Board gender diversity and firm risk: international evidence

Zhongtian Li · Jing Jia · Larelle Law Chapple

48 citations0/0 files storedManagerial Auditing Journal

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Gender Diversity and Inequality Corporate Finance and Governance Gender Politics and Representation

Abstract

Purpose This paper aims to uncover the global trend on the relationship between board gender diversity and firm risk. In addition, this paper investigates how country characteristics affect the relationship between board gender diversity and firm risk. Design/methodology/approach This study uses a large sample of firms in 45 countries for the period from 2002 to 2018. Ordinary least square regression is used as a baseline methodology, along with firm fixed effects. Difference-in-differences regression, two-stage least squares regression (instrumental variables approach) and change-on-change regression are adopted to better mitigate endogeneity. Findings This study finds that board gender diversity is associated with lower firm risk worldwide. In addition, the negative effect of board gender diversity on firm risk is more pronounced for firms that can more easily attract female directors, and for countries with lower power distance and greater preference for individualism. Practical implications The findings offer insights into the intense debate in recent years among academics and practitioners on the effect of board gender diversity on firm outcomes. Shareholders and directors may take the findings into account when they consider appointing female directors. The findings should be of interest to policymakers in countries that have not yet promoted board gender diversity. Originality/value By using an international sample with board gender quotas in different countries, this paper provides novel and persuasive evidence regarding the impact of board gender diversity on firm risk. This paper also adds to the literature by showing that the relationship between board gender diversity on firm risk is influenced by country characteristics.

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References

2009Women in the boardroom and their impact on governance and performance☆2007Upper Echelons Theory: An Update 1983Agency Problems and Residual Claims 2013Corporate social responsibility and access to finance 2003Enjoying the Quiet Life? Corporate Governance and Managerial Preferences 2009How does financial reporting quality relate to investment efficiency?2010The Impact of Board Diversity and Gender Composition on Corporate Social Responsibility and Firm Reputation 2007Gender Diversity in the Boardroom and Firm Financial Performance

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