CEO Incentive Contracts, Risk Shifting, and Commitment Benefits of Gender Diverse Boards

59 Pages Posted: 17 May 2019 Last revised: 22 Jun 2020

See all articles by Vikram K. Nanda

Vikram K. Nanda

University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics

Andrew K. Prevost

University of Vermont

Arun Upadhyay

Florida International University (FIU)

Date Written: June 20, 2020

Abstract

We argue gender-diverse boards are associated with distinct preferences that reassure investors about their commitment to moderate risk and boost long-term corporate survival. Results suggest a strong relation between gender-diverse boards and bondholder-aligned CEO compensation components, particularly when CEOs have greater incentives to take and shift risk. This association is robust to a variety of controls for potential endogeneity, and is more pronounced when women directors are on compensation committees, regularly attend meetings and have influential backgrounds. Compensation spillovers occur with gender-diverse boards choosing similar peers. Bond and stock prices increase around female director appointment announcements, especially for high-yield issuers.

Keywords: Gender diversity, Boards, Inside debt, Pensions, CEO compensation, Bond yields

JEL Classification: G32, G34, J32, J33, M52

Suggested Citation

Nanda, Vikram K. and Prevost, Andrew K. and Upadhyay, Arun, CEO Incentive Contracts, Risk Shifting, and Commitment Benefits of Gender Diverse Boards (June 20, 2020). Available at SSRN: https://ssrn.com/abstract=3383644 or http://dx.doi.org/10.2139/ssrn.3383644

Vikram K. Nanda

University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics ( email )

2601 North Floyd Road
P.O. Box 830688
Richardson, TX 75083
United States

Andrew K. Prevost

University of Vermont ( email )

Burlington, VT 05405
United States

Arun Upadhyay (Contact Author)

Florida International University (FIU) ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

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