The Gender and Ethnic Diversity of Boards and the Cost of Corporate Bond Issuance

Abstract

This study investigated the impact of boardroom diversity on bond issuance costs for S&P-1500-listed firms, focusing on gender and ethnic diversity. We explored whether diverse boards received discounts or premiums on underwriting fees and if there is a diversity threshold for reduced borrowing costs. Our results, based on 15 years of data, show that firms with boards reflecting the general workforce's demographic diversity tend to incur lower bond issuance costs. Conversely, increasing the ratios of female or ethnic-minority members on a board beyond this balance does not significantly impact bond issuance costs. This indicates no direct correlation between higher representation of these groups and lower underwriting fees. Our findings have significant implications for institutional borrowers and regulators, supporting recent legislative initiatives on board composition and suggesting strategies for obtaining favorable bond financing rates.

Keywords: Diversity, Corporate bond issuance, Corporate board