Board Gender Diversity and Supply Chain Risk Management
Author(s) Information:
Karca D. Aral, Associate Professor of Supply Chain Management, Whitman Research Fellow, Whitman School of Management, Syracuse University.
Erasmo Giambona, Professor of Finance, Michael J. Falcone Chair in Real Estate, Whitman School of Management, Syracuse University.
Ricardo Lopez A., Assistant Professor of Finance, Whitman School of Management, Syracuse University.
Ye Wang, Associate Professor, University of International Business and Economics.
Journal (Year):
Production and Operations Management (2026)
Summary:
Adding female directors to corporate boards increases corporate hedging of supply chain risk and improves overall operational risk management.
Research Questions:
How does board gender diversity impact operational risk management?
What We Know:
R. Studies have shown that board gender diversity impacts corporate policies, for example, on capital structure (Bernile, Bhagwat, and Yonker, 2018, Journal of Financial Economics), cash holdings (Ahern and Dittmar, 2012, Quarterly Journal of Economics), and employment (Matsa and Miller, 2013, American Economic Journal: Applied Economics). Given that a core responsibility of a corporate board is to define the firm’s risk tolerance level, guide risk management strategies, and oversee risk mitigation and resilience efforts, the potential implications of board gender diversity on supply chain risk management are significant. Yet, the relationship between board gender diversity and operational risk management was underexplored. Our paper fills this gap.
Novel Findings:
In our empirical tests, we leverage on a reform requiring California firms to increase board gender diversity. We find that the propensity to use purchase obligations, supply contracts designed to mitigate the risk of future price fluctuations and reduce procurement uncertainty, increased for California buyers following the reform. We also find that California buyers increased their geographic supply chain diversification and became more likely to discontinue relationships with high-default risk suppliers after the reform. To our knowledge, our paper is the first to document these findings.
Novel Methodology:
To study how women’s participation in corporate boards affects supply chain risk management, we rely on a regulatory change requiring public listed firms headquartered in California, which have a combined market capitalization of $6.9 trillion, to have at least one female board director by the end of 2019, making California the first and only US state to have ever passed a board gender quota regulation.
We use 3 novel measures of operational risk management: 1) Purchase Obligations (Parsed from 10-Ks in the SEC EDGAR database): Legally binding supply contracts to buy goods or services from a supplier at a certain point in the future or within a specified time period. Buyers rely on these supply contracts to secure important production factors, hedge against future price changes, and plan their production processes, making purchase obligations established measures of supply chain risk management. 2) Level of geographic supply chain diversification. (3) Propensity for high default-risk supplier termination.
Implications for Practice: The main takeaway for corporate executives is that board gender diversity can lead to a better operational risk management.
Implications for Policy:
Gender diversity can improve firm performance and stakeholders' value. Because men tend to exhibit greater overconfidence (e.g., Prince, 1993; Barber and Odean, 2001) and face less scrutiny compared to their female counterparts, they could implement suboptimal hedging policies that diminish firm performance and stakeholders' value.
Implications for Society:
Policies favoring diversity can lead to higher societal value.
Implications for Research:
Our paper highlights operational risk management as an important channel for the increase in performance with higher board gender diversity documented in previous studies (e.g., Chu et al., 2019, Management Science).
Future research should explore how gender diversity can affect risk management and hedging policies beyond operational risk.
Full Citation:
Board Gender Diversity and Operational Risk Management (K. Aral, E. Giambona, R. Lopez-A., and Y. Wang), Production and Operations Management (Forthcoming)
Abstract:
How does corporate board gender diversity affect supply chain risk management? Board gender diversity can influence supply chain risk management through behavioral and agency-based mechanisms. Female directors’ greater risk aversion, lower overconfidence in the face of uncertainty, and heightened accountability pressures may lead to stronger oversight and risk mitigation efforts in operations, where risks are quantifiable and failures are highly visible. Therefore, we should expect supply chain risk management to increase with increased women representation in corporate boards. We test this prediction leveraging on a reform requiring California firms to increase board gender diversity. We find that the propensity to use purchase obligations, supply contracts designed to mitigate the risk of future price fluctuations and reduce procurement uncertainty, increased for California buyers following the reform. We also find that California buyers increased their geographic supply chain diversification and became more likely to discontinue relationships with high-default risk suppliers after the reform. These changes are larger when female directors are better positioned to influence corporate decisions, contributing to validate board gender diversity as an important channel for operational changes. The takeaway for corporate leaders, policymakers, and shareholders is that board gender diversity can lead to a greater focus on supply chain risk management, which increases profitability.
Web URL for the Article:
http://dx.doi.org/10.2139/ssrn.4717346