Female Members in Corporate Board of Directors and Financial Performance

The supervisory role the board of directors is an essential corporate governance control mechanism, particularly in countries where external mechanisms are not well developed. The composition of the board based on gender can affect the quality of this supervisory role and thus the financial performance of the firm. While some national capital market regulators, such as UK, Germany and Australia, have introduced recommendations and disclosure requirements, other countries, such as Norway, Spain and France, have by legislation a minimum requirement of women’s participation in a company’s board of directors. While the matter of board gender diversity has captured researchers’ attention in recent years, most empirical results use US data. The present paper attempts to contribute to the growing literature of non-US studies investigating the link between gender diversity in the board and firm financial performance by focusing on the UK. We use panel data analysis and find that gender diversity—as measured by the percentage of women on the board and according to two indices—has a positive effect on firm value. That means that it is the balance between women and men that UK companies should focus on instead of merely the presence of women since the latter alone does not have any impact on firm performance. Our study also suggests that investors in the UK do not penalize firms which increase their female board membership and that greater gender diversity can generate economic gains.