The dynamic relation between board gender diversity and firm performance: the moderating role of shareholder activism

Fujiao Xie (), Ying Guo (), Shirley J. Daniel () and Yuanyang Liu ()
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Fujiao Xie: City University of New York
Ying Guo: California State University, East Bay
Shirley J. Daniel: University of Hawaii at Manoa
Yuanyang Liu: The University of Tennessee, Knoxville

Review of Quantitative Finance and Accounting, 2024, vol. 62, issue 1, No 8, 225-246

Abstract: Abstract California became the first state in the US to require gender diversity on publicly corporate boards. To provide timely evidence on the heated debate, we investigate the impact of board gender diversity on financial performance and how shareholder activism affects the dynamic relationship in the United States. We find that the relation between board gender diversity and firm performance presents an inverted U-shaped nonlinear form. Firm performance increases as the board is more gender-diverse, but performance decreases after the board diversity level reaches a turning point. Furthermore, shareholder activism through proxy proposals enhances the positive effect of diversity and alleviates the negative effect of diversity on firm performance, and the positive effect diminishes after board gender ratios reach an optimal level. Our study captures the dynamic impacts of shareholder activism and board gender diversity on firm performance and provides insights for regulators to make proper decisions in increasing board diversity.

Keywords: Corporate governance; Gender diversity; Firm performance; Shareholder activism; Proxy proposals; Nonlinear relationship (search for similar items in EconPapers)
JEL-codes: G34 M14 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11156-023-01201-z

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