Female directors and risk management sentiment: does feminism in boardrooms matter?

Purpose This study explores the effect of board gender diversity on the sentiments expressed in risk management disclosures. Drawing on upper-echelon and intergroup threat theories, we posit that innate values on risk aversion and the ethicality of female directors lead gender-diverse boards to display higher negative emotions in risk management disclosures. Design/methodology/approach We empirically test our postulation on a sample of banks from 12 emerging economies over the period 2005–2020 and develop a sentiment index using the Term Frequency-Inverse Document Frequency (TF-IDF) weighting scheme. We employ the system GMM estimation technique to address potential endogeneity issues in our models, ensuring more reliable and robust parameter estimates. Findings We find a positive association between the presence of female directors and negative sentiments in risk management disclosures. However, the number of females on board must reach the critical mass of at least three females to observe negative sentiments in risk management disclosures. Practical implications Our results exhibit important implications for theory and practitioners, particularly investors and regulators in emerging markets. Our study advocates for a more heterogeneous board, suggesting that the inclusion of more than two females is necessary to capitalize on the advantages of gender diversity in board dynamics. Hence, gender-diverse managerial sentiments enrich the risk-related information, which conveys valuable information to investors and regulators. Investors should include sentiments-driven information in the comprehensive analysis of firms’ disclosures. Regulators may observe the signals emerging from risk management sentiment as a tool for better bank supervision to avoid huge losses to the stakeholders. Originality/value As per the authors’ information, this study is the first of its kind that links the sentiments in risk management disclosures with female directorship, focusing on the banking sector. It may add a valuable contribution to the existing literature.