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Gender diversity in the boardroom: The role of female directors in mitigating stock price crash risk

Author

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  • Chen, Robin
  • Li, Shenru
  • Truong, Quang Thai
  • Chan, Chia-Ying

Abstract

This study investigates the effect of female board representation on stock price crash risk in the United States over the period 2006 to 2020. The empirical evidence suggests that increased gender diversity at the board level is associated with enhanced market stability, as reflected in a reduced likelihood of stock price crashes. The mitigating impact of female directors on crash risk is particularly pronounced in firms operating under conditions of weak market competition, lower board independence, and limited analyst coverage. The findings remain robust after addressing potential endogeneity concerns through entropy balancing (EB) and two-stage least squares (2SLS) estimation techniques. Overall, this affirms the positive contribution of female directors to corporate governance and highlight the relevance of promoting gender equality in alignment with Sustainable Development Goal 5 (SDG 5).

Suggested Citation

  • Chen, Robin & Li, Shenru & Truong, Quang Thai & Chan, Chia-Ying, 2025. "Gender diversity in the boardroom: The role of female directors in mitigating stock price crash risk," Global Finance Journal, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:glofin:v:67:y:2025:i:c:s1044028325000584
    DOI: 10.1016/j.gfj.2025.101131
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