The Effects of Board Gender Diversity on a Firm's Risk Strategies

Accounting and Finance, Forthcoming

47 Pages Posted: 8 Feb 2017 Last revised: 1 Nov 2018

See all articles by Linda H. Chen

Linda H. Chen

University of Idaho

Jeffrey Gramlich

Carson College of Business

Kimberly Houser

Oklahoma State University

Date Written: December 7, 2017

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

Suggested Citation

Chen, Linda H. and Gramlich, Jeffrey and Houser, Kimberly, The Effects of Board Gender Diversity on a Firm's Risk Strategies (December 7, 2017). Accounting and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2912655 or http://dx.doi.org/10.2139/ssrn.2912655

Linda H. Chen (Contact Author)

University of Idaho ( email )

Department of Accounting
College of Business and Economics
Moscow, ID 83944-3174
United States

Jeffrey Gramlich

Carson College of Business ( email )

Wilson Rd.
College of Business
Pullman, WA 99164
United States

HOME PAGE: http://https://business.wsu.edu/research-faculty/institutes/hoops-institute/

Kimberly Houser

Oklahoma State University ( email )

335 Spears College of Business
Stillwater, OK 74074
United States
+1(405)744-9430 (Phone)

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