The impact of female directors on firm risk: A study in the context of G6 countries

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Abstract

The main objective of this study is to assess the impact of female directors on firm risk in the G6 countries (all G7 countries except Italy, since data for Italy are not available). A total of 4617 firm-year observations were collected from six countries: the United States, Japan, Germany, the United Kingdom, France, and Canada. The firm risk measures (risk1 and risk2) are calculated as the ratio of a firm profitability to volatility of profitability. These risk measures capture the risk-seeking behavior of the firm. These ratios are a comprehensive measure of risk-seeking behavior since they capture the decisions made by the incumbent management related to the firm’s operations. The results show that the presence of female directors beyond a threshold point reduces firm risk in the total dataset as well as in individual countries. Interestingly, Europe as a continent and all European countries individually have the highest impact of the presence of female directors above the threshold. In the case of Japan, the presence of female directors has the least influence on firm risk.

Keywords: Female Directors, Firm Risk, G6 Countries, Threshold Point

Authors’ individual contribution: Conceptualization – S.B., D.M., and S.A.; Methodology — S.B., D.M., S.A., and R.K.D.; Investigation — S.B., D.M., S.A., and R.K.D.; Resources — S.B., D.M., S.A., and R.K.D.; Writing — S.B., D.M., S.A., and R.K.D.; Supervision — S.B. and D.M. Funding Acquisition — S.B. and D.M.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G30, M41

Received: 24.04.2024
Accepted: 26.09.2024
Published online: 01.10.2024

How to cite this paper: Banerjee, S., Mohanti, D., Aggarwal, S., & Dubey, R. K. (2024). The impact of female directors on firm risk: A study in the context of G6 countries [Special issue]. Corporate Ownership & Control, 21(3), 60–70. https://doi.org/10.22495/cocv21i3siart5