/pdf/the-theory-of-industrial-organization-19bejph0ej.pdf

The Theory of Industrial Organization

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.

Gender Diversity in the Boardroom and Firm Financial Performance

Manuscript Type: Empirical Research Question/Issue: We examine the business case for the inclusion of women and ethnic minority directors on the board. Specifically, we investigate the relationship between the number of women directors and the number of ethnic minority directors on the board and important board committees and financial performance measured as return on assets and Tobin’s Q. Research Findings/Insights: We do not find a significant relationship between the gender or ethnic diversity of the board, or important board committees, and financial performance for a sample of major US corporations. Our evidence also suggests that the gender and ethnic minority diversity of the board and firm financial performance appear to be endogenous. Theoretical/Academic Implications: Reasonable theoretical arguments drawn from resource dependence theory, human capital theory, agency theory, and social psychology suggest that gender and ethnic diversity may have either a positive, negative, or neutral effect on the financial performance of the firm. Our statistical analysis supports the theoretical position of no effect, either positive or negative. Our results are consistent with a contingency explanation because the effect of the gender and ethnic diversity of the board may be different under different circumstances at different times. Over several companies and time periods, the results could offset to produce no effect. Practitioner/Policy Implications: The results of our analysis do not support the business case for inclusion of women and ethnic minorities on corporate boards. However, we find no evidence of any negative effect either. Our evidence implies that decisions concerning the appointment of women and ethnic minorities to corporate boards should be based on criteria other than future financial performance.

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The Gender and Ethnic Diversity of US Boards and Board Committees and Firm Financial Performance

Manuscript Type: Conceptual (Review)

Research Question/Issue: This review examines how gender diversity on corporate boards influences corporate governance outcomes that in turn impact performance. We describe extant research on theoretical perspectives, characteristics and impact of women directors on corporate boards (WOCB) at micro, meso and macro levels: individual, board, firm and industry/environment.

Research Finding/Insights: To the best of our knowledge, this is the first comprehensive review of WOCBs, incorporating and integrating research from over 400 publications in psychology, sociology, leadership, gender, finance, management, law, corporate governance and entrepreneurship domains. In addition, we organized our findings to provide a new lens enabling the field to be readily examined by level and by theoretical perspective. The review indicates that WOCB research is about improving corporate governance through better use of the whole talent pool’s capital, as well as about building more inclusive and fairer business institutions that better reflect their present generation stakeholders.

Theoretical/Academic Implications: With only one in ten papers addressing theoretical development, the predominant perspectives are human and social capital theories and gender schema at individual level; social identity, token and social networks theories at board level; resource dependency, institution and agency theories at firm level, and institutional, critical and political theories at environmental level. We provide a short synopsis of findings at each level, and conclude with an outline of fruitful directions for future research.

Practitioner/Policy Implications: There are increasing pressures for WOCBs, from diverse stakeholders such as the European Commission, national governments, politicians, employer lobby groups, shareholders, Fortune and FTSE rankings, best places for women to work lists as well as expectations from highly qualified women who are likely to leave if they see no women board members. Rationales generally draw on the business case, however the moral justice case is also used by those who seek a fairer gender balance in all aspects of society. From our review, the ‘Impact’ section charts the effect of WOCB at all four levels of analysis.

/pdf/women-directors-on-corporate-boards-a-review-and-research-291ijfwxtw.pdf

Women Directors on Corporate Boards: A Review and Research Agenda

Despite a large body of literature examining the relationship between women on boards and firm financial performance, the evidence is mixed. To reconcile the conflicting results, we statistically combine the results from 140 studies and examine whether these results vary by firms' legal/regulatory and socio-cultural contexts. We find that female board representation is positively related to accounting returns and that this relationship is more positive in countries with stronger shareholder protections--perhaps because shareholder protections motivate boards to use the different knowledge, experience, and values that each member brings. We also find that, although the relationship between female board representation and market performance is near zero the relationship is positive in countries with greater gender parity (and negative in countries with low gender parity)--perhaps because societal gender differences in human capital may influence investors' evaluations of the future earning potential of firms that have more female directors. Lastly, we find that female board representation is positively related to boards' two primary responsibilities: monitoring and strategy involvement. For both firm financial performance and board activities, we find mean effect sizes comparable to those found in meta-analyses of other aspects of board composition. We discuss the theoretical and practical implications of our findings

Women on Boards and Firm Financial Performance: A Meta-Analysis

Board diversity has become a major issue within corporate governance where a number of studies seek to explore the impact of diversity on firm performance. The debate focuses on questions such as whether a corporation’s board should reflect the firm’s stakeholders or be more in line with society in general. This article uses a sample of listed Danish firms during the period of 1998–2001 in a cross sectional analysis. Despite that fact that Denmark has gone very far in the liberalisation of women, Danish board rooms are still to a large extent dominated by men. Contrary to a number of other studies, this article does not find any significant link between firm performance as measured by Tobin’s Q and female board representation. This is also the case for board members’ educational background as well as the proportion of foreigners. It is argued that board members with an unconventional background are socialised unconsciously adopting the ideas of the majority of conventional board members, which entails that a potential performance effect does not materialise.

Does female board representation influence firm performance? The Danish evidence

The impact of corporate reputation on performance: some danish evidence

After the emergence of the Cadbury Report in 1992, several countries in the EU, including Denmark, issued their own guidelines of corporate governance. However, whether such recommendations benefit shareholders is a controversial question. This article presents an empirical analysis of financial performance and the composition of semi-two-tier boards using a unique sample of Danish listed firms. It is shown that board size, proportion of insiders and positions held by board members in other firms do not significantly impact performance. Only the average age of the board has a significantly negative impact on performance. Thus, it is argued that board structure only plays crucial role when a firm is in financial trouble or faces a major threat - not under normal circumstances.

The Composition of Semi-Two-Tier Corporate Boards and Firm Performance

https://research-api.cbs.dk/ws/files/44825291/caspar_rose_firm_performance_postprint.pdf

Firm performance and comply or explain disclosure in corporate governance

After the emergence of the Cadbury Report in 1992, several countries in the EU, including Denmark, issued their own guidelines of corporate governance. However, whether such recommendations benefit shareholders is a controversial question. This article presents an empirical analysis of financial performance and the composition of semi-two-tier boards using a unique sample of Danish listed firms. It is shown that board size, proportion of insiders and positions held by board members in other firms do not significantly impact performance. Only the average age of the board has a significantly negative impact on performance. Thus, it is argued that board structure only plays crucial role when a firm is in financial trouble or faces a major threat – not under normal circumstances.

Caspar Rose

Papers

Does female board representation influence firm performance? The Danish evidence

The impact of corporate reputation on performance: some danish evidence

The Composition of Semi-Two-Tier Corporate Boards and Firm Performance

Firm performance and comply or explain disclosure in corporate governance

The Composition of Semi‐Two‐Tier Corporate Boards and Firm Performance