Does board gender diversity affect firms' expected risk?
Description
This paper examines whether board gender diversity is associated with firms' forward-looking risk as perceived by management and investors. It uses cash holdings and option-implied volatility as risk proxies and addresses selection, endogeneity, heteroskedasticity, and serial correlation through multiple robustness checks.
The results show an inverse relationship between board gender diversity and expected risk. The evidence suggests that the reduction in risk is more consistent with improved board group dynamics and collective intelligence than with a simple gender-difference explanation based on risk preferences.
What this paper contributes.
Uses forward-looking risk proxies.
Cash holdings and option-implied volatility capture expected risk from managerial and investor perspectives.
Tests robustness to common empirical concerns.
Dynamic panel GMM and Heckman correction checks are used alongside the main specifications.
Shows lower expected risk in more gender-diverse boards.
The empirical results indicate economically and statistically meaningful differences in expected risk.
Emphasizes board dynamics.
The explanation centers improved group decision-making rather than assuming that female directors are simply more risk averse.