Shhh... Do Gender Diverse Boards Prioritize Product Market Concerns over Capital Market Incentives? An Ethical Dilemma

Abstract

We examine whether gender diverse boards prioritize product market concerns over capital market incentives when proprietary cost is high. Using a matched sample of the United States (US) listed companies and difference-in-differences research designs, we find that firms with gender diverse board experience higher adverse selection cost relative to similar firms with all-male board when the firm faces high competition or redacts disclosure of proprietary information from its material contract filings. Collectively, our results suggest that when proprietary cost is high, gender diverse boards strategically prioritize product market concerns by refraining from disclosure of proprietary information, relative to an all-male board, to protect shareholder interests and reduce risk exposure from loss of proprietary information to competitors.

Keywords: Board gender diversity; Proprietary cost; Product market competition; Confidential treatment orders; Adverse Selection.

JEL Classification: D23; G12; G14; G34; M14.