Board diversity, female executives and stock liquidity: evidence from opposing cycles in the USA

Purpose: This study aims to address gaps and limitations in the literature on corporate governance and stock liquidity. It explores the potential benefits of increasing female representation in corporate leadership, which has been a subject of debate and policy intervention in recent years. Design/methodology/approach: Based on prior empirical studies and by integrating the insights of different theories, this study links gender diversity to stock liquidity and uses a multivariate panel regression approach. Findings: The results show that gender diversity, both on the board and in executive positions, positively and consistently affects stock liquidity across different business cycles. The findings reinforce the notion that diverse executive leadership is crucial and influential irrespective of the prevailing economic conditions. Practical implications: This study has practical implications for investors, managers and policymakers who are interested in the benefits of gender diversity in corporate leadership. It suggests that increasing the percentage of female executives and board members can improve stock market liquidity, which is a key indicator of market efficiency and firm value. Social implications: This study advocates for gender equality and diversity in corporate leadership, which can benefit society. It demonstrates that the presence of women directors can enhance financial stability and thus benefit the stakeholders and the community. Originality/value: This study contributes to the academic literature by examining the impact of gender diversity on board and executive levels on stock liquidity in the US market. Previous research on this topic has mainly relied on French or Australian data. Moreover, this study extends previous work through examining the case of executives’ gender diversity. To the best of the authors’ knowledge, this study is the first to analyze the relationship between gender diversity and stock liquidity across different business cycles, providing a nuanced understanding of how economic contexts affect this relationship.