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Firm Performance and Boardroom Gender Diversity: A Quantile Regression Approach

Julie Gorte, Ph.D. Senior Vice President for Sustainable Investing at Pax World

Board Gender Diversity Linked with Higher Performing Firms

There have been a lot of papers written about the link between gender diversity on corporate boards and financial performance. There are studies that find statistically significant, positive links – meaning there is a statistically valid link between greater gender diversity and better financial performance – and a lot of studies that find no link. There aren't many that find a negative correlation, but the overall state of the literature is still regarded by many financial analysts as unsettled, or inconclusive.

There's a new study out on Social Science Research Network that takes a different approach, using a quantile regression to examine the relationship between financial performance (specifically, Tobin's Q) and gender diversity in the boardroom.  That study finds that between 2000 and 2013, board gender diversity was associated with better financial performance in the United States.  Interestingly, the study also helps to shed light on why there is such a lack of consensus among the broader literature as well.  There are groups of firms for which gender diversity is particularly valuable, say the study's authors.  It turns out that the high performing firms tend to have more gender diverse boards. 

The authors advance one possible explanation: "gender diverse boards, by construction, contain people with more and varied skills, experiences, and personality attributes compared to male-only boards. Such diversity can be expected to affect the quality of decision-making by drawing upon wider and deeper knowledge. Ultimately, the outcome of these deliberations translates into superior firm performance." This is an academic study, so it sets out the alternative views of board diversity as well. It's worth reading:

To read the full article, see here:

Published with permission from Julie Gorte, Senior Vice President for Sustainable Investment, PAXWORLD

Find her on Twitter @jgorte @paxworld or on LinkedIN:

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