Female Directors, Overinvestment and Variability of Corporate Performance: From the Perspective of Prudency

Abstract

Abstract:

With the economic development and the improvement of women's status, Female directors become prevalent in Chinese listed companies, and if and how their characteristics of prudence affect the company's financial behaviors also becomes an important issue. From the perspective of prudency, we examine the female directors' governance role of overinvestment and variability of corporate performance. we find that, (1) Female directors can significantly reduce the probability of overinvestment; (2) Such governance role only exists in the overinvesting companies; (3) Female directors can also significantly decrease the variability of corporate performance; (4) The governance role of female directors is arising from the pre-risk perception rather than the degree of post-risk aversion attitude. Our research indicates that, introducing and improving the proportion of women directors in the board during ordinary business may be an effective way to improve China's corporate governance, so as to protect the interest of small investors.

Key words: female directors, prudency, overinvestment, variability of corporate performance

Sun Liang, Zhou Lin. Female Directors, Overinvestment and Variability of Corporate Performance: From the Perspective of Prudency[J]. , 2016, 28(7): 165-178.

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