Lone founders, family owners and borrowing cost: Are female directors influential?

This study examines the effect of lone founder and family ownership on borrowing cost. In addition, the study examines the moderating influence of gender diversity on this relationship.

The study used a sample of non-financial firms listed on Pakistan Stock Exchange over the period 2012–2021. The authors used ordinary least squares regression analysis method to test the hypotheses along with generalized method of moments estimation technique to control for unobserved heterogeneity, simultaneity and dynamic endogeneity.

The authors report that borrowing cost is higher in lone founder ownership, whereas borrowing cost is lower in family firms due to lesser risks attached to such firms by lenders. Further, the presence of female directors on the board weakens this relation in the case of lone founder ownership, whereas their presence further reduces borrowing cost in family-owned firms. Additionally, using the framework of critical mass theory, the authors found that higher number of female directors on boards reduces borrowing cost. Overall, this study’s results provide empirical support for social identity and critical mass theories in the sample firms.

The study provides novel evidence of the influence of lone founder and family ownership on borrowing cost in an emerging economy, as well as the moderating effects of gender diversity on this relationship.