Board diversity and firm risk-taking in the tourism sector: Moderating effects of board independence, CEO duality, and free cash flows

• Published in: Tourism economics : the business and finance of tourism and recreation Vol. 28; no. 7; pp. 1782 - 1804
• Main Authors: Ozdemir, Ozgur, Erkmen, Ezgi, Binesh, Fatemeh
• Format: Journal Article
• Language: English
• Published: London, England SAGE Publications 01-11-2022; Sage Publications Ltd
• Subjects: Companies; Moderators; Risk; Risk reduction; Risk taking; Tourism; board independence; free cash flows; risk-taking; board diversity; CEO duality
• ISSN: 1354-8166; 2044-0375
• DOI: 10.1177/13548166211014367

This study examines the effect of board diversity on risk-taking for tourism firms and analyzes the moderating effect of board independence, CEO duality, and free cash flows in this proposed relationship. Using a composite index of board diversity and a sample of tourism firms from the US hotel, restaurant, and airline industries, we find that greater board diversity leads to lower risk-taking, measured in standard deviation of return on assets. Moreover, we report that the risk-reduction effect of board diversity is more profound when tourism firms have less board independence and less free cash flows for investments. When board diversity is decomposed into relation-oriented and task-oriented diversity attributes, we find that only the task-oriented diversity is influential in reducing firm risk-taking for tourism firms. Akin to main analysis, the board independence and free cash flows are significant moderators of the relationship between task-oriented diversity and firm risk-taking.