Does Board Gender Diversity Influence Financial Performance? Evidence from Spain

Abstract

In recent years, several countries have enacted guidelines and/or mandatory laws to increase the presence of women on the boards of companies. Through these regulatory interventions, the aim is to eradicate the social and labor grievances that women have traditionally experienced and which has relegated them to smaller-scale jobs. Nevertheless, and despite the advances achieved, the female representation in the boardroom remains far from the desired levels. In this context, it is now necessary to enhance the advantages of board gender diversity from both ethical and economic points of view. This article examines the relation between board gender diversity and economic results in Spain: the second country in the world to legally require gender quotas in boardrooms and historically characterized by a minimal female participation in the workforce. Based on a sample of 125 non-financial firms listed on the Madrid Stock Exchange from 2005 to 2009, our findings show that in the period analyzed the increase of the number of women on boards was over 98 %. This suggests that compulsory legislation offers an efficient framework to execute the recommendation of Spanish codes of good governance by means of the increase in the number of women in the boards of firms. Furthermore, we find that the increase in the number of women on the boards is positively related to higher economic results. Therefore, both results suggest that gender diversity in boardrooms should be incremented, mandatory laws being a key factor to do so.

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Notes

  1. 1.

    The United Kingdom Social Investment Forum (UKSIF) defines socially responsible investments as investments that allow investors to combine financial objectives and social values, linked to areas of social justice, economic development, peace and the environment.

  2. 2.

    MADX includes all the firms in the Spanish stock exchange IBEX-35 and other large Spanish companies. MADX is considered by many analysts and investors to be the most representative stock exchange index in Spain.

  3. 3.

    The code indicates that when the number of women directors is low or null, the board will have to explain the motives and the initiatives adopted to correct this situation. When there are vacancies, it should be guaranteed that the firm deliberately includes among the potential candidates women who have the professional profile sought (this is in recommendation 15 of the Unified Code of Good Governance).

  4. 4.

    This test follows a χ 2 distribution with as many degrees of freedom as estimated coefficients. When the null hypothesis is not rejected, the fixed effects term must be dropped with the within-groups technique. Otherwise, the random effects method applies.

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Acknowledgments

The authors are grateful to Antonio J. Blanco-Oliver and Rafael del Pino-Mejías, Félix J. López Iturriaga, Thomas Clarke, and Sivakani Jayaprakash (Section Editor, Journal of Business Ethics), and three anonymous referees. All the remaining errors are our sole responsibility.

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Correspondence to Nuria Reguera-Alvarado.

Appendix

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Table 10 Definition of variables

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Reguera-Alvarado, N., de Fuentes, P. & Laffarga, J. Does Board Gender Diversity Influence Financial Performance? Evidence from Spain. J Bus Ethics 141, 337–350 (2017). https://doi.org/10.1007/s10551-015-2735-9

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Keywords

  • Corporate governance
  • Economic performance
  • Gender diversity
  • Regulatory intervention
  • Code of good governance

JEL classification

  • M48
  • M14