The “glass cliff” posits that when women do achieve high profile roles,
these are at firms in a precarious position.
Previous research tested for evidence of the glass cliff by monitoring appointments
(male or female), estimating the precariousness of the firms to which the
appointments were made and drawing inferences about the glass cliff from
resulting correlations. This study is
different insofar as it directly measures causation between the reporting of an
initial loss (as evidence of unequivocal precariousness) and changes in board gender
diversity. The sample is those companies
listed on the UK stock exchange reporting an initial loss in the years
2004–2006. Because gender diversity has
been to the forefront of corporate governance research for the last decade, a closely
matched control sample is also used in a difference-in-difference analysis to avoid
inadvertently attributing any improvements arising from system wide changes in
gender diversity to the initial loss event.
Findings suggest that when the initial loss is ‘big’ (representing a
relatively more precarious situation), there is a difference in the increase in
gender diversity versus both the control and the ‘small’ initial loss subsamples
across the test period, i.e. evidence of the glass cliff.