Board Gender Diversity and Corporate Risk-Taking in South Africa: The Power of Critical Mass

This study explored the influence of board gender diversity (BGD) on corporate risk-taking (CRT) within 90 non-financial companies listed on the Johannesburg Stock Exchange from 2016 to 2025. Utilising an ex post facto design, data were gathered from annual reports and the Who Owns Whom and Osiris databases. BGD was quantified by the proportion of women directors (PWD) and its square (PWD²). CRT was evaluated through the debt-to-equity (DE) and debt-to-total assets (DA) ratios. The hypothesis was tested using fixed effects models (FEM). The FEM findings indicated that PWD has a significant positive effect on DE, whereas PWD² has a significant negative effect. Similarly, PWD positively influences DA, while PWD² negatively impacts it. The statistical analysis revealed an inverted U-shaped relationship between PWD and the CRT proxies. Furthermore, the graphical analysis demonstrated that DE and DA reached their maximum values when PWD was between 40% and 60% of the board size. In this context, regions with skewed boards (PWD ≤ 20%) and tilted boards (20% < PWD ≤ 40%) were associated with increased DE and DA. Conversely, the balanced board region (40% ≤ PWD ≤ 60%) was associated with decreased DE and DA. These findings suggest that higher levels of BGD may lead to more conservative CRT policies, consistent with the principles of critical mass theory. Therefore, boards should implement guidelines that encourage BGD to reach a critical mass, helping transform the traditional "old boys' club" dynamics in corporate boardrooms and enabling meaningful influence on CRT mitigation efforts.