The effect of gender diversification in the board on a firm’s cost of capital
Independent thesis Advanced level (degree of Master (One Year)), 20 HE creditsStudent thesis
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.
IdentifiersURN: urn:nbn:se:uu:diva-279504OAI: oai:DiVA.org:uu-279504DiVA: diva2:908254
Master Programme in Business and Management