Participation of women in the firm's board of directors and financial performance

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Participation of women in the firm's board of directors and financial performance

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Participation of women, firm's board of directors, financial performance, board diversity, gender diversity, gender equality

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Abstract

Board diversity, especially gender diversity, has gathered increased attention in the context of corporate governance. While the involvement of women on the board of directors has grown, evidence relating to the impacts on financial performance has received a mixed reaction. A good number of research depicts that the involvement of women on the board of management enhances financial performance. This paper will critically examine the relationship between gender diversity on the board of directors, particularly women and financial performance, drawing upon comprehensive literature reviews, theories, literature, and examples. The paper will start by exploring theoretical frameworks like diverse perspectives and social identity theory that suggest that gender diversity enhances the decision-making process and stakeholders' perception, which later results in improved financial performance. Nevertheless, the counterarguments rooted in agency theory caution against attributing financial outcomes solely to gender diversity and emphasize the importance of expertise in board appointments and qualifications. This paper is aimed at providing an in-depth analysis of whether the participation of women in the firm's board of directors enhances financial performance.

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Introduction
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Key findings
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[...] and Sulimany, H.G.H., (2022). The effect of the board's educational and gender diversity on the firms' performance: evidence from non-financial firms in developing country. Sustainability, 14(17), p.11058. Miller, D. and Le Breton-Miller, I., (2011 Governance, social identity, and entrepreneurial orientation in closely held public companies. Entrepreneurship Theory and Practice, 35(5), pp.1051-1076. Monks, R.A.G. and Minow, N. (2012) Corporate governance. Fifth edition. Hoboken: Wiley. Nicolò, G., Sannino, G. and Iorio, S.D., (2022 Gender diversity and online intellectual capital disclosure: Evidence from Italian-listed firms. Journal of Public Affairs, 22(4), p.e2706. [...]

[...] When included in the board they can understand and respond to market dynamics by making suggestions on what decisions to be made, and this enhances financial performance. Conclusion. The debate surrounding whether the participation of women in the firm's board of directors enhances financial performance is very complex. While some researchers argue that their involvement has a significant impact on financial performance, since it leads to better decision-making, enhances stakeholders' perceptions, and improves corporate governance. The perspective is supported by theoretical aspects like diverse theory, and social identity theory. Other critics argue that financial performance is based on qualifications, expertise, and other factors, not gender diversity. [...]

[...] Key findings Despite theoretical arguments, it is evident that there is a positive correlation between gender diversity and firm performance. Firstly, women's participation in the board of directors brings in a broader talent pool and expertise. This allows the company to leverage wider skills, experiences, and perspectives to enhance financial performance. It means that by including women on boards, the companies benefit from their unique expertise and experiences making it easier for the board to make informed decisions that drive financial performance. [...]

[...] However, there is a need to review gender diversity on corporate boards as it has shown a significant impact on the financial performance of an entity. References Adams, R.B. and Ferreira, D., (2009). Women in the boardroom and their impact on governance and performance. Journal of financial economics, 94(2), pp.291-309. Carrasco, A., Francoeur, C., Labelle, R., Laffarga, J. and Ruiz-Barbadillo, E., (2015). Appointing women to boards: is there a cultural bias? Journal of Business Ethics, 129, pp.429-444. Jackson, K.V., (2011 Towards a stakeholder-shareholder theory of corporate governance: A comparative analysis. Hastings Bus. LJ, 7, p.309. Kabara, A.S., Khatib, S.F., Bazhair, A.H. [...]

[...] Tricker, R.I., (2015 ). Corporate governance: Principles, policies, and practices. Oxford University Press, USA. Gordini, N., He, L., & Cordeiro, J. (Eds.). (2016). Corporate governance. Emerald Group Publishing Limited. Garner, J. (ed.) (2017) Corporate governance. Place of publication not identified: Emerald Publishing Limited. [...]

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