Cost of equity, debt financing policy, and the role of female directors

Abdullah A. Aljughaiman; Mohammed Albarrak; Ngan Duong Cao; Vu Quang Trinh

doi:10.1080/23322039.2022.2109274

Cost of equity, debt financing policy, and the role of female directors

Abdullah A. Aljughaiman, Mohammed Albarrak, Ngan Duong Cao, Vu Quang Trinh

Research output: Contribution to journal › Article › peer-review

4 Citations (SciVal)

Abstract

We examine the role of female directors on firm cost of equity in the context of US-listed firms, and further explore the mediating impact of debt financing policy on such association. Using a dataset of 4619 non-financial firm-year observations covering the period of 2008–2019, we find that firms with female directors on boards are likely to exhibit a lower cost of equity, through relying on a less risky financing decision. The indirect effect is found to take up around 45% of the female-cost of equity association. In addition, our analysis also indicates that the lower debt financing levels are realised only if female representation reaches a critical mass of around 28%. Our findings provide important implications for firms in balancing the gender ratio within their boards to level out their risk-taking through their financing decisions.

Original language	English
Article number	2109274
Journal	Cogent Economics and Finance
Volume	10
Issue number	1
Early online date	21 Aug 2022
DOIs	https://doi.org/10.1080/23322039.2022.2109274
Publication status	Published - 31 Dec 2022

Bibliographical note

Funding Information:
This work was supported by the Deanship of Scientific Research, King Faisal University [207013]. The authors extend their appreciation to the Deanship of Scientific Research at King Faisal University in Saudi Arabia for funding this research through project number (207013).

Funding Information:
The authors extend their appreciation to the Deanship of Scientific Research at King Faisal University in Saudi Arabia for funding this research through project number (207013).

Funding

This work was supported by the Deanship of Scientific Research, King Faisal University [207013]. The authors extend their appreciation to the Deanship of Scientific Research at King Faisal University in Saudi Arabia for funding this research through project number (207013). The authors extend their appreciation to the Deanship of Scientific Research at King Faisal University in Saudi Arabia for funding this research through project number (207013).

Keywords

board gender diversity
capital structure
cost of equity
mediating effect

ASJC Scopus subject areas

Finance
Economics and Econometrics

Access to Document

10.1080/23322039.2022.2109274Licence: CC BY

Cite this

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abstract = "We examine the role of female directors on firm cost of equity in the context of US-listed firms, and further explore the mediating impact of debt financing policy on such association. Using a dataset of 4619 non-financial firm-year observations covering the period of 2008–2019, we find that firms with female directors on boards are likely to exhibit a lower cost of equity, through relying on a less risky financing decision. The indirect effect is found to take up around 45% of the female-cost of equity association. In addition, our analysis also indicates that the lower debt financing levels are realised only if female representation reaches a critical mass of around 28%. Our findings provide important implications for firms in balancing the gender ratio within their boards to level out their risk-taking through their financing decisions.",

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N1 - Funding Information: This work was supported by the Deanship of Scientific Research, King Faisal University [207013]. The authors extend their appreciation to the Deanship of Scientific Research at King Faisal University in Saudi Arabia for funding this research through project number (207013). Funding Information: The authors extend their appreciation to the Deanship of Scientific Research at King Faisal University in Saudi Arabia for funding this research through project number (207013).

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Cost of equity, debt financing policy, and the role of female directors

Abstract

Bibliographical note

Funding

Keywords

ASJC Scopus subject areas

Access to Document

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