Board Diversity, Firm Risk, and Corporate Policies
TL;DR: In this article, the effects of diversity in the board of directors on corporate policies and risk were examined using a multi-dimensional measure, and it was found that greater board diversity leads to lower volatility and better performance.
Abstract: We examine the effects of diversity in the board of directors on corporate policies and risk. Using a multi-dimensional measure, we find that greater board diversity leads to lower volatility and better performance. Lower risk levels are largely due to diverse boards adopting less risky financial policies. However, consistent with diversity fostering more efficient (real) risk-taking, firms with greater board diversity invest more in R&D and have more efficient innovation processes. Instrumental variable tests that exploit exogenous variation in firm access to the supply of diverse nonlocal directors indicate that these relations are causal.
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386 citations
TL;DR: In this article, the authors extended the sample period through 2016 to provide a powerful out-of-sample test of the specification and power of director stock ownership as a measure of corporate governance.
206 citations
Cites background from "Board Diversity, Firm Risk, and Cor..."
...…this literature would include Ashbaugh-Skaife, Collins, and Lafond (2006), Erickson et al. (2006), Wintoki et al. (2012), Armstrong et al. (2014), Cremers and Ferrell (2014), Jenter and Lewellen (2015), Appel et al. (2016), Ferreira et al. (2018), Anginer et al. (2018), and Bernile et al. (2018)....
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TL;DR: In this paper, the effects of women directors on firm performance with specific consideration of the common trend assumption were investigated in the Norwegian setting and the results imply a negative effect of mandated female representation on the firm performance and on firm risk.
Abstract: Norway was the first of ten countries to legislate gender quotas for boards of publicly traded firms. There is considerable debate and mixed evidence concerning the implications of female board representation. In this paper, we explain the main sources of biases in the existing literature on the effects of women directors on firm performance and review methods to account for these biases. We address the endogeneity problem by using a difference-in-differences approach to study the effects of women directors on firm performance with specific consideration of the common trend assumption, and we explicitly distinguish between accounting-based (i.e., operating income divided by assets, return on assets) and market-based (i.e., market-to-book ratio and Tobin's Q) performance measures in the Norwegian setting. The control group are firms from Finland, Sweden, and Denmark. We further extend the analysis of causal effects of women directors to firm risk. Our results imply a negative effect of mandated female representation on firm performance and on firm risk.
120 citations
TL;DR: In this paper, the authors study the effect of board independence on corporate innovation and show that firms with more independent boards use more equity-based compensation, especially stock options, to promote managerial risk-taking.
99 citations
TL;DR: This paper examined stock market reactions, direct costs of compliance, and board adjustments to California Senate Bill No. 826 (SB 826), the first mandated board gender diversity quota in the United States.
89 citations
References
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Book•
01 Jan 1951TL;DR: Saari as mentioned in this paper introduced Arrow's Theorem and founded the field of social choice theory in economics and political science, and introduced a new foreword by Nobel laureate Eric Maskin, introducing Arrow's seminal book to a new generation of students and researchers.
Abstract: Originally published in 1951, Social Choice and Individual Values introduced "Arrow's Impossibility Theorem" and founded the field of social choice theory in economics and political science. This new edition, including a new foreword by Nobel laureate Eric Maskin, reintroduces Arrow's seminal book to a new generation of students and researchers. "Far beyond a classic, this small book unleashed the ongoing explosion of interest in social choice and voting theory. A half-century later, the book remains full of profound insight: its central message, 'Arrow's Theorem,' has changed the way we think."-Donald G. Saari, author of Decisions and Elections: Explaining the Unexpected
8,219 citations
TL;DR: In this paper, the authors show that standard errors of more than 3.0% per year are typical for both the CAPM and the three-factor model of Fama and French (1993), and these large standard errors are the result of uncertainty about true factor risk premiums and imprecise estimates of the loadings of industries on the risk factors.
6,064 citations
"Board Diversity, Firm Risk, and Cor..." refers background in this paper
...Columns 1 and 2 report OLS estimates, where Column 1 includes fixed effects for year, industry (i.e., Fama and French (1997) 49- industry), and headquarters-county, while Column 2 replaces industry and county with firm fixed effects....
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TL;DR: In this article, the authors present a destination search and find the appropriate manuals for their products, providing you with many Social Choice And Individual Values. You can find the manual you are interested in in printed form or even consider it online.
Abstract: If you want to have a destination search and find the appropriate manuals for your products, you can visit this website providing you with many Social Choice And Individual Values. You can find the manual you are interested in in printed form or even consider it online.
4,510 citations
"Board Diversity, Firm Risk, and Cor..." refers background in this paper
...On the one hand, if diversity is anticipated to disrupt the deliberation process and make the resulting outcomes more erratic (Arrow, 1951), then firms that operate in more volatile environments may find it optimal to have less diversity in the board....
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...On the other hand, it is certainly plausible that diversity would exacerbate conflicts and disrupt the board’s decision-making process, making the attainment of consensus harder and the resulting outcomes more erratic (Arrow, 1951)....
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Book•
01 Jan 1957
TL;DR: The second edition of "The Economics of Discrimination" has been expanded to include three further discussions of the problem and an entirely new introduction which considers contributions made by others in recent years and some of the more important problems remaining as discussed by the authors.
Abstract: This second edition of Gary S. Becker's "The Economics of Discrimination" has been expanded to include three further discussions of the problem and an entirely new introduction which considers the contributions made by others in recent years and some of the more important problems remaining. Mr. Becker's work confronts the economic effects of discrimination in the market place because of race, religion, sex, color, social class, personality, or other non-pecuniary considerations. He demonstrates that discrimination in the market place by any group reduces their own real incomes as well as those of the minority. The original edition of "The Economics of Discrimination" was warmly received by economists, sociologists, and psychologists alike for focusing the discerning eye of economic analysis upon a vital social problem-discrimination in the market place. "This is an unusual book; not only is it filled with ingenious theorizing but the implications of the theory are boldly confronted with facts. . . . The intimate relation of the theory and observation has resulted in a book of great vitality on a subject whose interest and importance are obvious."-M.W. Reder, "American Economic Review" "The author's solution to the problem of measuring the motive behind actual discrimination is something of a "tour de force." . . . Sociologists in the field of race relations will wish to read this book."-Karl Schuessler, "American Sociological Review"
3,219 citations
TL;DR: This article reviewed and evaluated recent management research on the effects of different types of diversity in group composition at various organizational levels (i.e., boards of directors, top management groups, and organizational task groups) for evidence of common patterns.
Abstract: In this article, we review and evaluate recent management research on the effects of different types of diversity in group composition at various organizational levels (i.e., boards of directors, top management groups, and organizational task groups) for evidence of common patterns. We argue that diversity in the composition of organizational groups affects outcomes such as turnover and performance through its impact on affective, cognitive, communication, and symbolic processes.
3,053 citations
"Board Diversity, Firm Risk, and Cor..." refers background in this paper
...Existing studies on diversity often distinguish between demographic (i.e. observable) and cognitive (i.e. unobservable) characteristics (e.g., Maznevski, 1994; Milliken and Martins, 1996)....
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