Labor Market Gender Disparity and Corporate Performance in Japan

We address a gap in prior literature on female managerial representation and corporate performance. Prior evidence linking increases in female managerial representation to corporate performance has been surprisingly mixed, due in part to data limitations and methodological difficulties. Using panel data from Japan, we are able to address several of these prior challenges. With the help of a nationally representative sample of Japanese firms covering the 2000s, we find that increases in the female executive ratio, employing at least one female executive, and employing at least one female section chief are associated with increases in corporate profitability in the manufacturing sector. Employing a female executive appears particularly helpful to corporate performance for the Japanese affiliates of North American multinationals. The results are robust to controlling for time effects and company fixed effects and the time-varying use of temporary and part-time employees. Part of the competitive benefit to employing female managers is shown to come from compensation savings, in line with Becker's economic theory of discrimination.