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

Posted: 13 Nov 2016

See all articles by Rubeena Tashfeen

Rubeena Tashfeen

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

Tahir Suleman

Wellington Institute of Technology

Multiple version iconThere are 2 versions of this paper

Date Written: November 9, 2016

Abstract

This is the first comprehensive study of board gender diversity and its policy impacts on derivatives risk management, through an examination of the value, risk, and hedging effects. 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, their influence through investment policies provide a value premium, and their financial strategies contribute both a value enhancing and risk reducing benefit to firms that use derivatives. 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 board gender diversity adds value to boards of directors in their risk management of financial derivatives and therefore women should have a larger representation on boards of directors in firms that use derivatives.

Suggested Citation

Tashfeen, Rubeena and Suleman, Tahir, Board Gender Diversity and Risk Management: And a View of the Financial, Investment and Liquidity Policies (November 9, 2016). 8th Conference on Financial Markets and Corporate Governance (FMCG) 2017. Available at SSRN: https://ssrn.com/abstract=2867239 or http://dx.doi.org/10.2139/ssrn.2867239

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

Tahir Suleman

Wellington Institute of Technology ( email )

21 Kensington Ave
Petone, Wellington 5012
New Zealand

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