GENDER DIVERSITY AND FIRM PERFORMANCE: EVIDENCES FROM MULTIPLE COUNTRIES FOR A PERIOD OF TEN YEARS

Abstract

The paper investigates the reciprocal relationship between firm performance and female presence on board and management. Analyses are conducted on a sample containing 425,006 firm-year observations from 41 countries obtained from Bloomberg database. Tobit estimator and Heckman two-stage estimator are utilized to analyze the impact of firm performance on gender diversity, while linear regression (cross-sectional and panel) and Heckman two-stage regression are used to find the impact of gender diversity on firm performance. The top line result shows that the direction of causality is partially from firm performance to gender diversity, and not the opposite. Female percentage on board and management is most significantly and positively impacted by the log of total assets and Tobin’s q, implying that larger and better performing firms are more likely to employ female leaders. On the other hand, gender diversity measured by Blau Index does not seem to be an important determinant of either Tobin’s q or ROA. Tokenism is likely to be an important factor preventing females from performing well. In addition, gender diversity is found to be negatively related to financial leverage, signifying that the presence of female reduces debt level, which in turn downgrades the risk carried by the firms. The research also documents different regression results by category. The results suggest that for one thing, female proportion is more related to past firm performance in service-oriented industries. It may be because these firms are generally more gender-equal, and females are more likely to be evaluated and promoted based on performance. For another, board gender diversity positively impacts ROA in large-medium firms, firms in technologyintensive industries, Asian firms, and firms in countries without gender quota laws. It is postulated that these firms are more male-dominated, thus more difficult for females to get promoted. The women who managed to reach the top in these firms have to be much more qualified and capable than their peers, and their high qualifications ensure their positive contribution to firm performance. Finally, by and large, board gender diversity demonstrates a more close relationship with firm performance than management gender diversity.