The moderation role of firm and country level factors in the relationship between board gender diversity and firm performance

Abstract

Increasing representation of women on corporate boards of directors has been on the political and economic agendas of many governments around the world. Following in the footsteps of Norway’s institution of a gender quota to its corporate boards in 2003, several EU countries legislated likewise (e.g. France and Spain). However, milder approaches to promote gender equality among its boards characterized initiatives undertaken by other countries (e.g. UK). Between the two approaches one may surmise the interaction different institutional and corporate environments that influence not only the presence of women in such positions but the effectiveness of women as participants in boards in terms of corporate outcomes (i.e. performance). The empirical evidence on the impact of presence of women on corporate boards is mixed and inconclusive. This might be due to difficulty of capturing complex interactions among endogenous and exogenous variables generating the level -- and effectiveness thereof -- of participation of women in corporate boards. Inadequate theoretical frameworks used to address this relationship and contextual disparities that perturb it also contribute to these inchoate results. In addressing this analytical gap, this doctoral thesis poses a complex question: why does effectiveness of women on boards vary from one country to another? In other words, why would women have a substantive impact on corporate performance in France yet only having a marginal impact on the same in USA? In answering this question, a comprehensive and multi-level literature review from various backgrounds was conducted. Following that, several theoretical frameworks that underpin the relationship between board gender diversity and firm performance are discussed with a view to the elaboration of endogenous and exogenous variables interacting in a conceptual model constructed in line with the integration of agency theory and institutional theory. The integration of both theories allows studying board gender diversity as a part of corporate governance phenomenon that affects firm performance in an external institutional environment that creates isomorphic pressures on the firm decisions and outcomes. The moderating role of country- and firm-level factors hypothesized in the relationship between board gender diversity and firm operational and market performance was tested using sixteen hypotheses. Most studies were conducted in western corporate environments with few in emerging economies. In this thesis, notably, substantial differences between western and emerging countries in terms of institutional and corporate environments were evaluated to gauge the extent to which these differences influence the ability of women to impact corporate performance. Panel data models were constructed using variables drawn from the conceptual model to investigate how firm and country-level factors affect the contribution to firm performance of women on boards. Firms listed in GCC countries’ financial markets comprised the sample of the population of all GCC firms for the years (2017-2018). In addition, a control sample from publicly listed companies in France and UK was added. Firm-level data was collected on GCC firms from GCC financial markets and, for firms listed in UK and France, from the Bloomberg database, while country-level data was derived from global research projects (i.e. UNESCO, ILOSTAT, World Economic Forum). On the firm-level, findings indicated that institutional ownership and board independence influences the relationship between board gender diversity and firm operational and market performance. In contrast, ownership concentration only influences the relationship between board gender diversity and firm operational performance. On the country-level, female tertiary education influences the relationship between board gender diversity and firm operational and market performance. Both female labour market participation and legal support for women representation on boards only impact the relationship between board gender diversity and firm market performance. Moreover, culture only impacts the relationship between board gender diversity and firm operational performance. This study is the first to empirically investigate the influence of firm- and country-level factors in the relationship between board gender diversity and firm operational and market performance in GCC countries (KSA, UAE, Kuwait, Bahrain, Oman, Qatar). It indicates that effectiveness of women on firm performance is contingent on certain firm and country-level factors as well as on the performance measure that is used (i.e. market, operational or financial). On the basis of the findings derived from this study, policies of increasing women participation in boards of directors across all industries in the GCC merit implementation. Legislation should also be considered in order to enhance women representation in corporate leadership positions, as on board of directors, in a suitable form that matches the nature of their institutional and cultural environments such as quotas for at least one woman on corporate boards. On a firm level, corporate governance codes should promote gender diversity on boards of directors to enhance board independence especially in GCC countries.