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Board gender diversity and cost of equity: Evidence from mandatory female board representation

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Listed:
  • Jun, Chen
  • Qiyuan, Liu
  • Xiaofang, Ma
  • Zhang, Feida (Frank)

Abstract

In this paper, we examine whether and how board gender diversity impacts firms’ cost of equity. We predict that firms with greater board gender diversity enjoy a lower cost of equity than firms with less gender diversity due to a larger investor base, less information asymmetry among investors, and more conservative accounting disclosure. We use staggered worldwide boardroom gender diversity reforms as a quasi-natural experiment to conduct a difference-in-differences analysis. Using a large sample of firms from 43 markets, we obtain empirical evidence in line with our prediction. Our results are robust to tests involving alternative samples, specifications, and explanations. Cross-sectional analyses show that the effect of board gender diversity on the cost of equity is less (more) pronounced when firms are more (less) gender-equal, transparent, and conservative in accounting.

Suggested Citation

  • Jun, Chen & Qiyuan, Liu & Xiaofang, Ma & Zhang, Feida (Frank), 2023. "Board gender diversity and cost of equity: Evidence from mandatory female board representation," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 501-515.
    • Handle: RePEc:eee:reveco:v:88:y:2023:i:c:p:501-515
    DOI: 10.1016/j.iref.2023.06.031
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    References listed on IDEAS

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    1. Merton, Robert C, 1987. "A Simple Model of Capital Market Equilibrium with Incomplete Information," Journal of Finance, American Finance Association, vol. 42(3), pages 483-510, July.
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    Cited by:

    1. Ding, Shusheng & Du, Min & Cui, Tianxiang & Zhang, Yongmin & Duygun, Meryem, 2024. "Impact of board diversity on Chinese firms’ cross-border M&A performance: An artificial intelligence approach," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 1321-1335.
    2. Xiaohui Xin & Ruoyu Zhu & Guoli Ou, 2024. "Does digital transformation lower equity financing costs? An explanation based on the “return-risk-expectation” framework," Economic Change and Restructuring, Springer, vol. 57(2), pages 1-26, April.

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    More about this item

    Keywords

    Mandatory female board representation; Cost of equity; International evidence;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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