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Does board gender diversity influence firm profitability? A control function approach

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  • Rey Dang

    (LaRGE Research Center, Université de Strasbourg)

  • L’Hocine Houanti
  • Krishna Reddy
  • Michel Simioni

Abstract

We investigate the relation between board gender diversity and firm profitability using the control function (CF) approach recently suggested by Wooldridge (2015). The CF method takes account of the problem of endogenous explanatory variables that have potential to bias the results. Using a sample of firms that made up the S&P 500 over the period 2004-2015, we find that the presence of women on corporate boards (measured either by the percentage of female directors on corporate boards or the Blau index of heterogeneity) has a positive and significant (at the 1% level) effect on firm profitability (measured by the return on assets). We compare our results to more traditional approaches (such as pooled OLS or the fixed-effects model). Through this study, we shed light on the effect of women on corporate boards on firm performance, as it is still a controversial issue (Post and Byron, 2015).

Suggested Citation

  • Rey Dang & L’Hocine Houanti & Krishna Reddy & Michel Simioni, 2019. "Does board gender diversity influence firm profitability? A control function approach," Working Papers of LaRGE Research Center 2019-01, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    • Handle: RePEc:lar:wpaper:2019-01
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    File URL: http://ifs.u-strasbg.fr/large/publications/2019/2019-01.pdf
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    References listed on IDEAS

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    1. Sila, Vathunyoo & Gonzalez, Angelica & Hagendorff, Jens, 2016. "Women on board: Does boardroom gender diversity affect firm risk?," Journal of Corporate Finance, Elsevier, vol. 36(C), pages 26-53.
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    Cited by:

    1. Zaid Saidat & Claire Seaman & Mauricio Silva & Lara Al-Haddad & Zyad Marashdeh, 2020. "Female Directors, Family Ownership and Firm Performance in Jordan," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(1), pages 206-219, January.

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    More about this item

    Keywords

    Women; board of directors; econometrics; control function; firm performance.;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J1 - Labor and Demographic Economics - - Demographic Economics

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