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Women in the Boardroom and Their Impact on Governance and Performance

  • Adams, Renée B.
  • Ferreira, Daniel

Although some argue that tokenism drives the selection of female directors, we show that they have a significant impact on measures of board effectiveness. In a large panel of data on publicly-traded firms from 1996-2003, we find that (1) the likelihood that a female director has attendance problems is 0.29 lower than for a male director, (2) male directors have fewer attendance problems the greater the fraction of female directors on the board, (3) firms with more diverse boards provide their directors with more payperformance incentives, and (4) firms with more diverse boards have more board meetings. We also show that the positive relationship between corporate performance measures and gender diversity documented by previous studies is not robust to attempts to address the endogeneity of diversity. Instead, the average effect of gender diversity on both market valuation and operating performance appears to be negative. This negative effect is driven by companies with greater shareholder rights. In firms with weaker shareholder rights, gender diversity has positive effects. Our results suggest that diverse boards are tougher monitors. Nevertheless, mandating gender quotas in the boardroom may not increase board effectiveness on average, but may reduce it for well-governed firms where additional monitoring is counterproductive.

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Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2008-7.

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Length: 40, [14] p.
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:hit:hitcei:2008-7
Note: This version: September 2007
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  1. Adams, Renée B. & Ferreira, Daniel, 2005. "Do Directors Perform for Pay?," CEI Working Paper Series 2005-2, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  2. Andres Almazan & Javier Suarez, 2003. "Entrenchment and Severance Pay in Optimal Governance Structures," Journal of Finance, American Finance Association, vol. 58(2), pages 519-548, 04.
  3. Bertrand, Marianne & Schoar, Antoinette, 2003. "Managing With Style: The Effect of Managers on Firm Policies," Working papers 4280-02, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  4. Linck, James S. & Netter, Jeffry M. & Yang, Tina, 2008. "The determinants of board structure," Journal of Financial Economics, Elsevier, vol. 87(2), pages 308-328, February.
  5. Coles, Jeffrey L. & Daniel, Naveen D. & Naveen, Lalitha, 2008. "Boards: Does one size fit all," Journal of Financial Economics, Elsevier, vol. 87(2), pages 329-356, February.
  6. Farrell, Kathleen A. & Hersch, Philip L., 2005. "Additions to corporate boards: the effect of gender," Journal of Corporate Finance, Elsevier, vol. 11(1-2), pages 85-106, March.
  7. Weisbach, Michael S., 1988. "Outside directors and CEO turnover," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 431-460, January.
  8. M. Andrew Fields & Phyllis Y. Keys, 2003. "The Emergence of Corporate Governance from Wall St. to Main St.: Outside Directors, Board Diversity, Earnings Management, and Managerial Incentives to Bear Risk," The Financial Review, Eastern Finance Association, vol. 38(1), pages 1-24, 02.
  9. Canice Prendergast, 2002. "The Tenuous Trade-off between Risk and Incentives," Journal of Political Economy, University of Chicago Press, vol. 110(5), pages 1071-1102, October.
  10. Niessen, Alexandra & Ruenzi, Stefan, 2007. "Sex matters: Gender differences in a professional setting," CFR Working Papers 06-01, University of Cologne, Centre for Financial Research (CFR).
  11. David A. Carter & Betty J. Simkins & W. Gary Simpson, 2003. "Corporate Governance, Board Diversity, and Firm Value," The Financial Review, Eastern Finance Association, vol. 38(1), pages 33-53, 02.
  12. Agrawal, Anup & Knoeber, Charles R, 2001. "Do Some Outside Directors Play a Political Role?," Journal of Law and Economics, University of Chicago Press, vol. 44(1), pages 179-98, April.
  13. Boone, Audra L. & Casares Field, Laura & Karpoff, Jonathan M. & Raheja, Charu G., 2007. "The determinants of corporate board size and composition: An empirical analysis," Journal of Financial Economics, Elsevier, vol. 85(1), pages 66-101, July.
  14. Renée B. Adams & Daniel Ferreira, 2007. "A Theory of Friendly Boards," Journal of Finance, American Finance Association, vol. 62(1), pages 217-250, 02.
  15. Stephen P. Ferris & Murali Jagannathan & A. C. Pritchard, 2003. "Too Busy to Mind the Business? Monitoring by Directors with Multiple Board Appointments," Journal of Finance, American Finance Association, vol. 58(3), pages 1087-1112, 06.
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