International Journal of Physical Distribution and Logistics Management, Vol. 53 No. 1, pp. 62-92, doi: 10.1108/IJPDLM-09-2021-0415.
Franczak, J. and Margolis, J. (2022), “Women and great places to work: gender diversity in leadership and how to get there”, Organizational Dynamics, Vol. 51 No. 4, 100913, doi: 10.1016/j.orgdyn.2022.100913.
Garcia-Blandon, J., Argilés-Bosch, J.M., Ravenda, D. and Castillo-Merino, D. (2022), “Board gender quotas, female directors and corporate tax aggressiveness: a causal approach”, International Review of Financial Analysis, Vol. 79, 102010, doi: 10.1016/j.irfa.2021.102010.
Gold, N.O. and Taib, F.Md. (2022), “Corporate governance and extent of corporate sustainability practice: the role of investor activism”, Social Responsibility Journal, Vol. 19 No. 1, pp. 184-210, doi: 10.1108/srj-06-2021-0228.
Granovetter, M. (1978), “Threshold models of collective behavior”, American Journal of Sociology, Vol. 83 No. 6, pp. 1420-1443, doi: 10.1086/226707.
Guizani, M. and Abdalkrim, G. (2022), “Does gender diversity on boards reduce the likelihood of financial distress? Evidence from Malaysia”, Asia-Pacific Journal of Business Administration, Vol. 15 No. 2, pp. 287-306, doi: 10.1108/APJBA-06-2021-0277.
Gull, A.A., Nekhili, M., Nagati, H. and Chtioui, T. (2018), “Beyond gender diversity: how specific attributes of female directors affect earnings management”, British Accounting Review, Vol. 50 No. 3, pp. 255-274, doi: 10.1016/j.bar.2017.09.001.
Gull, A.A., Atif, M. and Hussain, N. (2023), “Board gender composition and waste management: cross-country evidence”, The British Accounting Review, Vol. 55 No. 1, 101097, doi: 10.1016/j.bar.2022.101097.
Higgins, R.C. (1981), “Sustainable growth under inflation”, Financial Management, Vol. 10 No. 4, p. 36, doi: 10.2307/3665217.
Husted, B.W. and Sousa-Filho, J.M.D. (2019), “Board structure and environmental, social, and governance disclosure in Latin America”, Journal of Business Research, Vol. 102, November 2016, pp. 220-227, doi: 10.1016/j.jbusres.2018.01.017.
Indah Lestari, R., Wahyudi, S., Muharam, H. and Nur Utomo, M. (2020), “The role of monitoring and bonding mechanisms of good corporate governance towards banks performance”, Humanities and Social Sciences Reviews, Vol. 8 No. 2, pp. 328-336, doi: 10.18510/hssr.2020.8237.
Javaid, H.M., Ain, Q.U. and Renzi, A. (2021), “She-E-Os and innovation: do female CEOs influence firm innovation?”, European Journal of Innovation Management, Vol. 26 No. 4, pp. 982-1004, doi: 10.1108/EJIM-04-2021-0227.
Kelan, E.K. and Wratil, P. (2021), “CEOs as agents of change and continuity”, Equality, Diversity and Inclusion: An International Journal, Vol. 40 No. 5, pp. 493-509, doi: 10.1108/EDI-06-2020-0171.
Kim, H. and Kim, Y. (2023), “The effects of gender diversity in boards of directors on the number of female managers promoted”, Baltic Journal of Management, Vol. 18 No. 1, pp. 122-139, doi: 10.1108/BJM-01-2022-0035.
Kock, N. (2021), “Moderated mediation and J-curve emergence in path models: an information systems research perspective”, Journal of Systems and Information Technology, Vol. 23 Nos 3-4, pp. 303-321, doi: 10.1108/JSIT-04-2021-0077.
Kock, N. and Sexton, S. (2017), “Variation sharing: a novel numeric solution to the path bias underestimation problem of PLS-based SEM”, International Journal of Strategic Decision Sciences, Vol. 8 No. 4, pp. 1-27, doi: 10.4018/ijsds.2017100102.
Kubo, K. and Nguyen, T.T.P. (2021), “Female CEOs on Japanese corporate boards and firm performance”, Journal of the Japanese and International Economies, Vol. 62 December 2020, 101163, doi: 10.1016/j.jjie.2021.101163.
Lafuente, E. and Vaillant, Y. (2019), “Balance rather than critical mass or tokenism”, International Journal of Manpower, Vol. 40 No. 5, pp. 894-916, doi: 10.1108/IJM-10-2017-0268.
Lefley, F. and Janeček, V. (2023), “Board gender diversity, quotas and critical mass theory”, Corporate Communications, Vol. 29 No. 2, pp. 139-151, doi: 10.1108/CCIJ-01-2023-0010.
Li, Z., Jia, J. and Chapple, L. (2022), “Board gender diversity and firm risk: international evidence”, Managerial Auditing Journal, Vol. 37 No. 4, pp. 438-463, doi: 10.1108/MAJ-05-2021-3157.
Ludwig, P. and Sassen, R. (2022), “Which internal corporate governance mechanisms drive corporate sustainability?”, Journal of Environmental Management, Vol. 301 September 2021, 113780, doi: 10.1016/j.jenvman.2021.113780.
Martínez-Jiménez, R., Hernández-Ortiz, M.J. and Fernández, A.I. (2020), “Gender diversity influence on board effectiveness and business performance”, Corporate Governance, Vol. 20 No. 2, pp. 307-323, doi: 10.1108/cg-07-2019-0206.
Mazzotta, R. and Ferraro, O. (2020), “Does the gender quota law affect bank performances? Evidence from Italy”, Corporate Governance (Bingley), Vol. 20 No. 6, pp. 1135-1158, doi: 10.1108/CG-08-2019-0252.
Menicucci, E. and Paolucci, G. (2022), “Gender diversity and bank risk-taking: an empirical investigation in Italy”, Corporate Governance: The International Journal of Business in Society, Vol. 22 No. 2, pp. 317-339, doi: 10.1108/CG-11-2020-0498.
Mnif, Y. and Cherif, I. (2020), “Female board directorship and earnings management”, Pacific Accounting Review, Vol. 33 No. 1, pp. 114-141, doi: 10.1108/PAR-04-2020-0049.
Nadeem, M., Suleman, T. and Ahmed, A. (2019), “Women on boards, firm risk and the profitability nexus: does gender diversity moderate the risk and return relationship?”, International Review of Economics and Finance, Vol. 64, pp. 427-442, doi: 10.1016/j.iref.2019.08.007.
Neschen, A. and Hügelschäfer, S. (2021), “Gender bias in performance evaluations: the impact of gender quotas”, Journal of Economic Psychology, Vol. 85, 102383, doi: 10.1016/j.joep.2021.102383.
Nicolò, G., Sannino, G. and Iorio, S.D. (2021), “Gender diversity and online intellectual capital disclosure: evidence from Italian-listed firms”, Journal of Public Affairs, Vol. 22 May, pp. 1-13, doi: 10.1002/pa.2706.
Öberg, C. (2021), “Women on board: the disregarded issue of board interlocks”, Gender in Management, Vol. 36 No. 1, pp. 39-60, doi: 10.1108/GM-11-2019-0225.
Paoloni, M., Paoloni, P. and Lombardi, R. (2019), “The impact on the governance of the gender quotas legislation: the Italian case”, Measuring Business Excellence, Vol. 23 No. 3, pp. 317-334, doi: 10.1108/MBE-02-2019-0019.
Patel, P.C., João Guedes, M., Pagano, M.S. and Olson, G.T. (2020), “Industry profitability matters: the value of sustainable growth rate and distance from bankruptcy as enablers of venture survival”, Journal of Business Research, Vol. 114 March, pp. 80-92, doi: 10.1016/j.jbusres.2020.04.004.
Roy, C.K. and Xiaoling, H. (2022), “Achieving SDG 5, gender equality and empower all women and girls, in developing countries: how aid for trade can help?”, International Journal of Social Economics, Vol. 49 No. 6, pp. 930-959, doi: 10.1108/IJSE-12-2020-0813.
Schopohl, L., Urquhart, A. and Zhang, H. (2021), “Female CFOs, leverage and the moderating role of board diversity and CEO power”, Journal of Corporate Finance, Vol. 71 December 2020, 101858, doi: 10.1016/j.jcorpfin.2020.101858.
Shaheen, R., Luo, Q. and Bala, H. (2022), “Untying the role of board gender diversity in dividend policy of politically embedded Chinese firms”, Journal of Applied Accounting Research, Vol. 24 No. 1, pp. 170-198, doi: 10.1108/JAAR-11-2021-0301.
Sousa, M. and Santos, M.J. (2022), “Gender diversity and equality in the boardroom: quota implementation in Europe”, in Crowther, D. and Seifi, S. (Eds), The Equal Pillars of Sustainability, Emerald Publishing, Vol. 17, pp. 143-169, doi: 10.1108/S2043-052320220000017008.
Sraieb, M.M. and Akin, A. (2021), “Gender diversity, environmental performances, and the role of countries' development status”, in Rezaei, S., Li, J., Ashourizadeh, S., Ramadani, V. and Gërguri-Rashiti, S. (Eds), The Emerald Handbook of Women and Entrepreneurship in Developing Economies, Emerald Publishing, pp. 49-69, doi: 10.1108/978-1-80071-326-020211004.
Tapver, T., Laidroo, L. and Gurvitš-Suits, N.A. (2020), “Banks' CSR reporting – do women have a say?”, Corporate Governance (Bingley), Vol. 20 No. 4, pp. 639-651, doi: 10.1108/CG-11-2019-0338.
Torchia, M., Calabrò, A. and Huse, M. (2011), “Women directors on corporate boards: from tokenism to critical mass”, Journal of Business Ethics, Vol. 102 No. 2, pp. 299-317, doi: 10.1007/s10551-011-0815-z.
Uddin, M.N. (2021), “Leverage structure decisions in Bangladesh: managers and investors' view”, Heliyon, Vol. 7 No. 6, e07341, doi: 10.1016/j.heliyon.2021.e07341.
Usman, M., Siddique, M.A., Makki, M.A.M., Gull, A.A., Dardour, A. and Yin, J. (2021), “Executives' pay–performance link in China: evidence from independent and gender-diverse compensation committees”, International Journal of Emerging Markets, Vol. 16 No. 8, pp. 1984-2008, doi: 10.1108/IJOEM-09-2019-0701.
Warmana, G.O., Rahyuda, I.K., Purbawangsa, I.B.A. and Artini, N.L.G.S. (2020), “Investigating capital structure speed of adjustment (SOA) of Indonesian companies for corporate value”, Global Journal of Flexible Systems Management, Vol. 21 No. 3, pp. 215-231, doi: 10.1007/s40171-020-00235-9.
WEF (2015), The Global Gender Gap Report 2015, Geneva.
World Economic Forum (2022), Global Gender Gap Report 2022, World Economic Forum, Geneva.
Wu, A.D. and Zumbo, B.D. (2008), “Understanding and using mediators and moderators”, Indicators Research, Vol. 87 No. 3, pp. 367-392, doi: 10.1007/sl.
Yami, N., Poletti-Hughes, J. and Hussainey, K. (2023), “The impact of female directors on earnings management and the moderating effect of board quality: enabler or deterrent?”, Journal of Financial Reporting and Accounting. doi: 10.1108/JFRA-03-2023-0119.
Yosra, G. and Sioud, O.B.O. (2011), “Ultimate ownership structure and stock liquidity: empirical evidence from Tunisia”, Studies in Economics and Finance, Vol. 28 No. 4, pp. 282-300, doi: 10.1108/10867371111171546.
Zaid, M.A.A., Wang, M., Adib, M., Sahyouni, A. and Abuhijleh, S.T.F. (2020), “Boardroom nationality and gender diversity: implications for corporate sustainability performance”, Journal of Cleaner Production, Vol. 251, 119652, doi: 10.1016/j.jclepro.2019.119652.
Zhou, M., Li, K. and Chen, Z. (2021), “Corporate governance quality and financial leverage: evidence from China”, International Review of Financial Analysis, Vol. 73, 101652, doi: 10.1016/j.irfa.2020.101652.
Acknowledgements
The authors would like to express our sincere gratitude to Semarang University, for all monetary and non-monetary support to conduct this research.