Corporate governance and firm risk-taking: the moderating role of board gender diversity

Abstract

Purpose

This study aims to explore the moderating role of board gender diversity (BGD) in the relationship between corporate governance mechanisms (i.e. board size, board independence, chief executive officer (CEO) gender, CEO duality and ownership concentration) and firm risk-taking.

Design/methodology/approach

Using a sample of 192 non-financial publicly traded Italian firms over 2014–2018, this study tests the proposed research hypotheses and assess the moderating effect of BGD.

Findings

Drawing on agency theory and resource dependence theory, this study finds a significant relationship between corporate governance mechanisms and firm risk-taking, which is significantly moderated by BGD. BGD accentuates the negative effect of board size, independent directors, CEO gender and CEO duality on firm systematic risk and attenuates the positive impact of CEO duality on firm unsystematic risk. The results, which are consistent with the risk-reduction effect of BGD, are robust to the use of alternative measures of firm risk-taking.

Practical implications

Women’s presence on corporate boards plays a critical role in the board’s involvement in risk-taking. Hence, investors and stakeholders should consider women on corporate boards as a crucial risk-mitigating factor.

Originality/value

This paper contributes to our knowledge on risk management by demonstrating the moderating role of BGD while relating corporate governance mechanisms and firm risk-taking.

Citation

Muhammad, H., Migliori, S. and Mohsni, S. (2023), "Corporate governance and firm risk-taking: the moderating role of board gender diversity", Meditari Accountancy Research, Vol. 31 No. 3, pp. 706-728. https://doi.org/10.1108/MEDAR-07-2020-0949