Gender diversity on corporate boards, firm performance, and risk-taking: New evidence from Spain

Abstract

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Spain was the first European country to pass a ”Gender Equality Act” to improve gender balance on corporate boards. Motivated by this vital development in Spanish law, we examine whether and how women directors play a role in influencing firm risk-taking and performance. We use 805 firm-year observations from 165 unique firms for 2013–2018. We find that firms with higher board gender diversity experience better accounting-based firm performance but lower market-based firm performance. Notably, our results show that firms with more female directors take higher risks, which puts a new insight into the long-standing tale that female directors are risk averse. Our results are robust with alternative measures of board gender diversity, performance and risk measures, alternative model specifications, and the two-step system GMM approach to address possible endogeneity. Our study context is, however, limited to Spain and does not account for female directors’ demographic and professional attributes due to the unavailability of relevant data. Despite these limitations, our research has important practical implications for policy and practice to enact a more gender-diverse board for better firm performance and risk management.