Journal of Business Ethics

, Volume 83, Issue 3, pp 435–451 | Cite as

Gender Diversity in the Boardroom and Firm Financial Performance

Article

Abstract

The monitoring role performed by the board of directors is an important corporate governance control mechanism, especially in countries where external mechanisms are less well developed. The gender composition of the board can affect the quality of this monitoring role and thus the financial performance of the firm. This is part of the “business case” for female participation on boards, though arguments may also be framed in terms of ethical considerations. While the issue of board gender diversity has attracted growing research interest in recent years, most empirical results are based on U.S. data. This article adds to a growing number of non-U.S. studies by investigating the link between the gender diversity of the board and firm financial performance in Spain, a country which historically has had minimal female participation in the workforce, but which has now introduced legislation to improve equality of opportunities. We investigate the topic using panel data analysis and find that gender diversity – as measured by the percentage of women on the board and by the Blau and Shannon indices – has a positive effect on firm value and that the opposite causal relationship is not significant. Our study suggests that investors in Spain do not penalise firms which increase their female board membership and that greater gender diversity may generate economic gains.

Keywords

board of directors corporate governance endogeneity firm value women 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Agrawal A., C. R. Knoeber: 1996, Firm Performance and Mechanisms to Control Agency Problems Between Managers and Shareholders. Journal of Financial and Quantitative Analysis, 31, 377–397CrossRefGoogle Scholar
  2. Aja, E., F. Carbonell, W. Pereda, C. Ioė, J. Funes and I. Vila: 2000, ‹La inmigración extranjera en España’. Los retos educativos', Colección de Estudios Sociales, 1, Fundación La Caixa, BarcelonaGoogle Scholar
  3. Aldama Report: 2003, ‹Report of the Special Commission for the Promotion of the Transparency and the Security in the Financial Markets and in Listed Companies’, MadridGoogle Scholar
  4. Andreoni J., L. Vesterlund: 2001, Which is the Fair Sex? Gender Differences in Altruism. The Quarterly Journal of Economics, 116, 293–312CrossRefGoogle Scholar
  5. Arellano M., O. Bover: 1990, Un Estudio Econométrico Con Datos de Panel. Investigaciones Económicas, 14, 3–45Google Scholar
  6. Ballesta J. P. S., E. García-Meca: 2005, Audit Qualifications and Corporate Governance in Spanish Listed Firms. Managerial Auditing Journal, 20, 725–738CrossRefGoogle Scholar
  7. Baumgartner, S.: 2006, ‹Measuring the Diversity of What? And for What Purpose? A Conceptual Comparison of Ecological and Economic Biodiversity Indices’, Working Paper, University of HeidelbergGoogle Scholar
  8. Beekes W., P. Pope, S. Young: 2004, The Link Between Earnings Timeliness, Earnings Conservatism and Board Composition: Evidence from the UK. Journal of Corporate Governance, 12, 47–59CrossRefGoogle Scholar
  9. Blau P. M.: 1977, Inequality and Heterogeneity. New York: The Free PressGoogle Scholar
  10. Bocatto, E.: 2006, ‹Family Owned Business Succession: The Influence of Pre-Performance in the Nomination of Family and Non-Family Members: Evidence from Spanish Firms’, Paper presented at the Department of Economics de l’Empresa Jornada Conference, November 30, 2006. Available at: http://selene.uab.es/dep-economia-empresa/Jornadas/Papers/2006_11/IVJornadas_paper_EBocatto.pdf
  11. Böhren, O. and R. O. Ström: 2005, ‹Aligned, Informed, and Decisive: Characteristics of Value-Creating Boards’, Working Paper, Norwegian School of Management BI, Oslo, SeptemberGoogle Scholar
  12. Brammer S., A. Millington, S. Pavelin: 2007, Gender and Ethnic Diversity Among UK Corporate Boards. Corporate Governance: An International Review, 15(2), 393–403CrossRefGoogle Scholar
  13. Brown-Kruse J., D. Hummels: 1993, Gender Differences in Laboratory Public Goods Contribution: Do Individuals Put their Money where their Mouth is? Journal of Economic Behavior and Organization, 22, 255–267CrossRefGoogle Scholar
  14. Cabrera-Suárez K., D. J. Santana-Martín: 2004, Governance in Spanish Family Business. International Journal of Entrepreneurial Behaviour and Research, 10(1/2), 141–163CrossRefGoogle Scholar
  15. Cadbury Report: 1992, Report of the Committee on the Financial Aspects of Corporate Governance. London: GeeGoogle Scholar
  16. Carrera N., I. Gutiérrez, C. Salvador: 2001, Gender, the State and the Audit Profession: Evidence from Spain (1942–88). European Accounting Review, 10, 803–815CrossRefGoogle Scholar
  17. Carter D. A., B. J. Simkins, W. G. Simpson: 2003, Corporate Governance, Board Diversity, and Firm Value. Financial Review, 38, 33–53CrossRefGoogle Scholar
  18. Catalyst: 2004, The Bottom Line: Connecting Corporate Performance and Gender Diversity. New York: CatalystGoogle Scholar
  19. Catalyst: 2006, 2005 Census of Women Board Directors of the Fortune 500. New York: CatalystGoogle Scholar
  20. Catalyst: 2007, 2006 Census of Women Board Directors of the Fortune 500. New York: CatalystGoogle Scholar
  21. Catan, T.: 2006, ‹In the Dark Heart of Machismo Shines a Beacon of Sexual Equality’, The Times, November 29Google Scholar
  22. Cervantes Institute: 1999, Anuario 1999. Centro Virtual Cervantes, MadridGoogle Scholar
  23. Comisión Nacional del Mercado de Valores: 2006, Report of the Special Working Group on the Good Governance of Listed Companies. CNMV: Madrid, 19 MayGoogle Scholar
  24. Cox T. H., S. Blake: 1991, Managing Cultural Diversity: Implication for Organizational Competitiveness. Academy of Management Executive, 5, 45–56Google Scholar
  25. Curdová, A.: 2005, ‹Discrimination Against Women in the Workforce and the Workplace’, Committee on Equal Opportunities for Women and Men, Spanish Parliamentary Assembly, Doc. 10484Google Scholar
  26. Demsetz H., B. Villalonga: 2001, Ownership Structure and Corporate Performance. Journal of Corporate Finance, 7, 209–233CrossRefGoogle Scholar
  27. Du Rietz A., M. Henrekson: 2000, Testing the Female Underperformance Hypothesis. Small Business Economics, 14(1), 1–10CrossRefGoogle Scholar
  28. Earley P. C., E. Mosakowski: 2000, Creating Hybrid Team Cultures: An Empirical Test of Transnational Team Functioning. Academy of Management Journal, 43, 26–49CrossRefGoogle Scholar
  29. Erhardt N. L., J. D. Werbel, C. B. Shrader: 2003, Board of Directors Diversity and Firm Financial Performance. Corporate Governance: An International Review, 11, 102–111CrossRefGoogle Scholar
  30. Fama E. F., M. C. Jensen: 1983, Separation of Ownership and Control. Journal of Law and Economics, 26, 301–325CrossRefGoogle Scholar
  31. Farrell K. A., P. L. Hersch: 2005, Additions to Corporate Boards: the Effect of Gender. Journal of Corporate Finance, 11, 85–206CrossRefGoogle Scholar
  32. Fernández A. I., S. Gómez-Ansón, C. Fernández-Méndez: 1998, El Papel Supervisor del Consejo de Administración Sobre la Actuación Gerencial. Evidencia Para el Caso Español. Investigaciones Económicas, 22, 501–516Google Scholar
  33. Gerke W., M. Bank, M. Steiger: 2003, The Changing Role of Institutional Investors – A German Perspective. In Hopt, K. J., E. Wymeersch (eds.), Capital Markets and Company Law (New York: Oxford University Press), (pp 357–385)Google Scholar
  34. Griffith J. M.: 1999, CEO Ownership and Firm Value. Managerial and Decision Economics, 20, 1–8CrossRefGoogle Scholar
  35. Hall, B. H.: 1999, ‹Innovation and Firm Value’, National Bureau of Economic Research Working Paper 6984. National Bureau of Economic Research, Cambridge, MA. Retrieved from http://www.nber.org/papers/w6984.pdf/
  36. Hambrick D. C., T. S. Cho, M. J. Chen: 1996, The Influence of Top Management Team Heterogeneity on Firms’ Competitive Moves. Administrative Science Quarterly, 41, 659–684CrossRefGoogle Scholar
  37. Harrison, D. A. and K. J. Klein: 2007, ‹What’s the Difference? Diversity Constructs as Separation, Variety, or Disparity in Organizations’, Academy of Management Review (forthcoming)Google Scholar
  38. Heidrick and Struggles: 2007, ‹Corporate Governance in Europe: 2007 Report’, ParisGoogle Scholar
  39. Herfindahl, O. C.: 1950, ‹Concentration in the U.S. Steel Industry’, Unpublished doctoral dissertation, Columbia University, New YorkGoogle Scholar
  40. Hermalin B., M. S. Weisbach: 1991, The Effect of Board Composition and Direct Incentives on Corporate Performance. Financial Management, 20, 101–112CrossRefGoogle Scholar
  41. Hillier, D. and P. McColgan: 2001, ‹Insider Ownership and Corporate Value: An Empirical Test from the United Kingdom Corporate Sector’, Financial Management Association (FMA) Meeting, ParisGoogle Scholar
  42. Himmelberg C. P., R. G. Hubbard, D. Palia (1999), Understanding the Determinants of Managerial Ownership and the Link Between Ownership and Performance. Journal of Financial Economics, 53, 353–384CrossRefGoogle Scholar
  43. Hirschman A. O.: 1964, The Paternity of an Index. American Economic Review, 54, 761–762Google Scholar
  44. Hyland D. C., J. D. Diltz: 2002, Why Firms Diversify: An Empirical Examination. Financial Management, 31, 51–81CrossRefGoogle Scholar
  45. ILO: 2007, ‹Global Employment Trends for Women Brief’, March, International Labour Organization, GenevaGoogle Scholar
  46. Jaskiewicz P., V. M. González, S. Menéndez, D. Schiereck: 2005, Long-Run IPO Performance Analysis of German and Spanish Family-Owned Businesses. Family Business Review, 18(3), 179–202CrossRefGoogle Scholar
  47. Jianakoplos N. A., A. Bernasek: 1998, Are Women More Risk Averse? Economic Inquiry, 36, 620–630Google Scholar
  48. Kini O., W. Kracaw, S. Mian: 1995, Corporate Takeovers, Firm Performance, and Board Composition. Journal of Corporate Finance, 1, 383–412CrossRefGoogle Scholar
  49. Konrad A. M., V. W. Kramer: 2006, ‹How Many Women Do Boards Need?’, Harvard Business Review, December, 84(12), 22Google Scholar
  50. La Porta R., F. Lopez de Silanes, A. Shleifer, R. Vishny: 1997, Legal Determinants of External Finance. Journal of Finance, 52, 1131–1150CrossRefGoogle Scholar
  51. La Porta R., F. Lopez de Silanes, A. Shleifer, R. Vishny: 1998, Law and Finance. Journal of Political Economy, 106, 1113–1155CrossRefGoogle Scholar
  52. La Porta R., F. Lopez de Silanes, A. Shleifer, R. Vishny: 2002, Investor Protection and Corporate Valuation. Journal of Finance, 57, 1147–1170CrossRefGoogle Scholar
  53. Lang L. H., R. M. Stulz: 1994, Tobin’s q, Corporate Diversification and Firm Performance. Journal of Political Economy, 102, 1248–1280CrossRefGoogle Scholar
  54. Lau D. C., J. K. Murnighan: 1998, Demographic Diversity and Faultlines: The Compositional Dynamics of Organizational Groups. Academy of Management Review, 23, 325–340CrossRefGoogle Scholar
  55. Lindenberg E., S. Ross: 1981, Tobin’s q Ratio and Industrial Organization. Journal of Business, 54(1), 1–32CrossRefGoogle Scholar
  56. López-Iturriaga F. J., J. A. Rodríguez-Sanz: 2001, Ownership Structure, Corporate Value and Firm Investment: A Simultaneous Equations Analysis of Spanish Firms. Journal of Management and Governance, 5, 179–204CrossRefGoogle Scholar
  57. Megna P., M. Klock: 1993, The Impact of Intangible Capital on Tobin’s q in the Semiconductor Industry. American Economic Review, 83, 265–269Google Scholar
  58. Montgomery C., B. Wernerfelt: 1988, Tobin’s q and the Importance of Focus in Firm Performance. American Economic Review, 78(1), 246–250Google Scholar
  59. Morck R., A. Shleifer, R. W. Vishny: 1988, Management Ownership and Market Valuation: An Empirical Analysis. Journal of Financial Economics, 20, 293–315CrossRefGoogle Scholar
  60. Nowell C., S. Tinkler: 1994, The Influence of Gender on the Provision of a Public Good. Journal of Economic Behavior and Organization, 25, 25–36CrossRefGoogle Scholar
  61. Olivencia Report: 1998, ‹Report of the Special Commission to Consider a Code of Ethics for Companies Boards of Directors’, MadridGoogle Scholar
  62. Organisation for Economic Co-Operation and Development: 2006a, OECD Labour Force Statistics by Age and Sex (OECD, Paris). http://stats.oecd.org/wbos/default.aspx
  63. Organisation for Economic Co-Operation and Development: 2006b, Education at a Glance 2006 (OECD, Paris). http://www.oecd.org/edu/eag2006
  64. Randøy, T., S. Thomsen and L. Oxelheim: 2006: ‹A Nordic Perspective on Corporate Board Diversity’, Working Paper, Nordic Innovation Centre, OsloGoogle Scholar
  65. Richard O. C., T. Barnett, S. Dwyer, K. Chadwick: 2004, Cultural Diversity in Management, Firm Performance, and the Moderating Role of Entrepreneurial Orientation Dimensions. Academy of Management Journal, 47, 255–266CrossRefGoogle Scholar
  66. Robinson G., K. Dechant: 1997, Building a Business Case for Diversity. Academy of Management Executive, 11, 21–30Google Scholar
  67. Rose C.: 2007, Does Female Board Representation Influence Firm Performance? The Danish Evidence. Corporate Governance: An International Review, 15(2), 404–413CrossRefGoogle Scholar
  68. Shannon C. E.: 1948, A Mathematical Theory of Communication. Bell System Technical Journal, 27, 379–423Google Scholar
  69. Shrader C. B., V. B. Blackburn, J. P. Iles: 1997, Women in Management and Firm Financial Value: An Exploratory Study. Journal of Managerial Issues, 9, 355–372Google Scholar
  70. Simpson E. H. (1949), Measurement of Diversity. Nature, 163, 688CrossRefGoogle Scholar
  71. Smirlock M., T. W. Gilligan, W. J. Marshall: 1984, Tobin’s q and the Structure–Performance Relationship. American Economic Review, 74, 1051–1060Google Scholar
  72. Smith N., V. Smith, M. Verner: 2006, Do Women in Top Management Affect Firm Performance? A Panel Study of 2,500 Danish Firms. International Journal of Productivity and Performance Management, 55, 569–593CrossRefGoogle Scholar
  73. Soria, F.: 2002, ‹Los Principales Retos de la Empresa Familiar en el Siglo XXI’, Fusiones y Adquisiciones Capital & Corporate, Octubre, UNILCOGoogle Scholar
  74. Steiner T. L.: 1996, A Reexamination of the Relationships Between Ownership Structure, Firm Diversification, and Tobin’s q. Quarterly Journal of Business and Economics, 35(4), 39–48Google Scholar
  75. Stirling, A.: 1998, ‹On the Economics and Analysis of Diversity’, Science Policy Research Unit Electronic Working Paper Series, Paper no. 28, University of SussexGoogle Scholar
  76. Tajfel H., J. Turner: 1986, The Social Identity of Inter-Group Behavior in Worchel S., W. Austin (eds.), Psychology and Intergroup Relations (Chicago: Nelson-Hall), pp. 7–24Google Scholar
  77. Weisbach M.: 1988, Outside Directors and CEO Turnover. Journal of Financial Economics, 20, 431–460CrossRefGoogle Scholar
  78. Wiener N.: 1961, Cybernetics. MIT Press, CambridgeGoogle Scholar
  79. Williams K., C. O’Reilly: 1998, Forty Years of Diversity Research: A Review, in Staw B. M., L. L. Cummings (eds.), Research in Organizational Behavior (Greenwich, CT: JAI Press), pp. 77–140Google Scholar
  80. Wools, D.: 2007, ‹Spain Lawmakers OK Women’s Equality Law’, Associated Press, March 15Google Scholar
  81. Yermack D.: 1996, Higher Market Valuation of Companies with a Small Board of Directors. Journal of Financial Economics, 40, 185–211CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media B.V. 2007

Authors and Affiliations

  1. 1.Department of Accounting and FinanceUniversity of StirlingStirlingU.K.

Personalised recommendations