Board Gender Diversity and Financial Default Risk: An Empirical Analysis

Abstract

This study investigates how women directors affect financial default risk of US firms. The findings suggest that women directors reduce financial default risk by increasing the distance to default. However, this is only the case if there are at least two women on the board. Additionally, white women directors reduce financial default risk, while women of color do not affect financial default risk. The study also identifies the channels through which women directors impact financial default risk as the resource dependence and monitoring channels. Furthermore, there is evidence that women directors improve the value and performance of distressed firms. The results are robust to alternative specifications and different ways of addressing endogeneity concerns. Keywords: Board gender diversity; Women directors; Women of color; Distance to default; Financial distress risk.