I’m here because I’m just as good as you: Ethnic minority CEOs, social categorisation processes and firm risk

Abstract Drawing on social categorisation processes, we investigate the potential impact of the presence of ethnic minority (EM) CEOs on overall firm risk and whether this relationship is contingent on a culturally distant board of directors. Analysing a sample of 1,190 firms across 12 European countries from 2005 to 2018, we find that the presence of an EM CEO increases overall firm risk, while a culturally distant board mitigates it, particularly in the presence of an EM CEO, especially of Asian and Middle Eastern descent. Additionally, we find that organizations benefit from EM CEOs with higher educational qualifications and larger boards. Our findings contribute to understanding the implications of EM CEOs on firm risk and underscore the importance of governance and human resource measures in addressing associated challenges. This study suggests new considerations for corporate recruitment and risk management policies, fostering more inclusive and sustainable business practices in line with the United Nations’ Sustainable Development Goals (SDGs).