Research correlates female representation on boards with improved financial performance

Having women on boards of directors is positively related to accounting returns, according to a recently published study.

Kris Byron, PhD, department chair and associate professor of management at the Martin J. Whitman School of Management at Syracuse University, and co-author Corinne Post, PhD examined female board representation’s effect on firm financial performance by aggregating results from 140 studies examining the relationship between firms’ financial performance and female board representation. This relationship is more positive in countries that have stronger shareholder protections, which the researchers say could be due to the fact that shareholder protections can motivate boards to use the varied experience, knowledge and values each member brings to the board.

According to study results, firms with more female directors tend to have boards that make stronger efforts to monitor the firms and to ensure that they are executing the right strategy.

The study also suggests that the societal context may determine how investors evaluate firms when they have female directors. In countries with high gender equality, there was a positive relationship between female board representation and market performance; in countries with low gender parity, a negative relationship.

Disclosure: See the study for a full list of all authors’ relevant financial disclosures.

For more information:

Byron K. Acad Manage J. 2014; doi:10.5465/amj.2013.0319.

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