Does board gender diversity have a financial impact? Evidence using stock portfolio performance.

There is growing regulatory pressure on firms worldwide to address the under-representation of women in senior positions. Regulators have taken a variety of approaches to the issue. We investigate a jurisdiction that has issued recommendations and disclosure requirements, rather than implementing quotas. Much of the rhetoric surrounding gender diversity centres on whether diversity has a financial impact. In this paper we take an aggregate (market-level) approach and compare the performance of portfolios of firms with gender diverse boards to those without. We also investigate whether having multiple women on the board is linked to performance, and if there is a within-industry effect. Overall, we do not find evidence of an association between diversity and performance. We find some weak evidence of a negative correlation between having multiple women on the board and performance, but that in some industries diversity is positively correlated with performance.

Does board gender diversity improve the informativeness of stock prices?

We show that stock prices of firms with gender-diverse boards reflect more firm-specific information after controlling for corporate governance, earnings quality, institutional ownership and acquisition activity. Further, we show that the relationship is stronger for firms with weak corporate governance suggesting that gender-diverse boards could act as a substitute mechanism for corporate governance that would be otherwise weak. The results are robust to alternative specifications of informativeness and gender diversity and to sensitivity tests controlling for time-invariant firm characteristics and alternative measures of stock price informativeness. We also find that gender diversity improves stock price informativeness through the mechanism of increased public disclosure in large firms and by encouraging private information collection in small firms. © 2011 Elsevier B.V.

Board gender diversity in UK firms – recent trends and performance eEffects

This paper provides an overview of the position of women directors in UK firms. Based on data for all UK firms with more than three directors, this data provides a comprehensive picture of the position of women in UK business leadership and contributes to our understanding of progress towards achieving greater gender balance in the boardroom. Five key points emerge. •Female directors account for around 1:4 directors in UK firms but only around 1:10 businesses in the UK are female controlled. •Only 1:226 larger firms in this category have a majority of female directors. •The overall proportion of female directors in the UK has grown in recent years but slowly. At the rate of progress achieved over the 2003-2005 period, it will be the year 2225 before gender balance in company directorships is achieved in the UK. •There are a significant and interesting group of 12, 600 sisterhood companies in the UK – those wholly owned and led by women. Although they are predominantly services, these do firms exist in all business sectors with a focus on smaller companies. These firms represent an interesting potential focus for future research. •Our analysis of board gender diversity and business growth suggests that there is a business cost to gender balance in terms of foregone growth.

Board age and gender diversity : a test of competing linear and curvilinear predictions

We test competing linear and curvilinear predictions between board diversity and performance. The predictions were tested using archival data on 288 organizations listed on the Australian Securities Exchange. The findings provide additional evidence on the business case for board gender diversity and refine the business case for board age diversity.

Board age and gender diversity : a test of competing linear and curvilinear predictions

The inconsistent findings of past board diversity research demand a test of competing linear and curvilinear diversity–performance predictions. This research focuses on board age and gender diversity, and presents a positive linear prediction based on resource dependence theory, a negative linear prediction based on social identity theory, and an inverted U-shaped curvilinear prediction based on the integration of resource dependence theory with social identity theory. The predictions were tested using archival data on 288 large organizations listed on the Australian Securities Exchange, with a 1-year time lag between diversity (age and gender) and performance (employee productivity and return on assets). The results indicate a positive linear relationship between gender diversity and employee productivity, a negative linear relationship between age diversity and return on assets, and an inverted U-shaped curvilinear relationship between age diversity and return on assets. The findings provide additional evidence on the business case for board gender diversity and refine the business case for board age diversity.

Who selects the 'right' directors? An examination of the association between board selection, gender diversity and outcomes

Using a sample of companies from the top 500 listed firms in Australia, we investigate whether the presence of a designated nomination committee and female representation on the nomination committee affect board gender diversity. We also examine whether gender diversity on the board affects firm risk and financial performance. We find that board gender diversity is significantly and positively associated with the presence of a designated nomination committee and that female representation on the nomination committee is a significant explanatory factor of increasing board gender diversity following the release of the 2010 Australian Securities Exchange Corporate Governance Council (ASXCGC) recommendations. Further, our results support the business case for board gender diversity as we find greater gender diversity moderates excessive firm risk which in turn improves firms’ financial performance. Our results are robust after correcting for selection bias and controlling for other board, firm and industry characteristics.

Gender diversity and board performance: women's experiences and perspectives

Despite considerable progress that organizations have made during the past 20 years to increase the representation of women at board level, they still hold few board seats. Drawing on a qualitative study involving 30 companies with women directors in the United Kingdom, the United States, and Ghana, we investigate how the relationship between gender in the boardroom and corporate governance operates. The fi ndings indicate that the presence of a minority of women on the board has an insignifi cant effect on board performance. Yet the chairperson’s role is vital in leading the change for recruiting and evaluating candidates and their commitment to the board with diversity and governance in mind. Our study also sheds light on the multifaceted reasons why women directors appear to be resisting the discourse of gender quotas.

Board diversity or gender diversity? Perspectives from Europe, Australia and South Africa

Board diversity has been a hot topic for several years. However, it is only in recent years that pertinent questions have been asked about what is actually meant by board diversity and what would constitute a board with an ideal diversity. In the past the debate on board diversity has always been dominated by the lack, or very low numbers, of females on boards. This has been a fact in most countries with sophisticated corporate law and corporate governance systems in place. The issue of female representation on boards still dominates the board diversity debate, but other forms of diversity, including age, cultural, nationality and race have also become part of the debate. The quest is to find answers to questions like whether a diversified board would be better, and whether diversified boards will ensure a better return for investors; in other words, whether there is a ‘business case’ to be made out to have diversity on a board. Many studies have been done, but the answer is still evasive. This is not totally unexpected as the criteria used for these studies differ and the circumstances and complexities of business are such that a final conclusion will probably never be reached. In this article we focus on the board diversity debate in Europe, Australia and South Africa – three completely different parts of the world. In addition we devote Part V to put the topic of board diversity in a broader context, but paying particular attention to gender diversity.

Gender Diversity in the FTSE 100: The Business Case Claim Explored

This article examines the debate within corporate governance about the
appointment of female non-executive directors (NEDs). The first part
tracks the diversity story that corporate governance tells about itself from
the Cadbury Report (1992) to the Davies Report (2011). The second sets
out the evidence used to support the argument that female appointments
enhance profits and corporate profile. The third part presents the
authors' empirical analysis of FTSE 100 companies and female non-
executive board membership, and concludes that there is little evidence
that companies with female board membership display different charac-
teristics from those without. Industry sector emerges as a significant
factor in female appointments. The idea that women should be appointed
to boards to increase corporate profitability and profile is not strongly
supported by this analysis.A social justice argument based upon the right
of woman to equal economic participation opportunities provides a much
superior articulation of the need for boardroom diversity.

Pathways to leadership:board independence, diversity, and the emerging pipeline in the US for women directors

In the wake of this decade's corporate scandals, crimes and excesses, improving the effectiveness of corporate governance in the United States has become a priority. An important influence on a board's effectiveness at monitoring is its members’ degree of independence from senior management. While the current definition of independence revolves around the absence of familial and economic connections between a firm and its directors, research suggests that this standard may be inadequate in ensuring independent oversight. Rather, diversity along racial, gender and other dimensions has been proposed as a potentially more effective standard for board independence. This is especially welcome news for women, who currently comprise 51 per cent of the US managerial workforce but only 14.8 per cent of the directors on boards of large, publicly traded US corporations. Some explain the current dearth of women board members by claiming that there are no qualified women available for board service and/or that women are not interested in board service. However, there is more anecdotal rather than empirical evidence on the issue. Surveying women at a women's leadership conference in Boston, this research investigates the extent to which women are currently involved in some type of board service and the extent to which women aspire to future board service. We find that women are currently more active in governance activities than prior research on corporate boards suggests and that they aspire to play a continued and expanded role in governance activities.

The impact of gender diversity on turnover : the moderating effect of human resource policies and practices

Demography theory suggests that high gender diversity leads to high turnover. As turnover is costly for organizations, we examined whether HR policies and practices influence the expected gender diversity-turnover relationship. Survey data were collected from 198 HR decision makers at publicly listed organizations. We found that HR policies and practices that are supportive of diversity moderate the gender diversity-turnover relationship, such that high gender diversity leads to low turnover in organizations with many diversity supportive policies and practices. Results suggest that organizations can avoid the negative consequences of high gender diversity by implementing diversity supportive HR polices and practices.

The impact of gender diversity on performance in services and manufacturing organizations

We present three competing predictions of the organizational gender diversity-performance relationship: a positive linear prediction, a negative linear prediction, and an inverted U-shaped curvilinear prediction. The paper also proposes a moderating effect of industry type (services vs. manufacturing). The predictions were tested using archival quantitative data with a longitudinal design. The results show partial support for the positive linear and inverted U-shaped curvilinear predictions as well as for the proposed moderating effect of industry type. The results help reconcile the inconsistent findings of past research. The findings also show that industry context can strengthen or weaken gender diversity effects.

Workforce gender diversity: Is it a source of competitive advantage?

Research on workforce diversity at the organisational level gained momentum in the 1990s, because of the growing trend in HR research to link HR practices with organisational performance. The new parallel wave of research focused on the business case for diversity, in which diversity was linked to organisational performance. However, the results of these studies, mainly focusing on linear diversity-performance relationships, have been inconsistent. Based on contrasting theories, this paper proposes three competing predictions of the gender diversity-performance relationship at the organisational level: a positive linear relationship derived from the resource-based view of the firm, a negative linear relationship derived from self-categorisation and social identity theories, and a U-shaped curvilinear relationship derived from the integration of the resource-based view of the firm with self-categorisation and social identity theories. The U-shaped relationship accounts for the inconsistent findings in past research, because different proportions of men and women produce different social dynamics that have different effects on organisational performance. Further, the proposed U-shaped relationship can have different slopes in the manufacturing and services industries. The paper contributes to the field of diversity by strengthening its weak theoretical foundations and by highlighting the industry differences.

The organisational gender diversity-performance link : does industry type matter?

Research on workforce diversity gained momentum in the 1990s. However, empirical findings to date on the link between gender diversity and performance have been inconsistent. Based on contrasting theories, this paper proposes a positive linear and a negative linear prediction of the gender diversity-performance relationship. The paper also proposes that industry type (services vs. manufacturing) moderates the gender diversity-performance relationship such that the relationship will be positive in service organisations and negative in manufacturing organisations. The results show partial support for the positive linear gender diversity-performance relationship and for the moderating effect of industry type. The study contributes to the field of diversity by showing that workforce gender diversity can have a different impact on organisational performance in different industries.

The gender diversity-performance relationship in services and manufacturing organizations

Empirical findings on the link between gender diversity and performance have been inconsistent. This paper presents three competing predictions of the organizational gender diversity-performance relationship: a positive linear prediction derived from the resource-based view of the firm, a negative linear prediction derived from self-categorization and social identity theories, and an inverted U-shaped curvilinear prediction derived from the integration of the resource-based view of the firm with self-categorization and social identity theories. This paper also proposes a moderating effect of industry type (services vs. manufacturing) on the gender diversity-performance relationship. The predictions were tested in publicly listed Australian organizations using archival quantitative data with a longitudinal research design. The results show partial support for the positive linear and inverted U-shaped curvilinear predictions as well as for the proposed moderating effect of industry type. The curvilinear relationship indicates that different proportions of organizational gender diversity have different effects on organizational performance, which may be attributed to different dynamics as suggested by the resource-based view and self-categorization and social identity theories. The results help reconcile the inconsistent findings of past research that focused on the linear gender diversity-performance relationship. The findings also show that industry context can strengthen or weaken the effects of organizational gender diversity on performance.