Gender Diversity and Financial Performance: Evidence for US Real Estate Companies

Motivated by the ongoing debates on the underrepresentation of women in top management and increased number of quota-based policy initiatives, this study investigates the relationship between gender diversity in boardrooms and firm performance. The real estate industry, a traditionally male dominated industry, may benefit from group heterogeneity, since a variety of perspectives, knowledge and experiences enhances decision making (Carter et al., 2003). In the context of mandated diversity policies, the North American market remains unregulated. Therefore, this study examines, whether there is a certain critical mass of female board members in the US real estate sector which positively affects firm performance.With a dataset of 116 listed property companies from the USA in the period of 2005-2015, we find evidence for a positive significant relationship between the percentage of women on boards and Tobin’s Q. In detail, balanced boards (40-60%female representation) outperform boards with fewer women. Consequently, adding just one woman to the board has no effect on the performance, a situation which is referred to as tokenism. Additionally, the findings show that the proportion of executive female directors is statistically related to a positive performance. Beyond that, female CEOs improve the market based performance by approximately 20%. The model specifications control for unobserved heterogeneity by using fixed effects regression and mitigate endogeneity concerns by using lagged board variables.This is the first real-estate-based gender diversity study for the US market considering differences between executive and non-executive board members.