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Do the Quota Applications for Women on Boards Improve Financial Performance

Sebahattin Yıldız (), Cebrail Meydan (), İlknur Taştan Boz () and Önder Sakal ()
Additional contact information
Sebahattin Yıldız: Department of Management, Kafkas University, 36100 Kars, Turkey
Cebrail Meydan: Department of Accounting and Finance, Adnan Menderes University, 09010 Aydın, Turkey
İlknur Taştan Boz: Department of Management, Trakya University, 22030 Edirne, Turkey
Önder Sakal: Department of Management, Binali Yıldırım University, 24100 Erzincan, Turkey

Sustainability, 2019, vol. 11, issue 21, 1-12

Abstract: In the context of corporate governance principles, governments set regulations to increase the sustainable representation of women on boards. This paper seeks to answer the question of whether or not the application of compulsory or voluntary quotas for female board members improves firm performance. Based on difference analyses on the 2011 principles of the Capital Markets Board (CMB), we do not find significant differences between the companies with at least one female member on their board and those without any female board members in terms of financial performance indicators (return on asset (ROA), return on equity (ROE), market value/book value (MV/BV)). Based on difference analyses on the 2014 principles of the Capital Markets Board, we further find that the ROA of the companies with 25% and more female members is lower than the companies with <25% female members. These results don’t support the arguments of agency theory, because government regulations including the efforts of women to increase their representation rate on the board in a sustainable manner don’t improve the accounting-based and market-based performance indicators of companies. If the company is successful, a quota for women cannot be imposed, because the obligation may result in a negative effect. Policymakers and practitioners may benefit from the knowledge that women may be improved and prepared for these positions and be accompanied with mentors before filling the compulsory or voluntary quota for women. It is not enough to increase the rate of women. The policy implication of the paper is that women must be equipped with the resources, authority, knowledge, and skills to perform well.

Keywords: woman of boards; gender discrimination; financial performance; corporate governance (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2019
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