How Do Women on Board Reduce a Firm’s Risks to Ensure Sustainable Performance during a Crisis?

Abstract

The research applies the Upper Echelons Theory and the Lehman Sisters Hypothesis to explain how women board members use investment, financial, and liquidity techniques to reduce risk and increase a firm’s value. An original dataset of listed US companies is analyzed to show how women strategists contribute to value creation and mitigate stock volatility and bankruptcy. A simultaneous equations approach captures the interplay between a company’s use of debt and financial derivatives. According to this research, organizations that employ derivative instruments benefit more from having women in advisory roles because women encourage proactive risk management and develop effective risk control measures. The research implies that businesses should actively promote gender equality on their boards rather than merely recognizing the need for diversity.