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

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