Board Gender Diversity and its Impact on Firm Risk-Taking

Hesniati Hesniati, Lovis Vernando, Hery Haryanto, Hengky Arviano

Abstract

This study aims to analyze the gender diversity of boards of directors and its impact on firm risk-taking. It is interesting to study because the presence of women on the board of directors of a firm has garnered considerable attention in the last few years. The sample is drawn from the industrial sector listed on the Indonesian Stock Exchange from 2017 to 2021. Firm risk-taking is measured by the volatility of stock returns. Using panel data, the results of the research indicate that gender diversity has a significantly positive impact on firm risk-taking. This finding contributes that a female board of directors would lead to greater risk-taking than their male counterparts. This research provides a literature on gender diversity and firm risk-taking in a male-dominated sector in Indonesia, providing insights for investors and companies to consider the potential benefits of gender diversity on board of directors in managing firm risk-taking. Further research could apply other measurements of firm risk-taking and observe other male-dominated sectors for comparison to enhance the study’s limitation.

Keywords

Gender Diversity, Corporate Governance, Firm Risk-Taking

Full Text:

PDF

References

Achour, Z. (2021). Board Gender Diversity and Firm Risk. Corporate Governance-Recent Advances and Perspectives.

Adams, R. B., & Ferreira, D. (2009). Women in the Boardroom and Their Impact on Governance and Performance. Journal of Financial Economics, 94(2), 291–309.

Biswas, S. (2021). Female Directors and Risk-Taking Behavior of Indian Firms. Managerial Finance, 47(7), 1016–1037.

Chairani, C., & Siregar, S. V. (2021). The Effect of Enterprise Risk Management on Financial Performance and Firm Value: The Role of Environmental, Social and Governance Performance. Meditari Accountancy Research, 29(3), 647–670.

Chatjuthamard, P., Jiraporn, P., & Lee, S. M. (2021). Does Board Gender Diversity Weaken or Strengthen Executive Risk-Taking Incentives?. PLoS ONE, 16(10), e0258163, 1-18.

Duppati, G., Rao, N. V., Matlani, N., Scrimgeour, F., & Patnaik, D. (2020). Gender Diversity and Firm Performance: Evidence from India and Singapore. Applied Economics, 52(14), 1553–1565.

Elisa, M., & Guido, P. (2020). Does Gender Diversity Matter for Risk-Taking? Evidence from Italian Financial Institutions. African Journal of Business Management, 14(10), 324–334.

Fama, E. F., Jensen, M. C., Jensen, © M C, & Fama, E. F. (1983). Agency Problems and Residual Claims. Journal of Law & Economics, 26(6). 327-349.

Hurley, D., & Choudhary, A. (2020). Role of Gender and Corporate Risk Taking. Corporate Governance (Bingley), 20(3), 383–399.

IFC. (2019, June 27). IFC Study: Asian Companies with Women on Boards Show Better Financial Performance. Available at: https://pressroom.ifc.org/all/pages/PressDetail.aspx?ID=24834.

Jensen, M. C., Meckling, W. H., Benston, G., Canes, M., Henderson, D., Leffler, K., Long, J., Smith, C., Thompson, R., Watts, R., & Zimmerman, J. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. In Journal of Financial Economics, 3(4), 305-360.

Ji, J., Peng, H., Sun, H., & Xu, H. (2021). Board Diversity, Culture, and Firm Risk: Cross-country Evidence. Journal of International Financial Markets, Institutions and Money, 70, 101276.

Khaw, K. L. H., Liao, J., Tripe, D., & Wongchoti, U. (2016). Gender Diversity, State Control, and Corporate Risk-Taking: Evidence from China. Pacific Basin Finance Journal, 39, 141–158.

Li, Z., Jia, J., & Chapple, L. (2022). Board Gender Diversity and Firm Risk: International Evidence. Managerial Auditing Journal, 37(4), 438–463.

Mastella, M., Vancin, D., Perlin, M., & Kirch, G. (2021). Board Gender Diversity: Performance and Risk of Brazilian Firms. Gender in Management, 36(4), 498–518.

Muhammad, H., Migliori, S., & Mohsni, S. (2022). Corporate Governance and Firm Risk-Taking: The Moderating Role of Board Gender Diversity. Meditari Accountancy Research, 31(3), 706-728.

Mumtaz, R., Rehan, M. F., & Khan, Q. I. (2021). Board Gender Diversity, Firm Performance and Risk-Taking: The Case of Non-Financial Firms of Pakistan. IRASD Journal of Economics, 3(3), 354-367.

Nadeem, M., Suleman, T., & Ahmed, A. (2019). Women on Boards, Firm Risk, and the Profitability Nexus: Does Gender Diversity Moderate the Risk and Return Relationship? International Review of Economics and Finance, 64, 427–442.

Ozdemir, O., & Erkmen, E. (2022). Top Management Team Gender Diversity and Firm Risk-Taking in the Hospitality Industry. International Journal of Contemporary Hospitality Management, 34(5), 1739–1767.

Peltomäki, J., Sihvonen, J., Swidler, S., & Vähämaa, S. (2021). Age, Gender, and Risk-Taking: Evidence from the S&P 1500 Executives and Market-Based Measures of Firm Risk. Journal of Business Finance and Accounting, 48(9–10), 1988–2014.

Rigolini, A., Gabaldon, P., & Le Bruyn Goldeng, E. (2021). CEO Succession with Gender Change in Troubled Companies: The Effect of a New Woman CEO on Firm Risk and Firm Risk Perceived. Scandinavian Journal of Management, 37(1), 101138.

Saeed, A., Mukarram, S. S., & Belghitar, Y. (2021). Read between the Lines: Board Gender Diversity, Family Ownership, and Risk-Taking in Indian High-Tech Firms. International Journal of Finance and Economics, 26(1), 185–207.

Sativa, E., Hesniati, & Robin. (2022). The Effectiveness of Female Board Independency on Intellectual Capital: Indonesian Companies Listed on Kompas 100. Jurnal Ilmiah Manajemen Fakultas Ekonomi, 8(2), 181–192.

Seebeck, A., & Vetter, J. (2022). Not Just a Gender Numbers Game: How Board Gender Diversity Affects Corporate Risk Disclosure. Journal of Business Ethics, 177(2), 395–420.

Shi, A. A., Kris Ong Yiu, M. A., Angelo Ricafrente, L. S., Unite, A. A., & Sullivan, M. J. (2021). Women on Boards of Philippine Publicly Traded Firms: Does Gender Diversity Affect Corporate Risk-Taking Behavior?. Asia-Pacific Social Science Review, 21(2).

Shropshire, C., Peterson, S., Bartels, A. L., Amanatullah, E. T., & Lee, P. M. (2021). Are Female CEOs Really More Risk Averse?

Examining Economic Downturn and Other-Orientation. Journal of Leadership and Organizational Studies, 28(2), 185–206.

Tania, K. S., & Hesniati, H. (2022). The Effect of Gender Diversity on Firm Performance in Indonesia. Jurnal Manajemen Strategi Dan Aplikasi Bisnis, 5(2), 267–284.

Teodósio, J., Vieira, E., & Madaleno, M. (2021). Gender Diversity and Corporate Risk-Taking: A Literature Review. Managerial Finance, 47(7), 1038–1073.

Worokinasih, S., & Zaini, M. (2020). The Mediating Role of Corporate Social Responsibility (CSR) Disclosure on Good Corporate Governance (GCG) and Firm Value. A Technical Note. Australasian Accounting, Business and Finance Journal, 14(1), 88–96.

Yang, P., Riepe, J., Moser, K., Pull, K., & Terjesen, S. (2019). Women Directors, Firm Performance, and Firm Risk: A Causal Perspective. Leadership Quarterly, 30(5), 101297.

Yun, L. (2022). More Women in the Boardroom Could Drive Higher Credit Ratings and Stock Returns for Firms — They Still Hold Just 29% of Seats. Available at: https://www.cnbc.com/2022/03/11/women-gain-ground-in-the-boardroom-holding-29percent-of-director-seats-in-2022.html.

View Counter: Abstract - 738 and PDF - 643

Refbacks

  • There are currently no refbacks.


Bookmark and Share