Abstract
In recent years, several countries have enacted guidelines and/or mandatory laws to increase the presence of women on the boards of companies. Through these regulatory interventions, the aim is to eradicate the social and labor grievances that women have traditionally experienced and which has relegated them to smaller-scale jobs. Nevertheless, and despite the advances achieved, the female representation in the boardroom remains far from the desired levels. In this context, it is now necessary to enhance the advantages of board gender diversity from both ethical and economic points of view. This article examines the relation between board gender diversity and economic results in Spain: the second country in the world to legally require gender quotas in boardrooms and historically characterized by a minimal female participation in the workforce. Based on a sample of 125 non-financial firms listed on the Madrid Stock Exchange from 2005 to 2009, our findings show that in the period analyzed the increase of the number of women on boards was over 98 %. This suggests that compulsory legislation offers an efficient framework to execute the recommendation of Spanish codes of good governance by means of the increase in the number of women in the boards of firms. Furthermore, we find that the increase in the number of women on the boards is positively related to higher economic results. Therefore, both results suggest that gender diversity in boardrooms should be incremented, mandatory laws being a key factor to do so.
Similar content being viewed by others
Notes
The United Kingdom Social Investment Forum (UKSIF) defines socially responsible investments as investments that allow investors to combine financial objectives and social values, linked to areas of social justice, economic development, peace and the environment.
MADX includes all the firms in the Spanish stock exchange IBEX-35 and other large Spanish companies. MADX is considered by many analysts and investors to be the most representative stock exchange index in Spain.
The code indicates that when the number of women directors is low or null, the board will have to explain the motives and the initiatives adopted to correct this situation. When there are vacancies, it should be guaranteed that the firm deliberately includes among the potential candidates women who have the professional profile sought (this is in recommendation 15 of the Unified Code of Good Governance).
This test follows a χ 2 distribution with as many degrees of freedom as estimated coefficients. When the null hypothesis is not rejected, the fixed effects term must be dropped with the within-groups technique. Otherwise, the random effects method applies.
References
Abad, C., Garcia-Borbolla, A., Garrod, N., Laffarga, J., Larran, M., & Piñero, J. (2000). An evaluation of the value-relevance of consolidated versus unconsolidated accounting information: evidence from quoted Spanish firms. Journal of International Financial Management and Accounting, 11(3), 156–177.
Adams, R. B., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of Financial Economics, 94, 291–309.
Apesteguia, J., Azmat, G., & Iriberri, N. (2012). The impact of gender composition on team performance and decision-making: Evidence from the field. Management Science, 58(1), 78–93.
Arellano, M. (2003). Panel data econometrics. Oxford: Oxford University Press.
Baum, C. F. (2006). An Introduction to Modern Econometrics Using Stata. Texas: Stata Press.
Baum, C. F., Schaffer, M. E., & Stillman, S. (2007). Enhanced routines for instrumental variables/generalized method of moments estimation and testing. The Stata Journal, 4, 465–506.
Bear, S., Rahman, N., & Post, C. (2010). The impact of board diversity and gender composition on corporate social responsibility and firm reputation. Journal of Business Ethics, 97(2), 207–221.
Berman, S. L., Wicks, A. C., Kotha, S., & Jones, T. M. (1999). Does stakeholder orientation matter? The relationship between stakeholder management models and firm financial performance. Academy of Management Journal, 42(5), 488–506.
Bonn, I., Yoshikawa, T., & Phan, P. H. (2004). Effects of board structure on firm performance: A comparison between Japan and Australia. Asian Business & Management, 3, 105–125.
Burke, R. J. (1997). Women on corporate boards of directors: A needed resource. Journal of Business Ethics, 16(9), 909–915.
Campa, J. M., & Kedia, S. (2002). Explaining the Diversification Discount. Journal of Finance, 57(4), 1731–1762.
Campbell, K., & Mínguez-Vera, A. (2008). Gender diversity in the boardroom and firm financial Performance. Journal of Business Ethics, 83(3), 435–451.
Carrera, N., Gutiérrez, I., & Salvador, C. (2001). Gender, the state and the audit profession: Evidence from Spain (1942–1988). European Accounting Review, 10(4), 803–815.
Carter, D. A., D’Souza, F., Simkins, B. J., & Simon, W. G. (2010). The gender and ethnic diversity of US boards and board committees and firm financial performance. Corporate Governance: An International Review, 18(5), 396–414.
Carter, D. A., Simkins, B. J., & Simpson, W. G. (2003). Corporate governance, board diversity and firm value.The. Financial Review, 38(1), 33–53.
Chen, G., Liu, C., & Tjosvold, D. (2005). Conflict management for effective top management teams and innovation in China. Journal of Management Studies, 42, 277–300.
Coles, J. L., Daniel, N. D., & Naveen, L. (2008). Boards: Does one size fit all? Journal of Financial Economics, 87, 329–356.
Core, J. E., Guay, W. R., & Rusticus, T. O. (2006). Does weak governance cause weak stock returns? An examination of firm operating performance and investors’ expectations. The Journal of Finance, 61(2), 655–687.
Croson, R., & Gneezy, U. (2009). Gender differences in preferences. Journal of Economic Literature, 47(2), 1–27.
De Andres, P., Azofra, V., & Lopez, F. (2005). Corporate boards in OECD countries: Size, composition, functioning and effectiveness. Corporate Governance: An International Review, 13(2), 197–210.
De Luis, P., Martinez, A., Perez, M., & Vela, M. J. (2007). La diversidad de género en la alta dirección de las mayores empresas españolas. Investigaciones Europeas de Dirección y Economía de la Empresa, 13(2), 33–53.
Erhardt, N. L., Werbel, J. D., & Shrader, C. B. (2003). Board of director diversity and firm financial performance. Corporate Governance: An International Review, 11(2), 102–111.
Farrell, K. A., & Hersch, P. L. (2005). Additions to corporate boards: The effect of gender. Journal of Corporate Finance, 11(1–2), 85–106.
Fernandez, E., Gomez, S., & Cuervo, A. (2004). The stock market reaction on the introduction of best practices codes by Spanish firms. Corporate Governance: An International Review, 12(1), 29–46.
Ferris, S. P., Jagannathan, M., & Pritchard, A. C. (2003). Too busy to mind the business? Monitoring by directors with multiple board appointments. The Journal of Finance, 58(3), 1087–1112.
Fich, E. M., & Shivdasani, A. (2006). Are busy boards effective monitors? The Journal of Finance, 61(2), 689–724.
Fryxell, G. E., & Lerner, L. D. (1989). Contrasting corporate profiles: Women and minority representation in top management positions. Journal of Business Ethics, 8(5), 341–352.
Gabrielsson, J., & Huse, M. (2004). Context, behaviour and evolution: Challenges in research on boards and governance. International Studies in Management and Organization, 34, 11–36.
Gallego, I., García, I., & Rodríguez, L. (2010). The influence of gender diversity on corporate performance. Spanish Accounting Review, 13(1), 53–88.
Garcia-Castro, R., Ariño, M., & Canela, M. (2010). Does social performance really lead to financial performance? Accounting for endogeneity. Journal of Business Ethics, 92, 107–126.
Guenther, A., & Young, P. (2002). Financial reporting environments at international capital mobility. Journal of Accounting Research, 8, 41–57.
Haniffa, R., & Hudaib, M. (2006). Corporate governance structure and performance of Malaysian listed companies. Journal of Business Finance & Accounting, 33(7–8), 1034–1062.
Harjoto, M., Laksmana, I., and Lee, R. (2015). Board diversity and corporate social responsibility. Journal of Business Ethics, forthcoming.
Heidrick, and Struggles. (2007). Corporate Governance in Europe: 2007 Report. Paris.
Heidrick, and Struggles. (2014). Towards dynamic governance 2014. European Corporate Governance Report.
Hillman, A. J., Cannella, A. A., & Harris, I. C. (2002). Women and racial minorities in the boardroom: How do directors differ? Journal of Management, 28(6), 747–763.
Hillman, A. J., & Dalziel, T. (2003). Board of directors and firm performance: Integrating agency and resource dependence perspectives. Academy of Management Review, 28(3), 383–396.
Holst, E., & Schimeta, J. (2011). 29 von 906: Weiterhinkaum Frauen in top-Gremiengrober Unternehmen. Wochenbericht des DIW, 3, 2–10.
Ibrahim, N. A., & Angelidis, J. P. (1994). Effect of board members’ gender on corporate social responsiveness orientation. Journal of Applied Business Research, 10(1), 35–40.
Jackling, B., & Johl, S. (2009). Board structure and firm performance: Evidence from India’s top companies. Corporate Governance: An International Review, 17(4), 492–509.
Jaquette, J. S. (1997). Women in power: from tokenism to critical mass. Foreign Policy, 108, 23–37.
Jin, Q. (2005). Business Cycle, Accounting Behavior and Earnings management. Unpublished PhD dissertation (Hong Kong University of Science and Technology).
Joecks, J., Pull, K., & Vetter, K. (2013). Gender Diversity in the Boardroom and Firm Performance: What exactly constitutes a ‘‘critical mass?’’. Journal of Business Ethics, 118(1), 61–72.
Kang, H., Cheng, M., & Gray, S. J. (2007). Corporate governance and board composition: Diversity and independence of Australian boards. Corporate Governance: An International Review, 15(2), 194–207.
Kiel, G. C., & Nicholson, G. J. (2003). Board composition and corporate performance: How the Australian experience informs contrasting theories of corporate governance. Corporate Governance: An International Review, 11(3), 189–205.
Lin, Z., and Shih, M. (2003). Earnings management in economics downturns and adjacent periods: Evidence from the 1990–1991 recession. Working Paper (National University of Singapore).
Lopez, F. J., & Morros, I. (2014). Boards of directors and firm performance: the effect of multiple directorships. Spanish Journal of Finance and Accounting, 43(2), 177–192.
Low, D.C.M., Roberts, H., and Whiting, R.H. (2015). Board gender diversity and firm performance: Empirical evidence from Hong Kong, South Korea, Malaysia and Singapore. Pacific-Basin Finance Journal, Forthcoming.
Mahdi, M., Mahdi, S., Seyed, J., & Masomeh, N. (2012). A Study of relationship between board characteristics and earning management: Iranian scenario. Universal Journal of Management and Social Sciences, 2(3), 12–29.
Mateos, R., Gimeno, R., & Escot, L. (2011). Disentangling discrimination on Spanish boards of directors. Corporate Governance an International Review, 19(1), 77–95.
Miller, T., & Triana, M. (2009). Demographic diversity in the boardroom: Mediators of the board diversity-firm performance relationship. Journal of Management Studies, 46(5), 755–786.
Milliken, F. J., & Martins, I. L. (1996). Searching for common threads: Understanding the multiple effects of diversity in organizational groups. Academy of Management Journal, 21(2), 402–433.
Monterrey, J., & Sánchez-Segura, A. (2008). Rotación y dependencia económica de los auditores: Sus efectos sobre la calidad del resultado en las compañías cotizadas españolas. Investigaciones Economicas, 31, 119–159.
Montgomery, C., & Wernerfelt, B. (1988). Tobin’s q and the Importance of Focus in Firm Performance. American Economic Review, 78(1), 246–250.
Navarro, J., & Martínez, I. (2004). Earnings management and audit quality in Spain: an empirical study. Spanish Journal of Finance and Accounting, 33(123), 1025–1061.
Niederle, M., & Vesterlund, L. (2007). Do women shy away from competition? Do men compete too much? Quarterly Journal of Economics, 122(3), 1067–1101.
Oakley, J. G. (2000). Gender-based barriers to senior management positions: Understanding the scarcity of female CEOs. Journal of Business Ethics, 27(4), 321–334.
Olcese, A., Bescós, M., Botín-Sanz, A.P., De La Cruz, M.V., Jiménez, I., and Ureta, J.C. (2005).Diversidad de género en los consejos de administración de las sociedades cotizadas y cajas de ahorro españolas. Papeles de la Fundación No 12, Fundación de Estudios Financieros, Madrid.
Pelled, L. H. (1996). Demographic diversity, conflict, and work group outcomes: An intervening process theory. Organization Science, 7(6), 615–631.
Pelled, L. H., Eisenhardt, K. M., & Xing, K. R. (1999). Exploring the black box: An analysis of work group diversity, conflict, and performance. Administrative Science Quarterly, 44(1), 1–28.
Post, C., and Byron, K. (2015). Women on boards and firm financial performance: A meta-analysis. Academy of Management. Forthcoming.
Randøy, T., Thomsen, S., and Oxelheim, L. (2006). A Nordic perspective or corporate board diversity. Nordic Innovation Centre.
Robinson, G., & Dechant, K. (1997). Building a business case for diversity. The Academy of Management Executive, 11(3), 21–31.
Rose, C. (2007). Does female board representation influence firm performance? The Danish evidence. Corporate Governance: An International Review, 15(2), 404–413.
Rosenzweig, P. (1998). Managing the new global workforce: Fostering diversity, forging consistency. European Management Journal, 16(6), 644–652.
Sánchez, A., & Sierra, G. (2001). El Informe de Auditoría y su Relación con las Características Corporativas. Spanish Journal of Finance and Accounting, 30(108), 349–391.
Shrader, C. B., Blackburn, V. B., & Iles, P. (1997). Women in management and firm financial performance: An explorative study. Journal of Managerial Issues, 9(3), 355–372.
Siciliano, J. I. (1996). The relationship of board member diversity to organizational performance. Journal of Business Ethics, 15(12), 1313–1320.
Srinidhi, B., Ferdinand, A. G., & Tsui, J. (2011). Female Directors and Earnings Quality. Contemporary Accounting Research, 28(5), 1610–1644.
Spencer Stuart. (2014). Board index 2013.
Stirling, A. (1998). On the Economics and Analysis of Diversity. Science Policy Research Unit Electronic Working Paper Series, Paper no. 28, University of Sussex.
Tacheva, S., and Huse M. (2006). Women directors and board task performance: Mediating and moderating effects of board working style. Proceedings of the European Academy of Management Conference. Oslo.
Torchia, M., Calabrò, A., & Huse, M. (2011). Women directors on Corporate Boards: From tokenism to critical mass. Journal of Business Ethics, 102(2), 299–317.
Tyson, L. (2003). The Tyson report on the recruitment and development of nonexecutive directors, London Business School, UK. Available in http://www.london.edu/tysonreport.
Van Der Walt, N., & Ingley, C. (2003). Board dynamics and the influence of professional background, gender and ethnic diversity of directors. Corporate Governance: An International Review, 11(3), 218–234.
Voordeckers, W., Van Gils, A., & Van Den Heuvel, J. (2007). Board composition in small and medium-sized family firms. Journal of Small Business Management, 45(1), 137–156.
Webb, E. (2004). An examination of socially responsible firms’ board structure. Journal of Management and Governance, 8(3), 255–277.
Zahra, S., & Stanton, W. (1988). The implications of board of directors: Composition for corporate strategy and performance. International Journal of Management, 5(2), 261–272.
Acknowledgments
The authors are grateful to Antonio J. Blanco-Oliver and Rafael del Pino-Mejías, Félix J. López Iturriaga, Thomas Clarke, and Sivakani Jayaprakash (Section Editor, Journal of Business Ethics), and three anonymous referees. All the remaining errors are our sole responsibility.
Author information
Authors and Affiliations
Corresponding author
Appendix
Appendix
See Table 10
Rights and permissions
About this article
Cite this article
Reguera-Alvarado, N., de Fuentes, P. & Laffarga, J. Does Board Gender Diversity Influence Financial Performance? Evidence from Spain. J Bus Ethics 141, 337–350 (2017). https://doi.org/10.1007/s10551-015-2735-9
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10551-015-2735-9
Keywords
- Corporate governance
- Economic performance
- Gender diversity
- Regulatory intervention
- Code of good governance