The value of women serving on the corporate board for strengthening the board's efficiency and decision-making quality has received a large amount of prominence. Therefore, this paper aims to underscore the effect of women directors on a company’s equity risk.
This empirical research employed a system generalized method of moments, a superior approach to investigate the relationship between women directors and corporate risk. This study also utilized Blau and Shannon indices for the robustness of the study’s results.
The results indicate that the percentage of female directors has a negative and significant relationship with corporate risk. The outcome is bolstered by other measures of gender diversity. It validates the concept of the resource-based theory, which holds that a more diverse and larger board is linked to better results through reduced variability in corporate performance. Furthermore, the interaction effect between board size and female directors may minimize the corporate risk.
Regulators and policymakers should design new policies and regulations that will further expand the role of female directors beyond mere tokenism. Further, it guides investors that investing funds in gender diversity corporate firms can enhance their returns.
The study contributes to the existing literature by examining the relationship between female directors and corporate risk in the Indian context. It also investigates how board size influences such a relationship, which is an underexplored area in corporate governance literature.
