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

Rey Dang, L’Hocine Houanti, Krishna Reddy and Michel Simioni
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Rey Dang: LaRGE Research Center, Université de Strasbourg

Working Papers of LaRGE Research Center from Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg

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)
JEL-codes: G30 G34 J1 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-eff and nep-gen
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Persistent link: https://EconPapers.repec.org/RePEc:lar:wpaper:2019-01

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