The Role of Gender Diversity in Downside Risk: Empirical Evidence from Vietnamese Listed Firms

Abstract

Corporate governance has been marked as an important component of the fast-growing pace of the Vietnam economy recently. Aligning with the concern that gender plays a critical role in corporate management, this study aims to reveal the entire benefits of the appearance of women on board to reduce downside risk in the frontier countries. By using a unique dataset from Vietnamese listed firms and appropriate econometric methods, we present tight results that the presentation of women at firm management level is more likely to lessen the downside risk. In particular, female non-senior reduces all risk attributes, whereas the presence of women in executive board decrease firm risk only. Furthermore, the decreasing of individual and systemic risk are additionally driven by female Chief Executive Officer (CEO) and chairman. We found strong evidence that female leadership may decrease risk-taking in the low-risk firms at all managerial levels but not in the case of a female CEO. In summary, by examining data from specific frontier areas such as Vietnam, we confirm that the role of female leadership in terms of reducing the downside risk depend on their power managerial levels and the firm-risk behavior.

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“…Thus, the new tight rules of hedging funds and consumer protection may reduce the investment capabilities of financial institutions. In that context, although female leaderships are mentioned to reduce the agency cost and increase firm value, their contributions to firm performance and growth opportunities may be limited due to their conservative decisions in investment (Tran et al, 2020). Furthermore, the appearance of women may not be relevant to a firm's value-enhancing strategies, but firms may positively be responding to outside pressure and satisfy the social requirement on gender equality in the boardroom (Farrell & Hersch, 2005).…”

“…On the other hand, Tran et al (2020) indicate that the presence of women directors could help the firm reduce risk-taking behavior.…”

“…Finally, in line with previous research (Campbell & Mínguez-Vera, 2008;Vafaei, Ahmed, & Mather, 2015;Gordini & Rancati, 2017;Tran et al, 2020), we use a set of control variables which are listed in table 2 to control for the proposed econometric model.…”

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