Board Gender Diversity and Firm Value in Times of Crisis: Evidence from the COVID-19 Pandemic

Abstract

We study the impact of board gender diversity on stock price reactions to the outbreak of the COVID-19 pandemic. We provide robust evidence that stocks of firms with gender-diverse boards experienced higher abnormal returns when the negative market sentiment induced by the outbreak of the COVID-19 pandemic was at its peak. In cross-sectional analysis, we find that the documented effect was amplified among financially constrained firms, firms with a longer cash conversion cycle, and firms with higher information uncertainty, while it was mitigated among firms with higher managerial ability. Supplemental analysis suggests that gender diversity in both advisory and monitoring board committees played a role in shaping the documented relation. Our findings are consistent with the view that the market interpreted board gender diversity as a positive signal regarding firms’ ability to weather the economic implications of the COVID-19 pandemic.

Keywords: Board gender diversity, Abnormal returns, Crisis, COVID-19

JEL Classification: G14, G30, G40