Women on Boards and Performance Trade-offs in Social Enterprises: Insights from Microfinance

Social enterprises combine social and financial goals. Previous studies have theorized the existence of a dual objective and maintain that it can lead to conflicts and create trade-offs. While the literature on trade-offs is extensively developed, empirical evidence is lacking on how the intensity of trade-offs might vary among organizations. We fill the void by investigating the moderating effect of female directorship on the relationship between the social and financial goals of social enterprises. Using data on 1193 microfinance organizations (MFOs) from 108 countries between 2007 and 2019, we find that a high proportion of women in the boardroom attenuates social-financial trade-offs. Further, our results show that the mitigating effect of female directorship on social-financial trade-offs is more pronounced in nonprofit MFOs, in unsubsidized MFOs, in the period since the recent microcredit crisis, and in countries where women are more empowered in terms of access to higher education, leadership positions, and employment opportunities. We attribute our findings to the distinctive skills, competences, and experiences of women, including an ethical social orientation, as well as their transformational and relational leadership style. The findings are supported by predictions based on resource dependence and leadership style theories.