Board gender diversity and financial performance

Abstract

There is much debate amongst academics regarding the contribution of women on corporate boards, particularly, the effect on financial performance. There has been a stride post democracy to ensure equality in South Africa. Although there has been progress, the percentage of women on corporate boards is still microscopic. The purpose of this study was to examine the effect of board gender diversity on financial performance of publicly listed companies. Similar studies have been conducted in other countries with equivocal results implying that results are country-specific. Quantitative research methodology was employed, where financial ratios ROE, ROA and Tobin's Q, of companies with gender diverse boards were compared to those of companies whose boards are not considered gender diverse. Gender diverse boards are defined in this study as boards with 25 percent or more female representation on boards. Differences in financial performance of companies with gender diverse boards across industries were also examined. ROE and ROA mean scores were higher for the gender diverse group, whereas, mean scores of the market-based ratio Tobin‟s Q were higher in the group whose boards were not gender diverse. Market-based results are subjective and influenced by investors and analysts perceptions. Tobin‟s Q was higher in industries with lower percentages of women on boards; however, these results were not statistically significant.