Board gender diversity and firm risk in UK private firms

This research aims to investigate the effect of board gender diversity on private firm risk. Using a sample of 27,352 UK private firms from 2005 to 2017, we report a negative association between board gender diversity and firm risk. In particular, we find that risk reduction is associated with women owner directors who may have a stronger incentive for better risk management. Firm risk is lower (higher) for boards with local (foreign) women directors suggesting that local market knowledge is more valuable for private firms. Lower director busyness in gender diverse boards is the channel that enables women directors to reduce firm risk by directing more attention to fiduciary responsibilities. Additional analysis reveals that more risky, small to medium-sized firms benefit the most from gender-diverse boards. Our findings are robust to alternate risk measurements and endogeneity corrections.