The impact of the gender composition of company boards on firm performance

Purpose - The authors estimate the effect of the gender composition of company boards on firm performance by exploiting variation in the percentage of women after the implementation of a 2011 Belgian policy reform, which introduced a gender quota for listed companies. Design/methodology/approach - The authors analyze the evolution of firm performance between companies that were subjected to the quota law and compare it with the performance of similar firms that were not subjected to the law. This difference-in-difference (DiD) approach allows the authors to avoid the potential bias resulting from unobserved firm characteristics. Findings - The authors find that the quota policy resulted in the replacement of about one male director by a female one in the average firm between 2010 and 2017. However, this increase in diversity appears to have negatively affected some firm performance indicators. The authors find statistically significant negative effects for 10 out of the 23 financial indicators included in this study, while the other 13 indicators showed no significant effect. Originality/value - The originality of this research lies in both the methodology and the findings. The policy reform that the authors study can be regarded as a natural experiment so that the DiD method provides estimates of the causal effect of the gender composition of company boards on firm performance. To the best of the authors’ knowledge, this is the first study that presents causal evidence of negative effects of gender quota on organizational performance. These results cast doubts on the business case argument for gender quota and show that results from correlational studies are likely to be biased upward.