Does board gender diversity influence firm profitability? A control function approach |
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Institution: | 1. Department of Economics, Norwegian University of Science and Technology, Dragvoll N-7491 Trondheim, Norway;2. Department of Economics, Econometrics, and Finance, Faculty of Economics and Business, University of Groningen, The Netherlands;1. Kiel University, Germany;2. Rotterdam School of Management, Erasmus University, The Netherlands;3. Vlerick Business School, Belgium |
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Abstract: | We investigate the relation between board gender diversity and firm profitability using the control function (CF) approach recently suggested by Wooldridge (2015). The CF method takes account of the problem of endogenous explanatory variables that have potential to bias the results. Using a sample of firms that made up the S&P 500 over the period 2004–2015, we find that the presence of women on corporate boards (measured either by the percentage of female directors on corporate boards or the Blau index of heterogeneity) has a positive and significant (at the 1% level) effect on firm profitability (measured by the return on assets). We compare our results to more traditional approaches (such as pooled OLS or the fixed-effects model). Through this study, we shed light on the effect of women on corporate boards on firm performance, as it is still a controversial issue (Post and Byron, 2015). |
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Keywords: | Women Board of directors Econometrics Control function Firm performance G30 G34 J1 |
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