Women in the boardroom and their impact on governance and performance

We show that female directors have a significant impact on board inputs and firm outcomes. In a sample of US firms, we find that female directors have better attendance records than male directors, male directors have fewer attendance problems the more gender-diverse the board is, and women are more likely to join monitoring committees. These results suggest that gender-diverse boards allocate more effort to monitoring. Accordingly, we find that chief executive officer turnover is more sensitive to stock performance and directors receive more equity-based compensation in firms with more gender-diverse boards. However, the average effect of gender diversity on firm performance is negative. This negative effect is driven by companies with fewer takeover defenses. Our results suggest that mandating gender quotas for directors can reduce firm value for well-governed firms.     

Do women directors improve firm performance in China?

This paper examines the effect of board gender diversity on firm performance in China's listed firms from 1999 to 2011. We document a positive and significant relation between board gender diversity and firm performance. Female executive directors have a stronger positive effect on firm performance than female independent directors, indicating that the executive effect outweighs the monitoring effect. Moreover, boards with three or more female directors have a stronger impact on firm performance than boards with two or fewer female directors, consistent with the critical mass theory. Finally, we find that the impact of female directors on firm performance is significant in legal person-controlled firms but insignificant in state-controlled firms. This paper sheds new light on China's boardroom dynamics. As governments increasingly contemplate board gender diversity policies, our study offers useful empirical guidance to Chinese regulators on the issue.     

Do Women and Ethnic Minority Directors Influence Firm Value? Evidence from Post‐Apartheid South Africa

Previous studies on the value relevance of board gender and ethnic diversity have produced mixed results. This paper re‐examines this relationship using hand‐collected data of 245 South African listed firms over the period 2008–2013. We document a positive and significant effect of both board gender and ethnic diversity on firm value. We also find that the increase in firm value is greater when boards have three or more women directors. In contrast, ethnic minority directors contribute less to firm value when there are three or more on the board. Furthermore, we document that ethnicity has a concave relationship with firm value, but gender does not. We demonstrate that in better‐governed firms, ethnic diversity is more value relevant than gender diversity. Our results also suggest that financial crisis is associated with the propensity to restructure boards along gender and ethnicity. This paper sheds new light on the effect of board diversity in South African firms as the government increasingly pursues policies aimed at eradicating the effects of apartheid. Our results are robust after controlling for self‐selection and various forms of endogeneity.     

Do gender diverse boards enhance managerial ability?

We examine the link between board gender diversity and managerial ability to transform corporate resources into revenue. Drawing on a sample of U.S firms during the period 2001–2016, we find a positive and economically meaningful association between female directors on boards and managerial ability, particularly when female directors are in monitoring roles on the board. The documented effect is stronger when using a tenure weighted measure of female representation on boards; and more pronounced for firms that have three or more women on the board of directors, in line with the critical mass hypothesis. We uncover that critical mass of female directors in monitoring roles is particularly conducive to enhancing managerial ability. Our channel analysis tests further reveal a distinctive tendency of firms with more gender diverse boards to shape the human capital of the firm by promoting managers with more generalist managerial skills. We find consistent results when we employ propensity score matching estimates and difference-in-differences using sudden deaths of female directors as a potential shock to address endogeneity concerns. We discuss implications for theory and policy.     

Social Concentration on Boards,Corporate Information Environment and Cost of Capital

Prior evidence on the relationship between demographic diversity in corporate boards and firm performance is mixed. Some studies have found that the relationship between board attributes and firm performance is driven by a firm's information environment. This study examines whether corporate transparency also impacts the relationship between gender and ethnic diversity of directors and firm performance. To test this hypothesis, I use a Herfindahl Index based on directors’ gender and ethnicity to measure board diversity, and an opacity index based on analyst following, analyst forecast error, bid‐ask spread, and share turnover to measure corporate transparency. I find that the cost of capital is positively associated with social concentration on corporate boards and that this premium is larger for highly opaque firms. In further analysis, I find that the interaction of corporate information environment and social concentration on boards is more important for operationally complex firms. Compared with simple firms, operationally complex firms pay a greater premium on their capital if they have a socially concentrated board and an opaque information environment.     

The connection between gender diversity and firm performance: Evidence from Taiwan

This paper examines the factors influencing female board membership in Taiwan over the period from 1996 through 2017 and the potential impact of female board representation on firm performance. With 16,477 firm-year observations, our findings show that Taiwanese firms with higher board independence and institutional ownership tend to have lower female board representation. In examining performance implications, the results suggest that board gender diversity is positively associated with firm performance overall. This positive relationship is even stronger in small firms, where female directors may have more influence. In subsample analysis based on lowest and highest ultimate control ownership, we document that the positive impact of board gender diversity is mainly driven by firms that have high ultimate control ownership. Our findings suggest that, in environments with weak corporate governance, female board members may act as effective monitors, especially in smaller firms. Regulators and firms in developing economies with weak corporate governance environment should encourage gender diversity on boards.     

Board diversity,firm risk,and corporate policies

We examine the effects of diversity in the board of directors on corporate policies and risk. Using a multidimensional measure, we find that greater board diversity leads to lower volatility and better performance. The lower risk levels are largely due to diverse boards adopting more persistent and less risky financial policies. However, consistent with diversity fostering more efficient (real) risk-taking, firms with greater board diversity also invest persistently more in research and development (R&D) and have more efficient innovation processes. Instrumental variable tests that exploit exogenous variation in firm access to the supply of diverse nonlocal directors indicate that these relations are causal.     

Does board gender diversity affect renewable energy consumption?

This paper examines the effect of board gender diversity on renewable energy consumption. Using a panel of 11,677 firm-year observations from the USA for 2008–2016, we find a positive relationship between board gender diversity and renewable energy consumption. Moreover, boards require two or more women for women to have a significant impact on renewable energy consumption, consistent with the critical mass theory. Further, we document that the positive impact of female directors on renewable energy consumption stems from female independent rather than female executive directors. Finally, we find a positive effect of the interaction between renewable energy consumption and board gender diversity on firm financial performance. Our findings are robust to different identification strategies and estimation techniques.     

Effects of female directors on gender diversity at lower organization levels and CSR performance: Evidence in Japan

This paper examines the effects of board gender diversity on female representation at lower organization levels and corporate social responsibility (CSR) performance. Using a panel data set of more than 1000 Japanese listed firms from 2005 to 2014, we focus on firms that introduced female directors to their male-dominant boards for the first time and find that the first-introduced female directors are positively associated with a greater number of female officers and managers. The introduction of the first female director is also associated with better CSR performance. Our results are statistically significant and suggest that board gender diversity has an effect on promoting gender diversity at lower levels and CSR performance in listed firms.     

Corporate Governance, Board Diversity, and Firm Value

This study examines the relationship between board diversity and firm value for Fortune 1000 firms. Board diversity is defined as the percentage of women, African Americans, Asians, and Hispanics on the board of directors. This research is important because it presents the first empirical evidence examining whether board diversity is associated with improved financial value. After controlling for size, industry, and other corporate governance measures, we find significant positive relationships between the fraction of women or minorities on the board and firm value. We also find that the proportion of women and minorities on boards increases with firm size and board size, but decreases as the number of insiders increases.     

The Effect of Board Diversity on Earnings Quality: An Empirical Study of Listed Firms in Vietnam

Previous studies have established that firms’ effectiveness can differ based on the differences among directors within a board, and between boards. However, studies have yet to establish the effectiveness of the diverse attributes of the board on firms’ quality of earnings in an emerging market setting such as Vietnam. This study investigates the effect of board diversity on earnings quality in a sample of Vietnamese listed firms. The two dimensions of board diversity measures in this study cover a wide range of structural and demographic attributes of board of directors, using a diversity‐of‐boards index (dissimilarities among firm boards, i.e., board structure) and a diversity‐in‐boards index (dissimilarities among directors within a board, i.e., demographic attributes of board members). Earnings quality is an aggregate measure compiled from four accounting‐based measures of earnings quality: accruals quality, earnings persistence, earnings predictability and earnings smoothness. We find a significant, positive linear relationship between diversity of boards and earnings quality, while the relationship between diversity in boards and earnings quality is non‐linear, with a U‐shaped curve.     

Corporate board and board committee independence,firm performance,and family ownership concentration: An analysis based on Hong Kong firms

This study examines whether the relationship between corporate board and board committee independence and firm performance is moderated by the concentration of family ownership. Based on a sample of Hong Kong firms, we find no significant association between the independence of corporate boards or board committees and firm performance in family firms, whereas board independence is positively associated with firm performance in non-family firms. Additionally, our findings show that the proportion of independent directors on the corporate boards of family firms is lower than that of non-family firms, but we find no significant difference in the representation of independent directors on the key committees of corporate boards between family and non-family firms. Overall, these results suggest that the “one size fits all” approach required by the regulatory authorities for appointing independent directors on corporate boards may not necessarily enhance firm performance, especially for family firms. Thus, the requirement to appoint independent directors to the corporate boards of family firms needs to be reconsidered.     

Additions to corporate boards: the effect of gender

During the decade of the 1990s the number of women serving on corporate boards increased substantially. Over this decade, we show that the likelihood of a firm adding a woman to its board in a given year is negatively affected by the number of woman already on the board. The probability of adding a woman is materially increased when a female director departs the board. Adding a director, therefore, is clearly not gender neutral. Although we find that women tend to serve on better performing firms, we also document insignificant abnormal returns on the announcement of a woman added to the board. Rather than the demand for women directors being performance based, our results suggest corporations responding to either internal or external calls for diversity.     

Women in power with power: The influence of meaningful board representation on default risk

This paper examines the relationship between the presence of female board members and firms' corporate default risk. We find an inverted “U-shaped” relationship for a sample of 917 firms in 19 emerging markets for the period 2005–2019. We also show that, consistent with critical mass theory, boards need to have three or more female directors to significantly reduce default risk. Furthermore, having female directors with an independent role on the board in countries with less familial dominance, or having female directors with a leadership position, significantly reduces default risk. Finally, we find a positive effect of the interaction between a country's gender inequality and board gender diversity on default risk.     

Does mandatory gender balance work? Changing organizational form to avoid board upheaval

Norway is the first, and so far the only, country to mandate a minimum fraction of female and male directors on corporate boards. We find that after a new gender balance law surprisingly stipulated that the firm must be liquidated unless at least 40% of its directors are of each gender, half the firms exit to an organizational form not exposed to the law. This response suggests that forced gender balance is costly. The costs are also firm-specific, because exit is more common when the firm is non-listed, successful, small, young, has powerful owners, no dominating family owner, and few female directors. These characteristics reflect high costs of involuntary board restructuring and low costs of abandoning the exposed organizational form. Correspondingly, certain unexposed firms hesitate to become exposed. Overall, we find that mandatory gender balance may produce firms with inefficient organizational forms or inefficient boards.     

Venture Capitalists and the Oversight of Private Firms

This article examines the representation of venture capitalists on the boards of private firms in their portfolios. If venture capitalists are intensive monitors of managers, their involvement as directors should be more intense when the need for oversight is greater. I show that venture capitalists' representation on the board increases around the time of chief executive officer turnover, while the number of other outsiders remains constant. I also show that distance to the firm is an important determinant of the board membership of venture capitalists, as might be anticipated if the oversight of local firms is less costly than more distant businesses.     

Diverse boards: Why do firms get foreign nationals on their boards?

Corporate boards are the focal points for strategy and investment related firm decisions, and hence they embody the key features of production and management. In this paper, using a unique dataset of listed firms, we examine the determinants of board diversity based on directors' nationalities and ask whether the presence of foreign directors on boards contributes in some way to firm governance and performance. Our results show that boards containing diverse nationalities are positively and significantly associated with shareholder heterogeneity and the firm's international market operations. Nationality diversity is also positively related to operating performance. Moreover, as we find, institutions relating to investor engagement play an important role in influencing the nature and consequences of board diversity.     

The differential effects of classified boards on firm value

Classified boards actually benefit firms that have low monitoring costs and greater needs for advisory services. Previous literature has emphasized the entrenchment effect of classified boards. However, we find that this adverse impact of classified boards can be offset or even superseded by the potential benefits of board classification for firms who hope to benefit from the advisory services of their independent directors. We show that firms with greater advising needs appoint more outside directors with diverse attributes and expertise, qualifications that enhance the ability to provide useful advice to managers. Furthermore, in such firms, board classification is associated with higher performance sensitivity of forced CEO turnover and better acquisition performance. Conversely, in firms with high monitoring costs, board classification hurts managerial equity-based incentives and risk-taking incentives. These findings suggest how and through which channels classified boards engender the differential effects on firm value.     

Is Busy Really Busy? Board Governance Revisited

We investigate the relationship between firm governance and the board's position in the social network of directors. Using a sample of 133 German firms over the four‐year period from 2003 to 2006, we find that firms with intensely connected supervisory boards are (1) associated with lower firm performance, and (2) pay their executives significantly more. We interpret these results as evidence of poor monitoring in firms with directors who are more embedded in the social network. In both cases, simple measures for busy directors that were used by other studies in the past fail to show any significant pattern. The findings suggest that the quality and structural position of additional board seats may play a bigger role than simply the number of board appointments.     

The impact of gender diversity on shareholder wealth: Evidence from European bank M&A

We explore the association between board gender diversity and shareholder value creation. Specifically, we investigate the impact of gender diversity on the economic impact of bank mergers and acquisitions (M&A). We employ a multi-year sample of M&A announced by European listed banks and find that: (i) the presence of women on the board of directors has a positive and statistically significant effect on acquirer gains; and (ii) boards with three or more women, or where women represent more than 25% of the board, have a stronger impact on acquirer gains than in the opposite case, consistent with critical mass theory. Moreover, banks with a critical mass of female directors perform better in undertaking value-enhancing M&A after the global financial crisis. Policy makers and practitioners could benefit from the findings by exploiting the advantages of board heterogeneity in terms of gender.