A woman's worth: the impact of board bender diversity on company performance - a cross-country analysis
Purpose: The study aims to investigate whether female representation on corporate boards impacts company financial and non-financial performance. Existing studies show conflicting results regarding the impact that female representation on the boards of directors may have on financial and non-financial performance, namely social and environmental performance. Studies suggest that critical mass may influence the impact that a woman on the board may have on company performance. Existing studies have observed behavioural changes in female directors when there are three or more women on the board compared to when there are less than three women on the board. The study will explore the effects of critical mass on the impact of board female representation on firm performance. Furthermore, studies posit that singlecountry studies contribute to conflicting results due to the influence of country-level factors. Country-level factors (including cultural norms, gender parity in terms of educational attainment, economic employment and opportunity) may influence the level of impact that female representation on the boards of directors have on company performance. Thus, this study explores whether country-level factors influence the impact of board female representation on company performance. Design: Using a linear mixed regression, an analysis of female representation (as measured by the percentage of women on the board and critical mass) of the top 100 listed companies from Australia, Japan and South Africa between financial and nonfinancial performance during 2016 to 2018 is performed. Both accounting and market measures are used to determine a holistic measure of financial performance. Nonfinancial performance is measured using a social and environmental performance score. To determine the influence of country level factors, interaction terms are used to compare the level of impact that female representation on the boards of directors have on company performance between Australia, Japan and South Africa. In addition, an analysis of the mean female representation by country is conducted to understand the existing level of female representation per country. Findings: The descriptive statistics show that female representation was highest in Australia with an average of 29% over the three-year period; South Africa was at 22% and Japan at only 7%, demonstrating that each country in the study has varying levels of female representation on the boards of directors. The regression results show that female representation on boards of directors, as measured by the percentage of women on the board, is shown to have a positive and significant relationship with accounting performance, market performance and social performance. Critical mass of female representation on corporate boards is shown to positively and significantly influence financial performance but has little impact on non-financial performance. Conversely, country-level factors do not significantly influence the level of impact of female representation on performance measures. However, the descriptive statistics suggest that country-level factors are shown to influence the number of women on the boards of directors. Originality and Value: This study is relevant to shareholders and stakeholders when considering board composition and the value of gender diversity on corporate boards for both financial and non-financial performance. In addition, this study aids the understanding of the current status of female representation on boards of directors. The study adds to the existing body of research by exploring the influence of critical mass and country-level factors on the impact of board gender diversity on company performance. Lastly, the study is relevant to regulators and policy-makers as it highlights factors which contribute to increased female representation on corporate boards.
gender diversity, corporate governance, performance, social performance
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