See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/327339718

Female directors and the cost of debt: Does gender diversity in the boardroom
matter to lenders?

Article  in  Managerial Auditing Journal · August 2018

DOI: 10.1108/MAJ-04-2018-1863

CITATIONS READS
29 1,577

5 authors, including:

Muhammad Usman - Taunsvi Muhammad Umar Farooq

Nanjing Audit University Xi'an Jiaotong University
27 PUBLICATIONS   287 CITATIONS    5 PUBLICATIONS   84 CITATIONS   

SEE PROFILE SEE PROFILE

Junrui Zhang Abdul Majid Makki

Xi'an Jiaotong University The Islamia University of Bahawalpur
57 PUBLICATIONS   448 CITATIONS    21 PUBLICATIONS   246 CITATIONS   

SEE PROFILE SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Corporate Social Responsibility View project

Earnings Management: Evaluating the Monitoring Efficiency of Chinese Financial System View project

All content following this page was uploaded by Muhammad Usman - Taunsvi on 16 September 2018.

The user has requested enhancement of the downloaded file.

How to cite this paper
Usman, M. Farooq, M.U., Zhang, J., Makki, A.M.M. and Khan, M.K. (2018), “Female directors and the
cost of debt: Does gender diversity in the boardroom matter to lenders?”, Managerial Auditing Journal,
Accepted, DOI: 10.1108/MAJ-04-2018-1863.

[SSCI Impact Factor: 0.693] [ABS-2] [ABDC-B]

Running Title: Female directors and cost of debt

Female directors and the cost of debt: Does gender diversity in the boardroom matter to lenders?

Muhammad Usman
School of Management, Xi’an Jiaotong University, Xi’an P.R. China
Email: musmanms14@gmail.com

Muhammad Umar Farooq*

School of Management, Xi’an Jiaotong University, Xi’an P.R. China
Email: mufarooqms@hotmail.com

Junrui Zhang
School of Management, Xi’an Jiaotong University, Xi’an P.R. China
Email: zhangjr@mail.xjtu.edu.cn

Muhammad Abdul Majid Makki

Department of Commerce, The Islamia University of Bahawalpur, I.R Pakistan
Email: majid.makki@iub.edu.pk

Muhammad Kaleem Khan

School of Economics and Management, Beijing University of Posts and Telecommunications, P.R. China
Email:mkaleemkhan@yahoo.com

* Corresponding Authors Details:

Address: Corresponding author Muhammad Umar Farooq at School of Management, Xi’an Jiaotong University,
Xi’an, Shaanxi, China can be contacted at: mufarooqms@hotmail.com

Acknowledgement

We are thankful to the editor and two anonymous reviewers for their constructive feedback. Mr. Muhammad
Usman is also thankful to Junqin Sun, Professor Dong Nanyan, Professor, Wang Fangjun, Irfan Kazim, and the
accounting simulation lab fellows of the School of Management, Xi’an Jiaotong University, China for their help in
this research. The author Professor Junrui Zhang acknowledges the financial support by National Natural Science
Foundation of China under the grant number 71472148.

1
 Biography of Authors

Muhammad Usman is a PhD student in School of Management, Xi’an Jiaotong University, China. His area of
research interest is corporate finance, corporate governance, corporate social responsibility, executives
compensation, and audit fees. Currently his PhD research work revolves around the governance role of female
directors. His research work has been accepted or published by international journals of good repute e.g.
Economics Letters, Management Decision, Managerial Auditing Journal, Asia-Pacific Journal of Financial studies,
Pakistan Journal of Commerce and Social Sciences etc.

Muhammad Umar Farooq is a Master student in School of Management, Xi’an Jiaotong University, China. His area
of research interest is corporate governance, CEO power, executives compensation, and audit fees. Currently his
master research work revolves around the corporate governance, audit fess, CEO pay, and CEO power. His
research work has been published (accepted) by international journals of good repute e.g. Economics Letters,
Managerial Auditing Journal, Pakistan Journal of Commerce and Social Sciences etc

Junrui Zhang is a Professor of accounting and finance in School of Management, Xi’an Jiaotong University, China.
His area of research interest is cost of capital, employees’ quality, corporate governance, corporate social
responsibility, executive compensation, and audit quality. His research work has been published (accepted) in
international journals of well repute e.g. Applied Economics, Economics Letters, Management Decision, Business
Ethics: A European Review etc

Muhammad Abdul Majid Makki is an Associate Professor of accounting in Department of Commerce, The Islamia
University of Bahawalpur, Pakistan. His area of research interest is cost of capital, employees’ quality, corporate
governance, corporate social responsibility, executive compensation, Intellectual capital, knowledge management,
and audit quality. His research work has been accepted or published by international journals of well repute e.g.,
Economics Letters, Management Decision, Managerial Auditing Journal, Pakistan Journal of Commerce and Social
Sciences etc

Muhammad Kaleem Khan recently awarded PhD from School of Economics and Management, Beijing University of
Posts and Telecommunications, China. His area of research interest is technology innovation, corporate
governance, corporate social responsibility, and financial structure. His research work has been published by
international journal of well repute i.e. Asia-Pacific Journal of Financial studies; Journal of Business Economics and
Management; China Economic Review etc.

2
 Female directors and the cost of debt: Does gender diversity in the boardroom matter to
lenders?
Abstract:
Purpose: We investigate the question concerning whether gender diversity in the boardroom matters to lenders or
not?
Methodology: To answer this question, we use data from 2009 to 2015 of all A-share listed companies on the
Shanghai and Shenzhen stock exchanges. We use ordinary least squares regression and firm fixed effect regression
to draw our inferences. To check and control the issue of endogeneity we use one-year lagged gender diversity
regression, two-stage least squares regression, propensity score matching method, and Heckman two-stage
regression.
Findings: Our results suggest that the presence of female directors on the board reduces managerial opportunistic
behavior and information asymmetry and, consequently, creditors’ perceptions about the probability of loan default
and the cost of debt. We find that lenders charge 4 percent less from borrowers that have at least one female board
member than they do from borrowers with no female board members. We also find that the board structure (i.e.,
gender diversity) of government-owned firms also matters to lenders, as government-owned firms that have gender-
diverse boards have a lower cost of debt (i.e., 5% lower interest rate).
Implications: Our findings have implications for individual borrowers and for regulators. For example, borrowers
can get debt financing at lower rates by altering their boards’ composition (i.e., through gender diversity). From the
regulatory perspective, our results support recent legislative initiatives around the world regarding female directors’
representation on boards.
Originality: This paper makes several contributions. First, beyond the recent studies on boardroom gender, we
investigate the relationship between gender diversity in the boardroom and the cost of debt. Second, we extend the
literature on the association between government ownership and cost of debt by first time providing evidence that
the board composition (e.g., gender diversity) of government-owned firms also matters to the lenders. The other
contributions are discussed in introduction section.
Keywords: Gender diversity; Cost of debt capital; Government ownership.
JEL Classification: J16; O16

3
 1. Introduction:
In this research paper, we explore the association between gender diversity in the boardroom and the cost of debt.
Because of the growing concerns about gender equality, several regulatory bodies around the globe are seeking to
increase the representation of female directors on corporate boards. For example, Terjesen et al. (2016) document
that sixteen countries’ codes of corporate governance encourage their publicly listed companies to have gender
diversity on their boards (e.g., Australia, Canada, Sweden, the United Kingdom), while in fourteen countries it is
mandatory for publicly listed companies to have women on their boards (e.g., Belgium, France, India, Italy,
Malaysia, Norway, Pakistan).
Given this increased attention by regulators and policymakers around the globe, mostly researchers have focused on
exploring the economic benefit of boardroom gender diversity by investigating effect of gender diversity on the firm
performance (e.g., Post and Byron, 2015; Solakoglu and Demir, 2016; Green and Homroy, 2018). However, their
findings are mixed. (For a meta-analysis, see Post and Byron, 2015.) Those who find that gender diversity has
economic benefits argue that it improves decision-making because of the presence of alternative viewpoints (Zahra
and Pearce, 1989), attracts talented employees, improves firms’ external legitimacy (Hambrick et al., 2008),
improves corporate image, and helps companies to recruit and retain the best female employees (Daily et al., 1999).
On the other hand, some contend that gender diversity on the board may lead to negative consequences, such as
reduced firm performance because of time-consuming decision-making, differences in objectives and increased
disagreement on the board that may lower the effectiveness of decision-making process, and value destruction for
firms that operate in industries that require quick responses to market shocks (Smith et al., 2005; Petrovic, 2008). In
addition, Pletzer et al. (2015) argue that it may have an adverse effect on firm performance by increasing
interpersonal conflicts and impairing communication and cooperation.
Strobl et al. (2016) argue that it is more useful to investigate whether the presence of female directors improves
firms’ internal governance, rather than examining the causal relationship between gender diversity on the board and
firm performance, because several variables can affect firm performance. Adams and Ferreira (2009) argue that
gender diversity on their boards may not be associated with firms’ performance but that it can add to their
monitoring function. They find that the presence of female directors improves attendance at board meetings and
increases the sensitivity of CEO turnover to stock returns. Their finding on the monitoring role of female directors
gives a new dimension to the gender-diversity literature such that now an increasing number of studies are
investigating the effects of female directors on issues other than firm performance, such as its effects on agency cost
(Reguera-Alvarado et al., 2017), earnings quality (García-Sánchez et al., 2017), earnings management (Gull et al.,
2017; Luo et al., 2017), the quality of sustainability reporting (Al-Shaer and Zaman, 2016), accounting quality
(García Lara et al., 2017), dividend policy (Saeed and Sameer, 2017), CEO power (Usman et al., 2018a), CEO pay
(Usman et al., 2018b), and stock liquidity (Ahmed and Ali, 2017). The common objective of these studies is to
classify female directors as a governance mechanism that facilitates firms’ sound internal governance practices.
These studies report that female directors are more conscientious than men (Schmitt et al., 2008), more responsible
(Fondas and Sassalos, 2000), tough monitors (Adams and Ferreira, 2009) and less overconfident than their male
counterparts (Daily and Dalton, 2003) and that they improve board independence (Lucas- Pérez et al., 2015), reduce
agency costs (Reguera-Alvarado et al., 2017), objectively determine CEO pay (Usman et al., 2018b), deter managers
from managing earnings (Gull et al., 2017), make less risky investment decisions (Faccio et al., 2016), and improve
the corporate internal governance (Adams and Ferreira, 2009). These findings support the notion that lenders will
charge less for debt when the boardroom is gender-diverse because of the reduced default risk that is due to female
directors’ effective monitoring role, strategic-orientation, and advising capability.
However, Peterson and Philpot (2007) document that female directors are less likely than males to serve on boards’
key committees and report that gender diversity is not a significant factor in deciding the composition of the audit,
finance, nomination, or compensation committees. Eagly and Carli (2003) document that female directors usually
work very hard to get a place in the boardroom and face significant pressure to get along with other board members.
Similarly, Usman et al. (2018b) report that the CEO is more powerful when the board is gender-diverse because
female directors are under pressure to go along with what happens in the boardroom and are weak monitors. As a
vice chairwoman at Value Edge Advisors, a consulting firm that works with shareholder groups on compensation
and other issues, observed, “It’s very difficult for women to get on boards, and I think they are under even more
pressure to go along and get along [because] the culture of the boardroom is to vote yes. You want to stay on the
board, don’t you?” Furthermore, gender diversity in the boardroom slows the decision-making process because of

4
differences in perspective and differences in gender-related characteristics (Smith et al., 2005; Petrovic, 2008). The
resulting increase in interpersonal conflict and impairment in communication and cooperation can decrease the
effectiveness of board monitoring, resulting in lenders’ charging a risk premium.
Most studies on the relationship between corporate governance and the cost of debt focus on the corporate-control
model, which deals with factors like ownership structure (e.g., Borisova and Megginson, 2011; Borisova et al.,
2015: Shailer and Wang, 2015). A limited but growing number of studies investigate the effect of board composition
on the cost of debt capital (e.g., Lorca et al., 2010; Fields et al., 2012; Bradley and Chen, 2015; Hashim and Amrah,
2016; Ghouma et al., 2018). However, the limited literature on the effect of the board’s structure on the cost of debt
overlooks the relationship between gender diversity on the board and the cost of debt. In addition, most of these
studies are conducted in advanced economies with highly developed capital markets (e.g., the UK, the US, Canada).
Therefore, how firms’ board structures effect their cost of financing debt in emerging countries like China is far
from apparent.
Extant studies on the association between board composition and the cost of debt tend to be based on the argument
that debtholders favor monitoring mechanisms that can limit managers’ opportunistic behavior and to consider the
board’s composition as a reliable source of assurance of accounting numbers’ integrity. Therefore, the quality of
corporate governance mechanism may reduce lenders’ risk and, consequently, any risk premium. In alignment with
this argument, most studies report that the board’s quality (e.g., boardroom independence) is associated with lower
cost of debt (e.g., Bradley and Chen, 2015; Hashim and Amrah, 2016; Ghouma et al., 2018).
Regarding the effect of the boardroom’s gender diversity on cost of debt, we advance three alternative hypotheses
because of the contradictory evidences and arguments about female directors’ monitoring role. The first hypothesis
is that, if the lender considers that the presence of female directors on the board improves its independence and
monitoring function, then the association between gender diversity and the cost of debt financing is negative. We
refer to this hypothesis as the efficiency hypothesis (business case) because the presence of female directors on the
board has such economic benefits as reduced cost of debt. The second hypothesis is that, if the lenders think female
directors face more pressure than male directors and are weak monitors, reducing the effectiveness of the board’s
decision-making process, then the association between gender diversity and the cost of debt financing is positive.
We refer to this hypothesis as the inefficiency hypothesis because the presence of female directors on the board
leads to such negative economic impacts as increased cost of debt. The third hypothesis proposes that, if lenders are
neutral with respect to women on the board, then there is no relationship between gender diversity in the boardroom
and the cost of debt financing. We refer to this hypothesis as the neutrality hypothesis because it suggests that the
presence of female directors on the board has no effect on lenders’ perceptions and so none on cost of debt.
Therefore, we state following three alternative hypotheses:
H1a: The presence of women on the board is negatively associated with the cost of debt (Efficiency hypothesis).
H1b: The presence of women on the board is positively associated with the cost of debt (Inefficiency hypothesis).
H1c: The presence of women on the board is not associated with the cost of debt (Neutrality hypothesis).
Using recent data of all Chinese listed companies, we find support for the efficiency hypothesis. Our results support
the business case for women’s representation on the board because we find that lenders charge less risk premium
when the board is gender-diverse. Moreover, in additional tests, we find that the board composition of state-owned
firms also has a material effect on the cost of debt, as lenders charge lower interest for loans to government-owned
firms that have gender-diverse boards. Moreover, in contrast to token theory, we find that borrowers that only have a
single female director on their boards also pay less for debt. However, in alignment with critical mass theory, we
find that firms that have two female directors get better interest rates than do firms that have a single female director
and that lenders charge even less interest for borrower that have more than two female directors. All of our findings
remain even when we use alternative measures and various subsamples and after controlling for endogeneity issues.
This paper makes four main contributions. First, beyond the recent studies on boardroom gender, we investigate the
relationship between gender diversity in the boardroom and the cost of debt. Second, we extend the limited literature
on the association between government ownership and cost of debt (Borisova et al., 2015; Shailer and Wang, 2015)
by providing support for the finding that the board composition (e.g., gender diversity) of government-owned firms
affects lenders’ view about the firms; we find that government-owned firms that have gender-diverse boards have
advantage of lower cost of debt than government-owned firms whose boards are not gender-diverse. Third, we

5
contribute to the limited but growing literature on the relationship between board structure and the cost of debt (e.g.,
Bradley and Chen, 2015; Hashim and Amrah, 2016; Ghouma et al., 2018) by investigating this relationship within
the context of world’s largest developing country, China. Finally, the value of the paper stretches beyond bridging
gaps in the literature because we contribute to the recent global debate on the voluntary or mandatory representation
of female directors on boards. Given this increased attention, investigating the role that female directors play in the
corporate governance process will help to guide regulators, policymakers, and academics in making decisions about
the role of female directors.
2. Sample, Variables, and Methodology
2.1. Sample, Variables, and Statistics
We collected from China’s Stock Market and Accounting Research (CSMAR) database the data of all A-share listed
companies on the Shanghai and Shenzhen stock exchanges for recent period 2009 to 2015. Our study period begins
in 2009 because of significant changes in China's financing environment following the global financial crisis of
2008, and the data ends in year 2015.After deleting observations with missing data on the variables, our final usable
unbalanced panel data was 5,806 firm-year observations. The detail of sample selection is provided in table 1.
Following extant studies (e.g., Kim et al., 2011; Bliss and Gull, 2012; Shailer and Wang, 2015), we use interest rate
as a proxy for the cost of debt (Interest), defining the variable as the log of the firm’s total financing expense divided
by its short-term and long-term debt. Table 3, which shows the descriptive statistics, shows that, on average,
Chinese firms pay 10 percent for debt financing (s.d. = 3%).We use two most commonly used proxies for gender-
diversity in the boardroom (e.g., Usman et al., 2018a; 2018b): FemaleD, a dummy variable that equals 1 if there is at
least one female director on the board, and 0 otherwise, and FemaleP, which is defined as the proportion of female
directors on the board. Table 3 shows that 69 percent of the firms in our sample had at least one female director on
the board (average of 1.2 female directors).
Following the extant literature (e.g., Bradley and Chen, 2015; Shailer and Wang, 2015; Hashim and Amrah, 2016;
Ghouma et al., 2018) we isolate the effect of female directors on the cost of debt by controlling for other board
structures, the ownership structure, and the firm’s economic variables. Other board structure variables are board size
(BSize), board independence (BIndependence), CEO duality (CEODual), board activity (BActivity), and the board’s
share of ownership (BHolding). We control for board size because a larger board is positively associated with the
board’s monitoring capacity (John and Senbet, 1998), and board size is negatively associated with the firm’s cost of
financing (Lorca et al., 2011). We include board independence because the literature has reached a strong consensus
that firms that have a high proportion of independent directors have lower cost of debt (Lorca et al., 2011). CEO
duality is generally an indicator of poor governance, so CEO duality is likely to have a positive effect on the cost of
debt. We control for board activity, which is measured as the number of board meetings, because Garcia Lara et al.
(2009) suggest that the number of board meetings is a useful proxy for a board’s monitoring efforts. Similarly, Lorca
et al. (2011) document that board activity (board meetings) is negatively associated with the cost of debt. Table 3
shows that the average board size in China’ listed firms is 10.56 members, out of which 38 percent are independent
directors. In addition, the CEO also chairs the board in 20 percent of China’s listed firms. Table 3 also shows that,
on average, the board of directors holds 6 percent of company shares (S.D. = 14%).
The ownership structure variables include institutional ownership (InstOwner) and state-owned enterprises (SOE). In
alignment with Fields et al. (2012), we control for institutional ownership because it is also related to the firm’s
borrowing cost. We include the state ownership variables because studies document that government-owned firms
get debt financing at lower cost than Non-government-owned firms do (e.g., Shailer and Wang, 2015). Table 3
shows that 58 percent of the firms in our sample are owned by the state or government and that, on average,
institutional owners hold 7 percent of the listed companies’ shares. Following earlier studies, we also control for
firms’ economic variables: firm size (FSize), firm growth (FGrowth), growth opportunity (GOpportunity), short-
term debt ratio (ShortDR), long-term debt ratio (LongDR), and firm performance (return on assets (ROA) and the
Tobin’s Q ratio (TobinQ)). Table 2 provides detailed descriptions of all the variables used in this study, while Table
4 shows the correlations between all the variables. Except for the gender-diversity measures, the correlations
between the independent variables are under 0.60. Therefore, to control for the problem of multicollinearity, we do
not include both measures of gender diversity in a single regression.
[Insert table 1 about here]

6
 [Insert table 2 about here]
[Insert table 3 about here]
[Insert table 4 about here]
2.2. Empirical model
As we have panel data, we follow the spirit of previous studies (e.g., Liu et al., 2014; Shin-Ping and Hui-Ju, 2011) in
deciding on the optimal model using three tests: the F-test, the Lagrange multiplier (LM) test, and the Hausman test.
The result of the F-test (5.60 at p<0.01) shows that the fixed effects (Fixed-effect) regression model is more suitable
than the ordinary least squares (OLS) regression model. The result of the LM-test (1221.16 at p<0.01) shows that
the random effects regression method is more appropriate than the OLS regression method. Finally, the result of the
Hausman test (265.75 at p<0.01) indicates that the fixed effects model is preferred over the random effects model.
(1)
Therefore, we use firm fixed effects method to investigate the relationship between gender diversity in the
boardroom and the cost of debt.
However, following the convention in board structure and cost of debt literature (e.g., Fields et al., 2012; Hashim
and Amrah, 2016; Ghouma et al., 2018) we also report the OLS regression results. Our regression model can be
depicted as:
= + + ∑ + ∑ + ∑ +
, (Eq. 1),
where subscript i and subscript t refer to firm and time, respectively; Interest is the dependent variable; Female
refers to gender diversity; and Board, Ownership, and Economic refer to board structure, ownership structure, and
the firm’s economic controls, respectively.
3. Main regression results
Table 5 reports the regression results on the relationship between gender diversity and the cost of debt. Models 1 and
2 show the results of the OLS regression, and models 3 and 4 document the results of the Fixed-Effect regression.
The coefficients of both gender diversity measures (FemaleD and FemaleP) in all models (reported in table 5) are
negative and significant (at p<0.05 in the OLS regression and p<0.01 in the Fixed-Effect regression). The significant
negative coefficient of FemaleD in model 1 indicates that the firms that have at least one female director on the
board pay 4 percent less for debt financing than do board that have no female directors. These results indicate that
the presence of female directors on the board is negatively associated with a firm’s cost of debt. These findings
support our efficiency hypothesis (H1a), which suggests that gender diversity on the board creates economic benefit
(i.e., reduction in the cost of debt).
Among the board structure variables, BSize, BIndependence, CEODual, and BHolding remain significant. The
coefficient of BIndependence and BHolding remain negative and significant in all models (reported in table 5),
which indicates that firms that have independent boards and board shareholdings pay less for debt financing than do
firms that do not have these features. These results are consistent with our expectations and with the majority of
extant studies (e.g., Lorca et al., 2011; Fields et al., 2012; Bradley and Chen, 2015; Ghouma et al., 2018).
Unexpectedly, however, the coefficient of BSize remains negative and significant, which indicates that larger boards
are associated with a high cost of debt. This finding supports the notion that the cost of ineffective communication
and delays in decision-making that are associated with larger boards outweighs the benefits of larger boards
(Yermack, 1996; Lorca et al., 2011), such as a broader set of knowledge and experience (e.g., Pfeffer and Salancik,
2003).We find that CEODual is negatively associated with the cost of debt, which indicates that firms whose CEOs
are also board chairs enjoy a lower cost of debt. One possible explanation is that if CEO has a dual role as the
chairman of the board then it might be less likely to experience the communication breakdown that leads to
information asymmetry between the CEO and the board chair.
Among the firms’ economic controls, FSize, FGrowth, ShortDR, LongDR, and TobinQ remain significant. The
coefficients of FSize, FGrowth, LongDR, and TobinQ remain negative and significant are consistent with previous
studies (e.g., Shailer and Wang, 2015; Hashim and Amrah, 2016; Ghouma et al., 2018) that document that large
firms, growing firms, better-performing firms, and firms that have high long-term debt ratios are charged less by
lenders for a risk premium than by other firms.

7
 [Insert table 5 about here]
3.1. Additional test
3.1.1. SOEs and non-SOEs subsamples.
Our results indicate that government ownership does not affect the cost of debt. The limited but growing literature
on the topic has two alternative arguments related to this association. Some report that government-owned firms can
get debt financing at lower cost than private firms can (e.g., Shailer and Wang, 2015), arguing that government
ownership carries an implied guarantee on the firm’s debt. Government-owned firms also enjoy preferential
treatment by regulators (Wang and Shailer, 2012), preferential commercial treatment, and governance advantages
(Blanchard and Shleifer, 2000).
On the other side, some researchers document that state ownership has no association or a positive association with
the cost of debt (e.g., Borisova et al., 2015) based on agency issues like the private interests of politicians (Shleifer
and Vishny, 1994). In addition, the goal of government-owned firms can be to pursue political and social needs,
such as increased domestic investment and employment and the maintenance of key industries that provide crucial
services. The pursuit of these goals may reduce the risk-adjusted performance of state-owned firms, leading to an
increase in the cost of debt because profitability is associated with a firm’s ability to pay for debt. We extend the
literature on government ownership and the cost of debt (e.g., Borisova et al., 2015; Shailer and Wang, 2015) by
investigating for the first time whether SOEs’ board structure—especially gender diversity on the board—affects
lenders’ view of the firm. In alignment with our efficiency hypothesis, we expect that lenders consider the presence
of female directors on an SOE’s board improves the board’s independence and its monitoring function. Therefore,
we expect that SOEs that have gender-diverse boards have the benefit of lower cost of debt.
The OLS and Fixed-Effect results on the association between gender diversity on an SOE’s board and its cost of debt
are reported in of panel A of table 6 (models 1, 2, 3, and 4). The coefficients of FemaleD and FemaleP remain
negative and significant, indicating that gender diversity on the board is negatively associated with the cost of debt.
The coefficient of FemaleD in the OLS model is 0.05, suggesting that lenders charge SOEs that have gender-diverse
boards 5 percent less than they do SOEs that do not have such gender diversity.
In addition, some may argue that having SOEs in the sample renders the results tenuous given governmental
intervention in SOEs’ financial decisions. Therefore, we also investigate the effect of gender diversity in the
boardroom on the cost of debt for a non-SOE sub-sample. As shown in Table 6’s Panel B, the coefficient of the
gender diversity measures (FemaleD and FemaleP) remain negative and significant, indicating that the presence of
female directors on non-SOEs’ boards is also associated with a lower cost of debt. These results help to validate our
previous findings.
3.1.2. The number of women directors and cost of debt.
Studies on gender diversity in boardrooms have reported that having two female directors on a board is better than
having one, and three are better than two (Konrad et al., 2008). The literature suggests that single women may be
seen as tokens who may not be able to participate effectively in boards’ decision-making processes. The critical
mass theory, an extension of the token status theory, posits that “one is a token, two is presence, and three is voice”
(Kristie, 2011). Similarly, Kramer et al. (2007) argue that magic seems to occur when at least three female directors
serve on the board. In alignment with these arguments, we expect that the board with a critical mass of female
directors pays less for debt financing than does the board with one or two female directors.
To test the token and critical mass theories, we follow Liu et al. (2014) in creating three new dummy variables:
FemaleD1, FemaleD2, and FemaleD3. FemaleD1, a measure of the token appointment, equals 1 if only one female
director serves on the board, and 0 otherwise; FemaleD2 equals 1 if there are two female directors, and 0 otherwise;
and FemaleD3 is a measure of a critical mass of female directors that equals 1 if there are three or more female
directors on the board, and 0 otherwise.
In models 1 and 2 (Table 6’s panel C), all three new measures—FemaleD1, FemaleD2, and FemaleD3—are
negative and significant. These results do not support the token theory’s proposition that a single female director
may be considered as a token and so have no economic benefit; instead, the results show that a single female
director also reduces the cost of debt financing. The coefficients of FemaleD1, FemaleD2, and FemaleD3in the OLS
model (model 1of Table 6’s panel C) shows that, compared to a firm with no female directors, a firm with one

8
female director has a 3 percent lower cost of debt, a firm with two female directors has 5 percent lower cost of debt,
and a firm with three or more female directors has a 6 percent lower cost of debt. These results provide little support
for the critical mass theory’s proposition that a higher number of women directors on the board produce significantly
better results than a lower number does.
[Insert table 6 about here]
3.2. Endogeneity and other robustness tests
Another critical concern—one that most researchers in corporate finance, especially corporate governance, face—is
endogeneity. For example, one can argue that the firms’ choices of the number of women on their boards are not
random but tend to fall into discrete groups, which may indicate an issue of biased estimation of coefficients (Usman
et al., 2018b). This concern is consistent with Bilimoria and Piderit’s (1994) argument that female directors select
the firms they want to join. It may also be the case that lenders charge certain firms less because of other factors
(i.e., board structure, ownership structure, and the firms’ economic variables), rather than gender diversity.
Consequently, our findings may be merely coincidence. To address these problems, we use four model
specifications: a one-year lagged gender-diversity model, two-stage least squares regression, the two-stage Heckman
test, and the propensity score-matching method.
3.2.1. One-year lagged gender diversity model:
We replace our gender-diversity measures with one-year lagged measures of gender diversity (Lagged-Female) in
our main regression because female directors need some time to understand that how the firm’s boardroom functions
before they can perform their monitoring role effectively. Models 1 and 2 (panel D in table 6) use one-year lagged
measures of gender diversity and show that FemaleD and FemaleP remain negative and highly significant,
consistent with our previous findings.
3.2.2. Two-stage least square regression:
We use a standard instrumental variable method to address the issue of endogeneity. We estimate our main equation
using two-stage least squares regression (2SLS). In this regression, the instrument variables must fulfill the condition
of exogeneity and relevance (In our case, the instrument variable should be correlated with the decision to have
female directors on the board but should not be correlated with the cost of debt). In this regard, we follow Usman et
al. (2018a; 2018b) in using the lag of gender diversity measures and the industry average of gender-diversity
measures as instrument variables. Panel D in table 6 (models 3 and 4) reports the results of 2SLS. Again, our results
remain consistent.
3.2.3. Two-stage Heckman test:
To check the issue of sample-selection bias, we use the two-stage Heckman (1976) (Heckman) procedure. In the first
stage, we estimate the determinants of gender diversity using probit regression. Following Usman et al. (2018a), we
estimate probit regression for FemaleD by considering all of the control variables as the determinants of gender
diversity in the boardroom. After estimating this probit regression for FemaleD, we compute the Inverse Mills Ratio
(Mills-FemaleD). Finally, we estimate our main regression using Mills-FemaleD as the independent variable. Panel
D in table 6 (models 5 and 6) shows the results of the two-stage Heckman procedure. In both models, Mills-
FemaleD remains insignificant, which indicates that our OLS and Fixed-effect findings are reliable and there is no
issue of sample-selection bias.
3.2.4. Propensity Score-Matching Method:
Since it may be the case that the lender charges less for debt based on other firm characteristics, the firm’s
ownership structure, or firm-level economic characteristics, rather than the boardroom gender diversity, we use the
propensity score-matching method (PSM) method. Following Usman et al. (2018a), we match the firms based on the
probability that a firm has a gender-diverse board because of the board structure, the ownership structure, and firm-
level economic variables. The results of the PSM method are reported in models 7 and 8 (panel D in table 6).
Consistent with our previous findings, FemaleD and FemaleP remain negative and highly significant.

9
3.2.5. Alternative measures of gender diversity in the boardroom:
Finally, following the literature on gender diversity in the boardroom, we use two comprehensive measures of
gender diversity: the Blau index (FemaleBlau) and the Shannon index (FemaleShannon). Table 2 provides detailed
descriptions of both variables. The results of OLS and Fixed-Effect for both measures are reported in panel E of table
6 (models 1, 2, 3, and 4). The coefficients of FemaleBlau and FemaleShannon remain negative and significant,
supporting our previous finding that gender diversity in the boardroom is negatively associated with firms’ cost of
debt.
Overall, then, our additional tests and robustness test support our efficiency hypothesis that it is economically
beneficial for a firm to have gender diversity because it is associated with the independence and monitoring that
lenders consider to be less risky. Therefore, our results support the business case for gender diversity on the board.
4. Conclusion and Implications
The presence of women in companies’ top management is a controversial issue. Many studies report that women are
under-represented on corporate boards, which has driven politicians and regulators to intervene directly by
introducing quotas or indirectly by offering persuasion to increase women’s participation in the boardroom.
Norway’s government took the first step in this regard in 2003 by mandating a quota for women on corporate
boards. After Norway’s actions, many other developed and developing countries introduced a mandatory quota for
women in boardrooms. A few Asian countries, such as Malaysia and India, also introduced legislative quotas for
women’s participation recently. These countries justify legislative quotas based not only on ethical and social justice
but also on the positive monitoring role of women. Even so, several studies show no impact or a negative impact of
gender diversity on firm performance. (For a meta-analysis, see Post and Byron, 2015.)
An increasing number of studies focus on decoding the economic benefit of gender diversity in the boardroom by
investigating its effect on corporate governance (e.g., García-Sánchez et al., 2017; Gull et al., 2017; Saeed and
Sameer, 2017; Usman et al., 2018a; 2018b,). We go beyond these studies to investigate the business case for female
directors’ representation on boards to determine whether gender-diverse boards reduce the cost of debt. Using the
most recent data of listed companies in China, we find that gender diversity on the board is linked to firms’ cost of
debt. Our results suggest that borrowers’ board structure—especially gender diversity on the board—has a material
effect on the price of debt. We find that borrowers that have gender-diverse boards can borrow at a lower interest
rate than can those that do not have such boards. Moreover, we find that government-owned firms that have gender-
diverse boards enjoy the benefit of borrowing at lower interest rate. Furthermore, in contrast to token theory, we find
that borrowers with only one woman on their boards borrow at lower interest rates than do those with no women on
their boards; however, in alignment with critical mass theory, firms that have two female directors borrow at lower
cost than do those that have one female director, and firms that have at least three female directors borrow at lower
rates than do those that have only two. These findings remain consistent after several robustness and endogeneity
tests.
Our findings suggest that the presence of female directors on boards, which is thought to be beneficial for
shareholders, is also good for lenders because the improved monitoring from gender diversity reduces agency costs
by reducing managers’ opportunistic behavior and information asymmetry. Consequently, it reduces creditors’
perceptions of the probability of default, thereby reducing what they charge for debt.
Our findings have implications for individual borrowers and for regulators. For example, borrowers can get debt
financing at lower rates by altering their boards’ composition (i.e., through gender diversity). From the regulatory
perspective, our results support recent legislative initiatives around the world regarding female directors’
representation on boards. Our findings support the notion that legislative quotas for female representation on boards
should be justified not only on ethical and social-justice grounds but also on the grounds of economic benefit.
Although we contribute to the literature by investigating the association between presence of women on the board
and the cost of debt, the study has certain limitations that provide promising avenues for future research. First, our
sample is drawn from listed companies in a developing country, which hampers the generalizability of our findings
because China’s market differs from those of developed countries and even other developing countries. For
example, one of the distinguishing factors of China’s market is that most firms are owned and controlled by central
or local governments. Therefore, future studies could replicate our study in other developing and developed
countries to determine whether our findings are generalizable. Second, we consider only one within-country

10
institutional factor (i.e., SOEs). Future studies should consider how other within-country institutional contingencies
(e.g., family-owned firms, group-affiliated firms, or cross-listed firms) affect the relationship between gender
diversity in the boardroom and the cost of debt. Third, we performed a battery of tests to deal with the endogeneity
problem. However, future studies could use the passage of the compulsory gender quota in a country as an
exogenous shock to board composition to establish a causal link.
Finally, we focused on a narrow and specific question, so there remains a unique opportunity to investigate how
gender-diverse boards choose or change their firms’ financing mixes. Stakeholder theory suggests that female
directors are more socially responsible, care more about family, and are more inclined toward nature than men are
(e.g., Williams, 2003; Setó-Pamies, 2015), so investigating how boards gender diversity affect the firms’
financing structure in terms of choosing equity financing over debt financing. Given the fact that that interest on
debt causes economic, social, and moral harm when the rich become richer and the poor become poorer (For
detailed statistical justifications, see Hossain, 2009) Even the major religions’ Scripture (e.g., the Qur’an, Torah,
Talmud, and Bible) and early scholars (Aristotle and Boehm-Bawerk) condemned interest based on the argument
that it is better for people to avoid debt and interest. For example, Allah Almighty says in the Holy Qur’an, “That
they took interest, though they were forbidden; and they devoured people’s wealth wrongfully: We have prepared
for those amongst them who reject faith a grievous punishment” (Qur’an 4:161). Similarly the Bible prohibits
interest: “Do not charge your brother interest, whether on money or food or anything else that may earn interest”
(Deuteronomy 23:19). An investigation of how presence of women on the board affect the firms’ financing mix—
whether they move toward debt or equity financing—would be of value

Notes:
1
The relationship between gender diversity and the cost of debt may be driven by unobservable firm-level
characteristics. These unobservable characteristics can be correlated with both gender diversity and cost of debt. The
firm fixed-effect method controls this issue.

References
Adams, R. and Ferreira, D. (2009), “Women in the boardroom and their impact on governance and
performance”, Journal of Financial Economics, Vol. 94, pp. 291–309.
Ahmed, A. and Ali, S. (2017), “Boardroom gender diversity and stock liquidity: Evidence from
Australia”, Journal of Contemporary Accounting & Economics, Vol. 13 No. 2, pp. 148-165.
Al-Shaer, H. and Zaman, M. (2016), “Board gender diversity and sustainability reporting quality. Journal
of Contemporary Accounting & Economics, Vol. 12 No. 3, pp. 210-222.
Bilimoria, D. and Piderit, S.K. (1994), “Board committee membership: effect of sex-based bias”,
Academy of Management Journal, Vol. 37 No. 6, pp. 1453-1477.
Blanchard, O. and Shleifer, A. (2000), “Federalism with and without political centralisation: China versus
Russia”,NBER Working Paper w7616.
Bliss M.A. and Gul F.A. (2012), “Political connection and cost of debt: Some Malaysian evidence”,
Journal of Banking & Finance, Vol. 36, pp. 1520–1527.
Borisova, G. and Megginson, W. (2011) “Does government ownership affect the cost of debt? Evidence
from privatization”, Review of Financial Studies, Vol. 24, pp. 2693–2737.
Borisova, G., Fotak, V., Holland, K. V. and Megginson, W.L. (2015), “Government ownership and the
cost of debt: evidence from government investments in publicly traded firms”, Journal of Financial
Economics, Vol. 118: pp. 168–191.
Bradley, M. and Chen, D. (2015), “Does Board Independence Reduce the Cost of Debt?”, Financial
Management, Vol. 44, No. 1, pp. 15-47

11
Daily, C.M. and Dalton, D.R. (2003), “Women in the boardroom: A business imperative”, Journal of
Business Strategy, Vol. 24 No. 5, pp. 8–9.
Daily, C.M., Certo, S.T. and Dalton, D.R. (1999), “A Decade of Corporate Women: Some Progress in
Boardroom, None in the Executive Suite”, Strategic Management Journal, Vol. 20, No. 1, pp. 93-99.
Eagly, A.H. and Carli, L.L., (2003), “The female leadership advantage: An evaluation of the evidence.
Leadership Quarterly. Vol. 14 No. 6, pp. 807–834. http://dx.doi.org/10.1016/j.leaqua.2003.09.004.
Faccio, M., Marchica, M.T. and Mura, R., (2016), “CEO gender, corporate risk-taking, and the efficiency
of capital allocation”, Journal of Corporate Finance. Vol.39, pp. 193–209.
Fields, L. P., Fraser, D. R., and Subrahmanyamb, A. (2012), “Board quality and the costof debt capital:
The case of bank loans”, Journal of Banking & Finance, Vol. 36 No. 5, pp. 1536–1547.
Garcia Lara, J.M., Garcia Osma, B. and Pen˜alva, F. (2009), “Accounting Conservatism and Corporate
Governance”, Review of Accounting Studies, Vol. 14 No. 1, pp161–201.
García Lara, J.M., García Osma, B., Mora, A. Scapin, M. (2017), “The monitoring role of female
directors over accounting quality”, Journal of Corporate Finance, Vol. 45 (August), pp. 651-668.
García-Sánchez, I-M., Martínez-Ferrero, J. and García-Meca, E. (2017), “Gender diversity, financial
expertise and its effects on accounting quality”, Management Decision, Vol. 55 No. 2, pp. 347-382,
Ghouma, H., Ben-Nasrb, H. and Yana, R. (2018), “Corporate governance and cost of debt financing:
Empirical evidence from Canada”, The Quarterly Review of Economics and Finance, Vol. 67. pp. 138–
148.
Green, C.P. and Homroy, s. (2018), “Female directors, board committees and firm performance”,
European Economic Review, Vol. 102 (February), pp. 19-38.
https://doi.org/10.1016/j.euroecorev.2017.12.003
Gull, A.A., Nekhili, M., Nagati, H. and Chtioui, T. (2017), “Beyond gender diversity: How specific
attributes of female directors affect earnings management”, The British Accounting Review (forthcoming)
https://doi.org/10.1016/j.bar.2017.09.001
Hambrick, D.C., Werder, A. and Zajac, E.J. (2008), “New directions in corporate governance research”,
Organization Science, Vol. 19, pp. 381-385.
Hashim, H.A. and Amrah, M.R. (2016), “Corporate governance mechanisms and cost of debt: evidence of
family and non-family firms in Oman”, Managerial Auditing Journal, Vol. 31 No. 3 pp. 314-336.
Hossain, M.Z. (2009), “Why is interest prohibited in Islam? A statistical justification”, Humanomics, Vol.
25 No. 4, pp.241-253. https://doi.org/10.1108/08288660910997610
John, K. and Senbet, L.W. (1998), “Corporate Governance and Board Effectiveness”, Journal of Banking
and Finance, Vol. 22, pp. 371–403.
Kim, J.B., Simunic, D.A., Stein, M.T., and Yi, C.H. (2011), “Voluntary audits and the cost of debt capital
for privately held firms: Korean evidence”, Contemporary Accounting Research. Vol. 28, pp. 585–615.
Konrad, A.M., Kramer, V. and Erkut, S. (2008), “Critical mass: The impact of three or more women on
corporate boards”, Organizational Dynamics, Vol. 37 No. 2, pp. 145–164.
Kramer, V.W., Konrad, A.M., Erkut, S. and Hooper, M.J. (2007), Critical mass on corporate boards:
Why three or more women enhance governance, National Association of Corporate Directors,
Washington D.C.
Kristie, J. (2011), “The power of three”, Dir. Boards, Vol. 35 No. 5, pp. 22-32.

12
Liu, Y., Wei, Z. and Xie, F. (2014), “Do women directors improve firm performance in China?”, Journal
of Corporate Finance, Vol. 28, pp. 169-184.
Lorca, C., Sanchez-Ballesta, J. P., and Garcia-Meca, E. (2011), “Board effectiveness and cost of debt”,
Journal of Business Ethics, Vol. 100, pp. 613–631.
Lucas-Pérez, M.E., Mínguez-Vera, A., Baixauli-Soler, J.S., Martín-Ugedo, J.F. and Sánchez-Marín, G.
(2015). Women on the board and managers pay: Evidence from Spain”, Journal of Business Ethics, Vol.
129 No. 2, pp. 265–280.
Luo, J-H, Xiang,Y. and Huang, Z. (2017), “Female directors and real activities manipulation: Evidence
from China”, China Journal of Accounting Research, Vol. 10 No. 2, pp. 141-166.
Peterson, C.A. and Philpot, J. (2007), “Women’s roles on US Fortune 500 boards: Director expertise and
committee membership”, Journal of Business Ethics, Vol. 72, pp. 177-96.
Petrovic, J. (2008), “Unlocking the role of a board director: a review of the literature”, Management
Decision, Vol. 46, No. 9, pp.1373-1392.
Pfeffer, J. and Salancik, G. (2003), “The external control of organizations: A resource dependence
perspective”, Stanford California: Stanford University Press.
Pletzer, J.L., Nikolova, R., Kedzior, K.K. and Voelpel, S.C. (2015), “Does Gender Matter? Female
Representation on Corporate Boards and Firm Financial Performance-A Meta-Analysis”, PloS one, Vol.
10 No. 6, e0130005, doi:10.1371/journal.pone.0130005
Post, C. and Byron, K. (2015), “Women on boards and firm financial performance: A meta-analysis”,
Academy of Management Journal, Vol. 58, pp. 1546-1571, doi:10.5465/amj.2013.0319
Reguera-Alvarado, N., de Fuentes, P. and Laffarga, J. (2017), “Does board gender diversity influence
financial performance? Evidence from Spain, Journal of Business Ethics, Vol. 141 No. 2, pp. 337–350.
Saeed, A. and Sameer, M. (2017), “Impact of board gender diversity on dividend payments: Evidence
from some emerging economies”, International Business Review, Vol. 26, pp. 1100–1113.
Schmitt, D.P., Realo, A., Voracek, M. and Allik, J. (2008), “Why can’t a man be more like a woman? Sex
differences in big five personality traits across 55 cultures”, Journal of Personality and Social
Psychology, Vol. 94 No. 1, pp. 168-182.
Setó-Pamies, D. (2015), “The relationship between women directors and corporate social responsibility”,
Corporate Social Responsibility and Environmental Management, Vol. 22 No. 6, pp. 334–354.
Shailer, G. and Wang K. (2015), “Government ownership and the cost of debt for Chinese listed
corporations”, Emerging Markets Review, Vol. 22, pp. 1–17.
Shleifer, A. and Vishny, R. (1994), “Politicians and firms”, Quarterly Journal of Economics, Vol.109, pp.
995–1025.
Shin-Ping, L and Hui-Ju C., (2011) "Corporate governance and firm value as determinants of CEO
compensation in Taiwan: 2SLS for panel data model", Management Research Review, Vol. 34 No. 3,
pp.252-265,
Smith, N., Smith, V. and Verner. M. (2005), “Do Women in Top Management Affect Firm Performance?
A Panel Study of 2500 Danish Firms”, Centre for Industrial Economics Discussion papers.
Solakoglu, M.N., Demir, N. (2016), “The role of firm characteristics on the relationship between gender
diversity and firm performance”, Management Decision, Vol. 54 No. 6, pp.1407-
1419, https://doi.org/10.1108/MD-02-2015-0075

13
Strobl, S., Rama, D.V. and Mishra, S. (2016), “Gender diversity in compensation committees”, Journal of
Accounting, Auditing and Finance, Vol. 31 No. 4, pp. 415-427.
Terjesen, S., Couto, E. B. and Francisco, P.M. (2016), “Does the presence of independent and female
directors impact firm performance? A multi-country study of board diversity”, Journal of Management
and Governance, Vol. 20 No. 3, pp. 447–483, https://doi.org/10.1007/s10997-014-9307-8
Usman, M. Zhang, J., Farooq, M.U., Makki, A.M.M., and Dong, N. (2018a), “Female Directors and CEO
Power”, Economics Letters, Vol. 165 (April), pp. 44-47. https://doi.org/10.1016/j.econlet.2018.01.030.
Usman, M. Zhang, J., Wang, F., Sun, J., and Makki, A.M.M., (2018b), “Gender diversity in compensation
committees and CEO pay: Evidence from China”, Management Decision, Vol. 56 No. 5, pp.1065-1087.
http://dx.doi.org/10.1108/MD-09-2017-0815.
Wang, K. and Shailer, G. (2012), “Government control and performance criteria for Chinese listed
corporations”,2012 AFAANZ Annual Conference, Melbourne, Australia.
Williams, R.J., (2003), “Women on corporate boards of directors and their influence on corporate
philanthropy”, Journal of Business Ethics, Vol. 42 No. 1, pp.1–10.
Yermack, D. (1996), “Higher Market Valuation of Companies with a Small Board of Directors”, Journal
of Financial Economics, Vol. 40, pp. 185–211.
Zahra, S. and Pearce, J. (1989), “Boards of directors and corporate financial performance: A review and
integrative model”, Journal of Management, Vol. 15, pp. 291-334.

Table 1: Sample Selection

2009 2010 2011 2012 2013 2014 2015 Panel

Number of companies. 857 1,601 1,740 1,891 1,995 2,101 2,172 12357
Number of observations
429 843 877 938 1040 1061 1363 6551
with missing data.
Usable sample. 428 758 863 953 955 1,040 809 5806

14
 Table 2: Description of variables

Variables Description
Interest The log of finance cost divided by the sum of short-term and long-term debt.
FemaleD A dummy variable that equals 1 if there is at least one female director on the board, and 0 otherwise.
FemaleP The proportion of female directors on the board.
FemaleD1 A dummy variable that equals 1 if there is only one female director on the board, and 0 otherwise.
FemaleD2 A dummy variable that equals 1 if there are two female directors on the board, and 0 otherwise
A dummy variable that equals 1 if there are three or more female directors on the board, and 0
FemaleD3
otherwise.
FemaleBlau Defined as1 − ∑ , where Pi is the percent of male (female) directors on the board and n is 2.
FemaleShannon Defined as − ∑ where Pi is percent of male and female directors on the board and n is 2.
BSize The number directors on the board.
BIndependence The proportion of outside directors on the board.
CEODual A dummy variable that equals 1 if the CEO also chairs the board, and 0 otherwise.
BActivity The number of board meetings held during the year.
BHolding The percentage of the firm’s shares the board members own.
InstOwner The percentage of the firm’s shares institutions own.
A dummy variable that equals 1 if the firm is owned by the state or the central government, and 0
SOE
otherwise.
FSize The log of the firm’s total assets.
FGrowth The percentage change in the firm’s total assets.
GOpportunity The ratio of the firm’s shares’ book price to their market price.
ShortDR The ratio of the firm’s short-term debt to total assets.
LongDR The ratio of the firm’s long-term debt to total assets.
ROA The ratio of the firm’s net profit to total assets.
TobinQ The ratio of the firm’s market value to the book value of the firm’s total assets.

15
 Table 3: Descriptive Statistics

Minimum Maximum Mean Std. Deviation

Interest 0.00 0.30 0.10 0.03
FemaleD 0.00 1.00 0.69 0.46
FemaleP 0.00 0.60 0.12 0.11
BSize 5.00 26.00 10.56 2.72
BIndependence 0.17 0.80 0.38 0.07
CEODual 0.00 1.00 0.20 0.40
BHolding 0.00 0.81 0.06 0.14
BActivity 2.00 57.00 10.09 4.41
SOE 0.00 1.00 0.58 0.49
InstOwner 0.00 0.87 0.07 0.10
FSize 19.05 28.51 22.60 1.31
FGrowth -9.11 37.29 0.87 1.81
GOpertunity 0.03 16.15 1.32 1.27
ShortDR 0.00 2.68 0.14 0.12
LongDR 0.00 1.00 0.09 0.10
ROA -6.78 0.38 0.03 0.10
TobinQ 0.06 33.47 1.48 1.42

For a detailed description of variables see Table 1

16
 Table 4: Correlation Matrix

1 2 3 4 5 6 7 8 9 10 11 112 13 14 15 16 17
1-Interest 1
2-FemaleD -.031* 1
3-FemaleP -.030* .701** 1
4-BSize .035** .129** -.051** 1
5-BIndependence -.055** .009 .016 -.054** 1
6-CEODual -.043** .034** .077** -.069** .057** 1
7-BActivity -.116** .039** .014 .042** .049** .033* 1
** ** **
8-BHolding -.047 .063 .122 -.110** .087** .239** .045** 1
9-InstOwner .019 .014 .001 -.001 -.038** .002 -.010 -.061** 1
** ** **
10-SOE .049 -.088 -.170 .212** -.100** -.258** -.104** -.469** .094** 1
** ** **
11-FSize -.100 -.085 -.170 .230** .076** -.134** .147** -.245** .059** .315** 1
**
12-FGrowth -.176 .011 .010 .057** .001 .069** .095** .092** .057** -.111** .000 1
** ** **
13-GOpertunity -.060 -.034 -.085 .093** .014 -.115** .082** -.203** -.025 .271** .563** -.070** 1
14-ShortDR .126** .041** .026* -.012 -.012 .019 -.013 .042** -.040** -.051** -.116** -.024 .052** 1
15-LongDR -.213** .007 -.015 .039** -.028* -.095** .108** -.165** -.044** .130** .184** .030* .254** .000 1
**
16-ROA -.048 .017 .017 -.017 .015 -.007 -.025 .039** .052** -.061** .027* .143** -.094** -.140** -.078** 1
17-TobinQ .005 .015 .059** -.097** .045** .156** -.025 .246** .025 -.273** -.459** .077** -.529** -.081** -.214** .098** 1
*, ** Correlation is significant at 5% and 1% respectively.
For a detailed description of variables see Table 1

17
Table 5: Regression results on the association between boardroom gender diversity and cost of debt financing.

OLS Fixed-Effect
Model 1 Model 2 Model 3 Model 4
FemaleD -0.04**(-2.34) - -0.06***(-2.89) -
FemaleP - -0.14**(-2.31) - -0.25***(-2.86)
BSize 0.01*(1.68) 0.00*(1.71) 0.01***(3.94) 0.01***(3.52)
BIndependence -0.36***(-3.04) -0.36***(-3.07) -0.39***(-2.98) -0.40***(-3.00)
CEODual -0.06***(-2.81) -0.06***(-2.77) -0.09***(-3.69) -0.09***(-3.64)
BActivity 0.00(0.21) 0.00(0.17) -0.01***(-3.87) -0.01***(-3.93)
BHolding -0.36***(-5.27) -0.36***(-5.25) -0.33***(-4.27) -0.32***(-4.23)
InstOwner 0.00(1.24) 0.00(1.21) 0.00*(1.80) 0.00*(1.78)
SOE 0.02(1.12) 0.02(1.12) 0.02(0.91) 0.02(0.86)
FSize -0.06***(-6.18) -0.06***(-6.18) -0.01**(2.51) -0.01**(2.44)
FGrowth -0.05***(-11.28) -0.05***(-11.25) -0.06***(-11.95) -0.06***(-11.93)
GOpportunity 0.01(0.75) 0.01(0.72) -0.03(-1.44) -0.03(-1.46)
ShortDR 0.03***(3.80) 0.03***(3.75) 0.01(1.52) 0.01(1.55)
LongDR -0.08***(-13.19) -0.08***(-13.18) -0.12***(-18.99) -0.12***(-18.98)
ROA -0.13*(-1.64) -0.13*(-1.54) -0.14(-1.54) -0.14(1.56)
TobinQ -0.02***(-2.92) -0.02***(-2.91) -0.02***(-2.74) -0.02***(-2.76)
Year and Industry Yes Yes No No
Constant -2.23***(-10.96) -2.23***(-10.89) -3.26***(-15.18) -3.23***(-14.97)
Adj-R2 19.30% 19.20% 11.16% 11.16%

*, **, *** significant at 10%, 5% and 1%, respectively. T-statistics are reported in parentheses. For a detailed
description of variables, see Table 1.

18
 Table 6: Additional, endogeneity, and further robustness tests

Panel A: Association between boardroom gender diversity and cost of debt (SOEs sub-sample)
OLS Fixed-Effect
Model 1 Model 2 Model 3 Model 4
FemaleD -0.05***(-3.40) - -0.07***(-3.68) -
FemaleP - -0.20*(-1.90) - -0.23**(-2.24)
Board, ownership, economic, year,
included included included included
and industry controls
2
Adj-R 19.06% 18.94% 10.05% 9.82%
Panel B: Association between boardroom gender diversity and cost of debt (Non-SOEs sub-sample)
OLS Fixed-Effect
Model 1 Model 2 Model 3 Model 4
FemaleD -0.03** (-1.97) - -0.04** (-2.22) -
FemaleP - -0.13**(-2.09) - -0.21** (-2.27)
Board, ownership, economic, year,
included included included included
and industry controls
2
Adj-R 21.25% 20.84% 12.00% 11.99%
Panel C: Association between boardroom gender diversity and cost of debt (Token vs. critical mass)
OLS Fixed-Effect
Model 1 Model 2
FemaleD1 -0.03* (-1.94) -0.05**(-2.46)
FemaleD2 -.05***(-2.58) -0.06***(-2.94)
FemaleD3 -.06**(2.02) -0.09***(-3.97)
Board, ownership, economic, year,
included included
and industry controls
Adj-R2 19.30% 11.8%
Panel D: Relationship between boardroom gender diversity and cost of debt (Controlling endogeneity).
Lagged-Female 2SLS
Model 1 Model 2 Model 3 Model 4
FemaleD -0.06***(-3.03) - -0.11***(-3.86) -
FemaleP - -0.34***(-3.80) - -0.43***(-4.10)
Board, ownership, economic, year,
included included included included
and industry controls
2
Adj-R 15.73% 15.82% 14.24% 14.24%
Heckman PSM
Model 5 Model 6 Model 7 Model 8
FemaleD -0.15(0.75) - -0.06***(-2.77) -
FemaleP - -0.04(-0.26) - -0.17**(-2.08)
Mills- FemaleD 0.06(0.60) -.01(-0.73) - -
Board, ownership, economic, year,
included included included included
and industry controls
2
Adj-R 19.88% 19.87% 19.54% 19.49%
Panel E: Relationship between boardroom gender diversity and cost of debt (Using alternative measures of boardroom gender
diversity).
OLS Fixed-Effect
Model 1 Model 2 Model 3 Model 4
FemaleBlau -0.20***(-3.07) - -0.20***(-3.07) -
FemaleShannon - -0.13***(-3.09) - -0.13***(-3.09)
Board, ownership, economic, year,
included included included included
and industry controls
2
Adj-R 20.02% 19.87% 11.18% 11.18%

*, **, *** significant at 10%, 5% and 1%, respectively. T-statistics are reported in parentheses. For a detailed
description of variables, see Table 1.

19

View publication stats