Risk Taking and Performance- A Question of Gender?:

Abstract: This thesis investigates the effect that female directors and top managers have on the risk levels of a company, and the effect that gender diversity brings to firm performance. We perform cross-sectional regression analyses on a dataset consisting of 83 companies included in the OMX Large Cap and Mid Cap between 2004 and 2008, using the fraction of female directors on the board (FFD) and management dummies as regressors. Our first part of the thesis tests whether female directors and managers are more risk averse than men. We use risk measures such as the Debt-to-Equity ratio, Cash-to-Total Assets ratio and the Stock Price Volatility. In the second part of the thesis, where we investigate the effect that gender diversity has on firm performance, performance is defined as Excess Return, Tobin’s Q, Return on Assets and Return on Equity. Two of our risk measures generate significant results, proving women to be more risk averse than men. However, these results do not remain when tackling problems with omitted variables. Furthermore, one of our performance measures, Tobin’s Q, clearly shows that gender diversity enhances firm performance. This result is robust for heteroscedasticity and remains even after addressing endogeneity problems due to omitted variables. The thesis discusses methodological and sociological explanations to these results.