The Value of Board Gender Diversity vis-a-vis the Role of the Board in the Modern Company

Kamalnath, Akshaya

doi:10.2139/ssrn.2608301

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“…In quite a few European countries and also in India, board gender diversity was introduced in listed firms by the legislation, although owing to the growing realisation of equal rights and representation to women in various decision-making forums (Kamalnath, 2015) and varied pressure from national and international bodies. Signalling theorists posit that women appointment on corporate boards signals about the ‘robustness of the governance mechanism’ (Fama and Jensen, 1983) to the public which influences reputation and market valuation of the firm (Certo 2003; Kumar, 2014).…”

Section: Literature and Hypotheses Developmentmentioning

confidence: 99%

Do Women Directors Impact Financial Outcomes? The Indian Evidence

Kumar

Nigam

Singh

2020

Indian Journal of Corporate Governance

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This article investigates the impact of women directors on financial outcomes—return and risk of Indian companies. It applies fixed and random effects Tobit regressions to examine the effect of female directors on financial outcomes (returns and risk) of the firm, controlling promoters’ shareholding, leverage, firm growth and age, board size and board meetings. The study does not find any support to agency and resource dependence theories because the proportion of women directors in most Indian boards is too small to make much impact. However, it has a moderating influence to reduce variations in accounting profits and stock returns. The investors reward also meeting the regulatory quota of woman member on the boards by higher market returns indicating a signalling effect. The study adds an understanding of quota induced women directors’ influence on the firm’s financial outcomes. However, the regulators should be cautious in mandating induction of women members on the boards as they might be inexperienced or lack the needed grounding to effectively influence board processes.

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