Does gender diversity on boards reduce information asymmetry problems? Empirical evidence from the French market

Abstract

PurposeThe purpose of this paper is to investigate the effect of female members in boards of directors on asymmetric information in the French stock market.Design/methodology/approachThe authors use two proxies for asymmetric information: the idiosyncratic volatility and the bid-ask spread. This study is conducted on all listed firms in the SBF 120 index between 2002 and 2012.FindingsResults show that gender diversity in boardrooms has a negative effect on the level of private information in stock markets and reduces the bid-ask spread. However, these effects are significant in family-controlled firms: female inside directors significantly increase the idiosyncratic volatility and the bid-ask spread, while female independent directors decrease both proxies for stock market liquidity.Research limitations/implicationsOur empirical findings contribute to the current debate on the benefits of gender diversity on corporate boards from the market perspective. It shows that, under specific conditions, financial markets could be receptive to the presence of female directors in boardrooms.Practical implicationsPractitioners and policymakers advocate the benefits of gender diversity on corporate boards. This paper shows that when the protection of minority shareholders is poor, the stock market is receptive to the presence of women independent directors, only in family controlled firms. This is a further argument that could help women to overcome glass-ceiling barriers they usually face to achieve top management positions.Originality/valueThis paper provides support for the increased attention paid to gender-diverse boards. It addresses the market sensitivity toward the presence of women members in French boardrooms and their positions. This is the first paper, to the best of our knowledge, to address how appointing women to different positions in the boardroom could provide signals to investors in the presence of asymmetric information. French firms are mostly family controlled. Thus, the findings bring valuable information of the impact of board diversity on the stock market considering family and nonfamily firms.