Empirical Studies on Gender Diverse Boards: Be Aware of the Value Bias in Corporate Debt

20 Pages Posted: 17 Feb 2019 Last revised: 27 Mar 2019

See all articles by Jan Riepe

Jan Riepe

University of Tuebingen - Department of Banking

Philip Yang

University of Tuebingen

Date Written: March 22, 2019

Abstract

We analyze if the empirical research on the consequences of a board’s gender diversity is affected by a specific measurement bias in Tobin’s Q: the value bias in corporate debt (VBCD). Book values of corporate debt are a more downward biased proxy of the market values of debt if increased board’s gender diversity comes with a reduction in corporate risk-taking. Nevertheless, the market values of corporate debt are frequently approximates by their book value when measuring Tobin’s Q.

We first show the VBCD using bond market data and its link to higher board’s gender diversity. Second, we replicate two recent studies on the link between a board’s gender diversity and the firm’s performance. We show how the VBCD impacts the estimations and inferences. Coefficient sizes and significance levels are both affected by the VBCD. Third, we recommend an easy-to-implement correction that explicitly accounts for risk changes in the values of corporate debt.

Keywords: Female Board Members, Book Value Bias, Performance, Risk, Tobin’s Q

JEL Classification: G38, G32, M14

Suggested Citation

Riepe, Jan and Yang, Philip, Empirical Studies on Gender Diverse Boards: Be Aware of the Value Bias in Corporate Debt (March 22, 2019). Available at SSRN: https://ssrn.com/abstract=3329966 or http://dx.doi.org/10.2139/ssrn.3329966

Jan Riepe (Contact Author)

University of Tuebingen - Department of Banking ( email )

Nauklerstr. 47
72074 Tuebingen, Baden Wuerttemberg 72074
Germany

Philip Yang

University of Tuebingen ( email )

Wilhelmstr. 19
72074 Tuebingen, Baden Wuerttemberg 72074
Germany

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