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

Rey Đặng, L’hocine Houanti, Krishna Reddy () and Michel Simioni ()
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Rey Đặng: ISTEC - Institut supérieur des Sciences, Techniques et Economie Commerciales - ISTEC
L’hocine Houanti: Sup de Co La Rochelle - Ecole Supérieure de Commerce de la Rochelle - Groupe Sup de Co La Rochelle
Krishna Reddy: Toi Ohomai Institute of Technology
Michel Simioni: UMR MOISA - Marchés, Organisations, Institutions et Stratégies d'Acteurs - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - CIHEAM-IAMM - Centre International de Hautes Etudes Agronomiques Méditerranéennes - Institut Agronomique Méditerranéen de Montpellier - CIHEAM - Centre International de Hautes Études Agronomiques Méditerranéennes - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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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).

Keywords: Women; Board of directors; Econometrics; Control function; Firm performance (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-bec and nep-eff
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Citations: View citations in EconPapers (13)

Published in Economic Modelling, 2020, 90, pp.168-181. ⟨10.1016/j.econmod.2020.05.009⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02618276

DOI: 10.1016/j.econmod.2020.05.009

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