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Board Gender Diversity and Firm Risk Practices

Year: 2025
Type: article
Abstract: In the wake of global financial crises and high-profile corporate collapses, corporate governance mechanisms have come under increasing scrutiny, particularly about how board composition influences risk management. Despite growing emphasis on gender diversity, there is limited empirical consensus on the role of female directors in shaping corporate risk practices. Most existing studies either overlook this intersection or offer inconclusive results, especially in emerging markets where corporate governance structures differ markedly from those in developed economies. This study addresses this gap by investigating the effect of board gender diversity on risk practices, focusing on whether increased female representation contributes to more prudent and transparent risk-taking behavior in firms. The purpose of this study is to examine the extent to which board gender diversity influences risk practices among publicly listed firms. It aims to determine whether a higher proportion of female directors is associated with enhanced risk oversight, reduced risk-taking behavior, and improved risk disclosure. The study further seeks to contribute to policy discourse by providing evidence that informs board composition guidelines for effective risk governance. The study employs a quantitative research design using panel data derived from annual reports of 85 publicly listed non-financial firms over ten years (2014–2023). Board gender diversity is measured using the percentage of female directors and a binary indicator for the presence of at least one female director. Risk practices are proxied by financial risk indicators (e.g., leverage, earnings volatility) and qualitative disclosures from sustainability and corporate governance reports. A Random Effects Model (REM) regression analysis is used to control for firm-specific unobserved heterogeneity, while robustness checks include the use of Fixed Effects and Generalized Method of Moments (GMM) estimations. The results reveal a statistically significant negative relationship between board gender diversity and risk-taking, suggesting that firms with more women on their boards tend to adopt more conservative financial strategies and disclose risk information more transparently. Specifically, the presence of female directors is associated with lower leverage ratios, reduced earnings volatility, and improved quality of risk-related disclosures. These findings persist across various model specifications and sub-sectoral analyses. The study is limited by its reliance on secondary data, which may not fully capture the nuances of boardroom dynamics or informal governance practices. Additionally, the study focuses only on non-financial firms in one emerging economy, which may limit the generalizability of the findings to other sectors or jurisdictions. The findings have significant implications for corporate governance reforms and boardroom diversity policies. Regulators and institutional investors may consider promoting gender-diverse boards as a mechanism for enhancing risk governance. The study also contributes to ongoing efforts to bridge the gender gap in corporate leadership by demonstrating the functional value of female participation in strategic oversight roles. This study offers a novel contribution by integrating gender diversity literature with corporate risk management discourse, particularly within the context of an emerging market. Unlike previous studies that often treat gender diversity as a symbolic or compliance-driven issue, this research provides empirical evidence of its substantive influence on corporate risk behavior. It enriches academic and policy debates on how diverse leadership enhances organizational resilience and long-term value creation.
DOI: 10.5281/zenodo.15599620
Language: English
Subfield: Gender Studies
Open Access status: green
OpenAlex ID: W6911896952
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