The Impact of Board Gender Diversity on Firm Capital Structure: A Quantitative Study on S&P 500 firms

Abstract: Purpose: The objective of this study is to determine whether or not board gender diversity influences the capital structures of S&P 500 firms. This is done based on the premise of female risk aversion and conventional capital structure and agency issues theories. With this foundation, we intend to close the knowledge gap regarding the effects of gender diversity on corporate boards. Methodology: In this study, a panel dataset is analysed using ordinary least squares (OLS) regressions. OLS regressions include both pooled OLS and fixed effects. In addition, robust standard errors clustered by firm id are employed to address heteroskedasticity issues. The DTC dependent variable and the main explanatory variable board gender diversity are finally subjected to a robustness test. Theoretical Perspectives: This investigation is grounded in conventional theories of capital structure, such as trade-off theory and pecking order theory. In addition, it includes a conventional theory, namely agency theory, as well as a relatively contemporary theory known as critical mass. These theoretical channels have been discussed previously in either capital structure or gender diversity research. To establish the relationship between board gender diversity and capital structure and these theories, we include the following. Empirical Foundation: The data sample is 354 firms listed on S&P 50 from 2015-2022. Conclusions: This paper's findings support the notion that board gender diversity is negatively related to the debt in a firm's capital structure, which is consistent with both previous empirical findings on this topic and psychological literature describing the risk-averse behaviour of women. In addition, the results support the critical mass literature, as we find strong evidence that there must be a threshold of women on the board for them to have a significant impact on corporate decision-making.