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The effect of gender diversification in the board on a firm’s cost of capital
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Business Studies.
2016 (English)Independent thesis Advanced level (degree of Master (One Year)), 20 HE creditsStudent thesis
Abstract [en]

This paper examines the effect of gender diversification in the board of directors on a firm’s cost of capital. Women in the board lead to better monitoring due to higher attendance rates in board meetings for instance, which reduces agency costs. I argue that this reduction of agency costs results in a lower cost of capital. Furthermore, I hypothesize that the effect of a gender diverse board has a greater extent in low-debt firms and in firms with low corporate governance. The hypotheses are empirically analysed with a cross-sectional multivariate OLS regression. After controlling for other variables that influence the cost of capital, the results show that there is a significant negative correlation between gender diversification in the board and the cost of capital of a firm. The result is robust to taking different lags for gender diversity, the dummy variable if there is at least one woman in the board, and performing endogeneity tests. The sub-hypotheses are not statistically significant, except for the interaction effect of corporate governance on the firm level and gender diversity in the board, which has a negative sign. Thus, a gender diverse board and corporate governance are no substitutes and additional monitoring reduces the cost of capital.

Place, publisher, year, edition, pages
2016. , 41 p.
National Category
Business Administration
URN: urn:nbn:se:uu:diva-279504OAI: oai:DiVA.org:uu-279504DiVA: diva2:908254
Educational program
Master Programme in Business and Management
Available from: 2016-03-02 Created: 2016-03-02 Last updated: 2016-03-02Bibliographically approved

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