Women in boards of Philippine publicly traded firms: Does gender diversity affect corporate risk-taking behavior?

The idea that more women belong on corporate boards is attracting increased attention around the world. Some scholars argue that gender diversity on boards improves firm performance and induces more prudent corporate decision-making. This rationale is based on the hypothesis that women are less overconfident and are innately more risk-averse than men. Alternatively, other researchers argue that firms having more female directors are associated with greater corporate risk-taking as the profiles of women making it to the board level have proven to be open to greater challenges and risks. Still another strand of literature argues that risk-aversion does not vary between homogeneously male boards and more gender-diverse boards because risk-aversion is not a distinctive characteristic of female directors.

In this paper, we report results for our examination of the relationship between board-level gender diversity for Philippine publicly listed firms on corporate risk-taking over the period of 2003 to 2015. We use the leverage ratio, the current ratio, the annual growth rate of assets, and the volatility of Return on Assets to proxy for corporate risk-taking, and we employ the two-step Blundell-Bond System Generalized Method of Moments estimation technique to account for endogeneity issues that may influence this relationship. Our findings show that we cannot definitively conclude that the relationship between board-level gender diversity and corporate risk-taking is negative. This suggests that the case for greater gender diversity of Philippine corporate boards should be based on fairness, social, and moral considerations, and not try to improve the level of corporate risk-taking.