Women on boards and firm performance
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Women on boards and firm performance Mijntje Lu¨ckerath-Rovers
Published online: 2 August 2011 The Author(s) 2011. This article is published with open access at Springerlink.com
Abstract This study investigates the financial performance of Dutch companies both with and without women on their boards. The analysis extends earlier methods used in research by Catalyst (The bottom line: corporate performance and women’s representation on boards, 2007) and McKinsey (Women matter. Gender diversity, a corporate performance driver. McKinsey & Company, USA, 2007), two studies that are often cited in the literature, although, each has a number of methodological shortcomings. This article adds to the international debate, which is often normative, through examining 99 listed companies in the Dutch Female Board Index. Our results show that firms with women directors perform better than those without women on their boards. Keywords Governance Gender diversity Board composition Performance Resource dependence theory
1 Introduction The subject of women on boards of directors is a growing area of research. Scholars (e.g. Adams and Ferreira 2004; Burgess and Tharenou 2002; Van Ees et al. 2007; Sealy et al. 2007), professionals (e.g. McKinsey 2007) and societal pressure groups (e.g. Catalyst 2007) contribute to research on the subject indicating that the representation of women in the boardroom should be higher, and fewer all-male boards should occur for several reasons. Some authors (Brammer et al. 2007) look at M. Lu¨ckerath-Rovers Nyenrode Business University, P.O. Box 130, 3620 AC Breukelen, The Netherlands M. Lu¨ckerath-Rovers (&) Erasmus Universiteit Rotterdam, Room L4-37, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands e-mail: [email protected]
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the connection between the presence of women at the top and (good) corporate governance: a homogeneous group of directors does not accurately reflect the society in which it operates, and is both a symptom of weak corporate governance and a missed opportunity. The present article investigates whether or not companies with female directors perform better than companies with no female directors. Firstly, an outline is given of the arguments in favor of diversity from both the economic and the moral perspective, and the hypothesis of the relationship with company performance. The focus then turns to the research by Catalyst (2007) and McKinsey (2007) into the relationship between diversity and the financial performance of a company. The media and opinion makers often refer to these reports, despite their (statistical) shortcomings. This study reflects on and improves the methods of Catalyst (2007) and McKinsey (2007), and in doing so contributes to the discussion. The empirical investigation in this study uses Dutch data. Companies in the Netherlands use a two-tier board model: the executive board and the supervisory board are two separately functioning boards. Internationally the one-tier model is more usual; the executive and non-execu
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