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.

Keywords: board composition, gender diversity, reputation management, tax avoidance, financial risk

JEL Classification: G12, G30, G32, G34