Does Gender Diversity in the Boardroom Matter? Evidence from CEO Inside Debt Compensation
58 Pages Posted: 17 May 2019
Date Written: May 6, 2019
We show gender diverse boards offer compensation packages that incentivize CEOs to adopt strategies that lower risk and promote long-term firm survival. Appointment (exogenous departure) of independent female directors is followed by higher (lower) CEO pension compensation. Instrumental variable tests, exploiting geographic variation in supply of female directors, suggest effects are causal. Consistent with greater incentive alignment with bondholders, announcements of female director appointments are associated with decreases in yield spreads. We find no evidence of wealth transfer from equity investors to bondholders: Stock prices of firms, especially those with high-yield debt, react positively when female director appointments are announced.
Keywords: Gender diversity, Boards, Inside debt, Pensions, CEO compensation, Bond yields
JEL Classification: G32, G34, J32, J33, M52
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