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The role of board gender diversity in foreign currency hedging: A text-based analysis

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Listed:
  • Denlertchaikul, Nattarinee
  • Chatjuthamard, Pattanaporn
  • Ongsakul, Viput
  • Chintrakarn, Pandej
  • Jiraporn, Pornsit

Abstract

We investigate the effect of board gender diversity on foreign currency hedging using a text-based measure of currency hedging obtained from powerful textual analysis of 10-K reports. Based on a large sample of over 24,000 observations across two decades, our findings reveal that female directors view currency hedging favorably. Companies with a higher proportion of female board members utilize significantly more foreign exchange hedging, consistent with the notion that female directors are more risk-averse. Further analysis robustly validates the results, i.e., propensity score matching, entropy balancing, and an instrumental-variable analysis. Additionally, using an innovative text-based measure of firm-specific exposure to climate change generated from cutting-edge machine learning algorithms, we show that, when the firm is more vulnerable to climate change, the effect of board gender diversity on currency hedging is significantly weaker. One plausible explanation is that when the risk from climate change is more serious, foreign exchange rate risk is viewed as less significant in comparison, resulting in less support for currency hedging.

Suggested Citation

  • Denlertchaikul, Nattarinee & Chatjuthamard, Pattanaporn & Ongsakul, Viput & Chintrakarn, Pandej & Jiraporn, Pornsit, 2025. "The role of board gender diversity in foreign currency hedging: A text-based analysis," Research in International Business and Finance, Elsevier, vol. 77(PB).
    • Handle: RePEc:eee:riibaf:v:77:y:2025:i:pb:s0275531925001977
    DOI: 10.1016/j.ribaf.2025.102941
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    Keywords

    Foreign exchange hedging; Currency hedging; Female directors; Board gender diversity; Female board representation; Climate change; Textual analysis;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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