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Women in the Boardroom and Their Impact on Governance and Performance

Author

Listed:
  • Adams, Renée B.
  • Ferreira, Daniel

Abstract

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.

Suggested Citation

  • Adams, Renée B. & Ferreira, Daniel, 2008. "Women in the Boardroom and Their Impact on Governance and Performance," CEI Working Paper Series 2008-7, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:hitcei:2008-7
    Note: This version: September 2007
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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/29282/1/WP2008-7.pdf
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    References listed on IDEAS

    as
    1. 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).
    2. 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 179-198, April.
    3. 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, June.
    4. Marianne Bertrand & Antoinette Schoar, 2003. "Managing with Style: The Effect of Managers on Firm Policies," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1169-1208.
    5. 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.
    6. 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, April.
    7. 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.
    8. Renée B. Adams & Daniel Ferreira, 2007. "A Theory of Friendly Boards," Journal of Finance, American Finance Association, vol. 62(1), pages 217-250, February.
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    More about this item

    Keywords

    Board of Directors; Board Effectiveness; Gender; Diversit;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination

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