Board diversity and the timing of drug recalls: Implications for public health and shareholder value

• In 2023, adverse drug reactions caused 162,763 deaths. • Board diversity helps firms address public health risks more promptly. • Firms with low board diversity face financial penalties after product recalls. This study examines the influence of board diversity on firms’ strategic decision-making and shareholder value, analyzing pharmaceutical companies’ responses to adverse event reports. Employing duration analysis, we find that firms with higher proportions of foreign and female directors on their boards are significantly more likely to issue prompt recalls following adverse event reports. Additionally, our results demonstrate that delayed recalls by firms with less diverse boards lead to substantial negative stock returns. These findings underscore the importance of board diversity in enhancing public health protection and reducing financial risk.