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Impact of board gender diversity on firm risk

Mary Jane Lenard (School of Business, Meredith College, Raleigh, North Carolina, USA)
Bing Yu (School of Business, Meredith College, Raleigh, North Carolina, USA)
E. Anne York (School of Business, Meredith College, Raleigh, North Carolina, USA)
Shengxiong Wu (School of Business, Texas Wesleyan University, Fort Worth, Texas, USA)

Managerial Finance

ISSN: 0307-4358

Article publication date: 8 July 2014

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Abstract

Purpose

The purpose of this paper is to study gender diversity on the board of directors and the relation to risk management and corporate performance as measured by the variability of stock market return.

Design/methodology/approach

The sample consists of companies from the RiskMetrics database from 2007 to 2011. This database contains information on corporate board of directors. Financial variables were collected from the Compustat database and CRSP database for the years 2005-2011. The authors then measure the effect of gender diversity on corporate performance in terms of firm risk, using the model by Cheng (2008) which measures the variability of stock market return.

Findings

The study shows that more gender diversity on the board of directors impacts firm risk by contributing to lower variability of stock market return. The higher the percentage of female directors on the board, the lower the variability of corporate performance.

Originality/value

The research design and findings assist in providing additional evidence about the role of women in corporate leadership positions and the association with corporate performance. The approach combines Cheng's (2008) model of stock market variability with the impact of gender diversity on the board of directors.

Keywords

Acknowledgements

JEL Classification — G32

The authors would like to thank the anonymous referees for their valuable comments and suggestions.

Citation

Jane Lenard, M., Yu, B., Anne York, E. and Wu, S. (2014), "Impact of board gender diversity on firm risk", Managerial Finance, Vol. 40 No. 8, pp. 787-803. https://doi.org/10.1108/MF-06-2013-0164

Publisher

:

Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited

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