The effects of board gender diversity on a firm's risk strategies

Abstract

We study whether board gender diversity (BGD) affects corporate risk strategies. Specifically, we investigate the association between BGD and firms’ reputation risk and financial risk. Using S&P data from 1997 to 2013, we find that BGD is negatively associated with tax avoidance, suggesting firms with gender‐diverse boards are more cautious about potential reputation risks associated with aggressive tax strategies. However, we find that BGD is positively associated with firms’ financial risk. The combined findings illustrate that BGD aligns a firm's risk exposure closer to risk‐neutral shareholders’ preferences by reducing reputation risk exposure while enabling necessary financial risk exposure.

The impact of managerial discretion on fair value information in the Australian agricultural sector

“…When we introduce the four measures of board monitoring, a significant and positive coefficient for the joint effect of pre-agricultural earnings and managerial discretion is found when female directors are present (PREFV 9 PROSPECTOR 9 BOARD). This is consistent with the literature showing that female directors are more risk averse (MacLeod, 2007;Chen et al, 2019), less likely to engage in opportunistic behaviour (Gul et al, 2011), and more willing to question decisions made by managers (Adams and Funk, 2012). However, no significant result is found for the other three monitoring attributes.…”

“…This is consistent with the literature showing that female directors are more risk averse (MacLeod, 2007; Chen et al . , 2019), less likely to engage in opportunistic behaviour (Gul et al . , 2011), and more willing to question decisions made by managers (Adams and Funk, 2012).…”

Gender, ethnicity and stock liquidity: evidence from South Africa

“…To further address the possible endogeneity problems, we follow Chen et al (2019) and estimate the change model to investigate whether the current changes in gender and ethnic diversity in corporate boards are associated with future changes in stock liquidity by estimating the following equations:…”

Read between the lines: Board gender diversity, family ownership, and risk‐taking in Indian high‐tech firms

“…Drawing on the sample of emerging market firms, Saeed et al (2016) find that board gender diversity negatively associates with risk‐taking in Indian listed firms. Chen et al (2017) find that gender diverse boards are more cautious about reputational risks associated with aggressive tax strategies. Levi et al (2014) also support this notion that women directors avoid risky and challenging situations.…”

“…Empirical evidences examining the direct relationship between directors' gender and risk‐taking, however, remain equivocal at best, as some studies report negative or no effect of women executives on firm risk‐taking (e.g. Chen, Gramlich & Houser, 2017; Levi, Li, & Zhang, 2014; Wahid, 2018), whereas others indicate positive impact (Adams & Funk, 2012; Berger, Kick, & Schaeck, 2014; Bernile, Bhagwat, & Yonker, 2018; Green & Homroy, 2018). The inconclusive results lead researchers to suggest that rather than examining a direct relationship between gender diversity and risk‐taking, variables surrounding this relationship must be examined (e.g., Bargeron, Lehn, & Zutter, 2010; Berger et al, 2014; Bernile et al, 2018; Miller & Triana, 2009).…”