a Department of Economics and Finance, College of Business, P.O. Box 10318, Louisiana Tech University, Ruston, LA 71272, United States
b Luffey, Huffman, Ragsdale & Soignier (APAC), 1100 North 18th Street, Monroe, LA 71201, United States
Abstract:
This study investigates gender diversity among the top managers of Fortune 500 firms and its effect on agency costs. The study finds that firms with a greater percentage of female officers present lower agency costs but that the negative relation is not robust when considering the endogeneity of diversity. The study also finds that external governance influences the relationship. Although increasing diversity does not reduce agency costs for all firms, the evidence shows that diversity is significantly negatively related to agency costs in firms in less competitive markets. The results suggest that increasing diversity in management can have beneficial effects for firms where strong external governance is absent.