Local gender imbalance and corporate risk-taking

Abstract

We study the effects of local gender imbalance on corporate risk-taking. We find that firms in areas with a higher local male–female ratio have higher stock return volatilities, leverage ratios and capital expenditure, and less corporate hedging. Consequently, such firms face higher loan spreads, more collateral requirements and capital expenditure restrictions, and have more covenant violations. We address endogeneity concerns by using two instrumental variables for the local male-female ratio: the local prostate cancer and breast cancer mortality rates. We further show that local gender imbalance captures local residents’ risk preferences, which influence corporate policies via both local investor and employee channels.