Board Gender Diversity and Risk Management: And a View of The Financial, Investment and Liquidity Policies

Posted: 24 Jul 2016 Last revised: 5 Nov 2017

See all articles by Rubeena Tashfeen

Rubeena Tashfeen

University of Management and Technology; Victoria University of Wellington, Victoria Business School, Alumni

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Date Written: July 17, 2016

Abstract

This is the first comprehensive study of board gender diversity and its policies on derivatives risk management, through an examination of the value, risk, and hedging effects on risk control. Applying a simultaneous equations model to address the endogenous effects of financial and derivatives hedging decisions, our findings suggest that women directors provide a monitoring impact on derivatives decisions that result in a hedging value premium and reduction in risk. Further, gender diversity influence on investment policies achieve a value premium, and its financial strategies provide both a value enhancing and risk reducing benefit through the reduction in leverage, within firms that hedge with derivatives. While, in response to equity risk gender-diverse boards encourage the increase in cash reserves. Additional quantile analyses support the monotonic associations of gender diversity with firm value, and with firm risk. We find women directors on boards are effective risk managers and policy makers. Whether this may be attributed to risk aversion as proposed by some researchers, conservative attitude or just better risk acumen, it suggests that gender diversity adds value to boards of directors in their risk management of financial derivatives and therefore board gender diversity should have a larger representation on boards of firms that use derivatives.

Keywords: financial derivatives, risk, value, governance, board diversitry

Suggested Citation

Tashfeen, Rubeena, Board Gender Diversity and Risk Management: And a View of The Financial, Investment and Liquidity Policies (July 17, 2016). Available at SSRN: https://ssrn.com/abstract=2810712 or http://dx.doi.org/10.2139/ssrn.2810712

Rubeena Tashfeen (Contact Author)

University of Management and Technology ( email )

Johar Town - Phase 1
Lahore, 54000
Pakistan
+92 3224219636 (Phone)

Victoria University of Wellington, Victoria Business School, Alumni ( email )

PO Box 600
Wellington, Victoria 6140
New Zealand

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