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Does board gender diversity weaken or strengthen executive risk-taking incentives?

ABSTRACT: We investigate the effect of board gender diversity on managerial risk-taking incentives. Our results demonstrate that companies with stronger board gender diversity provide more powerful executive risk-taking incentives. It appears that female directors' risk aversion exacerbates managers' risk aversion, resulting in a sub-optimal level of risk-taking. To offset this tendency for too little risk, companies are induced to provide stronger risk-taking incentives. Specifically, an increase in board gender diversity by one standard deviation raises vega by 10.3%. Further analysis corroborates the results, including propensity score matching, entropy balancing, and an instrumental-variable analysis. Endogeneity appears to be unlikely, suggesting that female directors are not merely associated with, but probably bring about stronger risk-taking incentives.

SUBMITTER: Chatjuthamard P

PROVIDER: S-EPMC8504771 | biostudies-literature | 2021

REPOSITORIES: biostudies-literature

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Does board gender diversity weaken or strengthen executive risk-taking incentives?

Chatjuthamard Pattanaporn P Jiraporn Pornsit P Lee Sang Mook SM

PloS one 20211011 10

We investigate the effect of board gender diversity on managerial risk-taking incentives. Our results demonstrate that companies with stronger board gender diversity provide more powerful executive risk-taking incentives. It appears that female directors' risk aversion exacerbates managers' risk aversion, resulting in a sub-optimal level of risk-taking. To offset this tendency for too little risk, companies are induced to provide stronger risk-taking incentives. Specifically, an increase in boar ...[more]

PMID: 34634051

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Project description:Risk-taking is a complex form of decision-making that involves calculated assessments of potential costs and rewards that may be immediate or delayed. Thus, making predictions about inter-individual variation in risk-taking due to personality traits, decision styles or other attributes can be difficult. The association of risk-taking with gender is well-supported; males report higher propensity for risk-taking and show higher risk-taking on tasks measuring actual risk-taking behavior. Risk-taking also appears to be associated with circadian phenotypes (chronotypes), with evening-types reporting higher levels of risk-taking-but this association may be confounded by the fact that, in certain age groups, males are more likely to be evening-types. Here, we test for gender by chronotype effects on risk-taking in young adults (n = 610) using a self-reported risk propensity questionnaire, the health domain of the DOSPERT, and a behavioral task measuring risk-taking, the Balloon Analog Risk Task (BART). Our results show that males report and take significantly more risks than females in this population. In addition, evening-type individuals have significantly higher self-reported risk propensity and tend to take more risks on the BART. Interestingly, there is no significant difference in risk propensity or risk-taking behavior across male circadian phenotypes, but evening-type females significantly report and take more risk than female intermediate and morning types. In regression analyses, we found both gender and chronotype predict risk propensity and risk-taking. Path analysis confirms that chronotype has an indirect effect on gender differences in both risk propensity and risk-taking. Furthermore, we found that trait anxiety (STAI) and sleep disturbance (PROMIS), significantly correlate with chronotype and gender in the complete dataset, but do not independently predict differences in female risk-taking. These results suggest that chronotype mediates gender effects on risk-taking and that these effects are driven primarily by morning-type females, but are not related to gender-specific differences in trait anxiety or sleep quality.

Dataset Information

Does board gender diversity weaken or strengthen executive risk-taking incentives?

Publications

Does board gender diversity weaken or strengthen executive risk-taking incentives?

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