Females on Boards and Default Risk in the Chinese Real Estate Industry

Abstract

This study examines the relationship between female directors on boards and default risk in the Chinese real estate industry. While gender diversity is commonly viewed as an effective governance tool in boards to lower the risk of general market firms, we find that there is little influence with female directors in mitigating the default risk in our sample Chinese real estate firms. Nonetheless, once we partition our sample firms into state-owned enterprises (SOEs) and non-state-owned enterprises (non-SOEs), we observe a significant influence of female directors in lowering the default risk of non-SOEs. We further find that the significant relationship between female board representation and default risk in non-SOEs is attributed to non-SOE firms with high financial constraints and a critical mass of female directors. Our results are robust with a matched sample design, an instrumental variable approach, alternative measures of key variables, and inclusion of additional controls. Overall, our findings highlight the particular circumstances in which board gender diversity is effective in mitigating default risk in the unique environment of the Chinese real estate industry.