Gender diversity influence on board effectiveness and business performance

Abstract

Purpose The purpose of this paper is to analyze the mediating role of board effectiveness (understood as the capacity to efficiently manage and control all functions to guarantee the company’s prosperity) in the relationship between board diversity and firm performance. Design/methodology/approach The authors use partial least squares methodology to test the direct and indirect relationships between gender diversity in boards of directors and business performance. Findings Although the relationship between the presence of women on the board and the board’s effectiveness is statistically significant, this relationship is negative. However, board effectiveness (measured by the three constructs: strategic control, organizational innovation and decision-making) has a positive and statistically significant effect on business performance. Finally, there is a positive, but not statistically significant, relationship between gender diversity and firm performance. Research limitations/implications The study has a small sample size, and most of the boards of directors analyzed are unequal with only a few companies achieving gender parity. Social implications Public institutions must promote actions to achieve a critical mass of women directors and managers, so that women transcend a merely “symbolic” role on a board and are able to develop their skills and characteristics, thereby improving a board’s effectiveness and business performance. Originality/value This paper makes a theoretical contribution to the diversity and governance literature by providing a better understanding of the relationship between board gender diversity and firm performance. It considers the influence of women on the board through a holistic framework, analyzing the mediating role of the board’s effectiveness.

Gendering Corporate Boards and Conditional Effectiveness of Board Processes: Insights from a Sub-Saharan African Country

“…The empirical results show that women on corporate boards contribute to effective board processes and outcomes when their proposed ideas during board meetings are accepted by other board members, implemented by the management and impact positively on organizations' outcomes such as enhanced financial, product and staff outcomes. This finding seems to give credence to previous results by Srinidhi et al (2020) and Arioglu (2020) but inconsistent with prior studies that found negative outcomes (Comi et al, 2020;Martinez-Jimenez et al, 2020), or no significant impact (e.g., Arora & Singh, 2020;Zajiji et al, 2020). This result, from the perspectives of the resource dependence and resource-based theories, suggests that female directors of organizations are vital resources because they are sources of wise counsel, useful ideas and advice (Hillman & Dalziel, 2003) for making positive organizational changes or impacts.…”

“…Likewise, in Instanbul, Arioglu (2020) suggested that women on corporate boards improve corporate financial outcomes in men-dominated cultural societies because women ensure better monitoring and bring enriched ideas and perspectives, which inject creativity and innovation in board process by improving decision-making in the boardroom. On the contrary, Martinez-Jimenez et al (2020) found that women on corporate boards have a negative effect on board effectiveness (strategic control, organizational innovation and decision-making), but they have insignificant effect on business performance. Besides, some people argue that diversity breeds conflict, which, in turn, can adversely affect the speed of decision-making, by complicating and slowing decision-making (Triana et al, 2014).…”

“…Empirically, various studies have examined the influence of female directors or gender diversity on the effectiveness of board processes and organizational outcomes. While some found positive results (e.g., Arioglu, 2020;Li & Li, 2020;Kilic & Kuzey, 2016;Moussa, 2019;Song et al, 2020), others found negative outcomes (Comi et al, 2020;Martinez-Jimenez et al, 2020;Yang et al, 2019) or no significant impact (e.g., Arora & Singh, 2020;Zajiji et al, 2020). This suggests that there is still a lack of consensus in the extant research on the contribution of women on corporate boards to the effectiveness of board processes and organizational effectiveness.…”

Perception of women managers about the glass ceiling breakage

“…However, it has had little to no effect on high-level management positions. As such, a government proposal as the likes of implementing a legal quota to increase the number of women on management boards is necessary (Lazzaretti et al, 2013;Martinez-Jimenez, Hernández-Ortiz, & Fernández, 2020). Few countries have accomplished this, even with attenuating inequality levels in so-called first-world countries.…”

“…This phenomenon is becoming a trend of recent years in Europe as means to accelerate the gender equality process since the issue has not considerably advanced regarding positions of power and management, especially in private companies. It is the case even after the intensification of discussions on issues such as the glass ceiling, discrimination, and others related to existing gender inequality (Nekhili & Gatfaoui, 2013;Cohen et al, 2020;Martinez-Jimenez et al, 2020).…”