Board gender diversity and cost of equity

ABSTRACT

Evidence that women directors provide more effective monitoring suggests that greater board gender diversity is associated with lower cost of equity because of greater confidence in the firm’s governance. We test this hypothesis using a sample of French firms over the period 2006–2017. The results show that cost of equity is significantly lower when firms have a higher proportion of women directors. It thus appears that mandatory quotas have allowed women directors to reach the critical mass needed to have significant impact.

KEYWORDS:

• Cost of equity
• women directors
• gender diversity
• dynamic system
• GMM

JEL CLASSIFICATION:

• G32
• G34

Disclosure statement

No potential conflict of interest was reported by the author.