Does board gender diversity weaken or strengthen executive risk-taking incentives?

Pattanaporn Chatjuthamard, Pornsit Jiraporn and Sang Mook Lee

PLOS ONE, 2021, vol. 16, issue 10, 1-18

Abstract: We investigate the effect of board gender diversity on managerial risk-taking incentives. Our results demonstrate that companies with stronger board gender diversity provide more powerful executive risk-taking incentives. It appears that female directors’ risk aversion exacerbates managers’ risk aversion, resulting in a sub-optimal level of risk-taking. To offset this tendency for too little risk, companies are induced to provide stronger risk-taking incentives. Specifically, an increase in board gender diversity by one standard deviation raises vega by 10.3%. Further analysis corroborates the results, including propensity score matching, entropy balancing, and an instrumental-variable analysis. Endogeneity appears to be unlikely, suggesting that female directors are not merely associated with, but probably bring about stronger risk-taking incentives.

Date: 2021
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0258163

DOI: 10.1371/journal.pone.0258163

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