Does Corporate Board Diversity Impact Disaster Preparedness? An Empirical Investigation of Corporate Reactions to Covid-19

This study investigates the impact of board diversity on disaster preparation by firms. The Covid-19 crisis showed the importance of firms’ disaster preparedness as the pandemic disrupted global economic activity. Using financial flexibility as a proxy for disaster preparation, we find that comparatively, firms with greater financial flexibility suffered less during the period of stock market collapse early in the year 2020. We further explore the advisory role of boards in guiding disaster preparation by their firms. Consistent with resource dependency theory which stipulates that corporate boards provide the resources to guide firms in preparing for uncertainties, we find that firms with nationally diverse and gender-diverse board members tended to increase financial flexibility prior to the Covid-19 pandemic. The results indicate that corporate board diversity can contribute to improved support and directions for disaster preparedness to the companies they served.