Predictors of Board Gender Diversity in Traditionally Male-Dominated Stock Exchanges: An Institutional and Strategic Response Approach

As organizations, stock exchanges have been traditionally male-dominated and run as old boys’ clubs, hence representing a particularly hostile environment for women. In addition to their regulatory function, they are increasingly considered guardians of the quality of the corporate governance of listed companies and are expected to set an example, with societal and ethical pressures for board gender diversity. Some exchanges have responded to these calls for action by considering gender diversity in their board policy. However, while gender balance has been incorporated into the agenda of some exchanges, gender diversity on exchange boards remains very low compared to other sectors. This study is the first to use institutional theory and a strategic response approach to explain this low female representation. In particular, we use a unique and very rich hand-collected firm-level panel dataset comprising 22 equity stock exchanges representing 53 percent of the World Federation of Exchanges 2020 total market capitalization covering a 25-year period from 1995 to 2019 to empirically investigate the predictors of the exchanges’ compliance with those societal pressures. We find that mandatory quotas (and not soft quotas), having a female CEO, and the representation of directors with strong business administration backgrounds positively impact board gender diversity. In contrast, the representation of traditional stock exchange members (stockbrokers formerly owning the exchanges) has a negative impact. We also find that cultural values play a role. Overall, our results indicate that institutional theory is an appropriate approach to understanding board gender diversity strategies in sectors where boards have been traditionally intensively male-dominated. Accordingly, scholars and policymakers should consider the interests and motivations of the different actors to advance potential resistance to change. Our results also suggest that policymakers and regulators should also consider national culture.