The Impact of the Dual Board Structure and Board Diversity: Evidence from Chinese Initial Public Offerings (IPOs)

Abstract

Chinese listed companies have a two-tier (dual) governance structure that comprises a supervisory board/committee (SB) and the board of directors (BoD). However as there is no hierarchical relationship between them, the two boards are independent. This is different from the governance mechanism in Continental Europe in which the SB appoints the directors of the management board; in this sense the Chinese two-tier governance structure is unique. We investigate the impact of governance characteristics and ownership structure on gender diversity of both the board of directors (BoD) and the supervisory board (SB) for a sample of 892 Chinese IPOs floated in both the Shanghai and Shenzhen Stock Exchanges. We find that the average proportion of female directors and female SB members on the BoD and the SB are 10% and 22% respectively. Using both static and dynamic panel data methods, we find that there is no significant impact of board structure on gender diversity in China. However, we find a positive and significant relationship between SB size and gender diversity. We also find that the higher the state ownership the lower the female representation on both boards. Finally, our findings show that there is a bi-directional relationship between financial performance and the proportion of female directors sitting on the BoD.

Keywords: Board Diversity; Corporate Governance; Two-Tier Board; Initial Public Offerings (IPOs); China