Gender Diversity Influence on Corporate Performance

In this paper, we investigate how gender diversity in the boardroom influences corporate performance and explore the underlying mechanisms of this relationship. In order to overcome the endogeneity issue, occurring due to the internal nature of the process of board members appointment, we employ two instrumental variable approaches based on the gender quotas. The quotas were introduced by 14 countries and obliged public companies to hire a particular percentage of female directors, which produced exogenous shocks. Our findings show that there is no significant effect of increased female participation on performance and financial measures. At the same time, gender diversity positively influences board characteristics, such as age, independence and qualification, and the quality of governance, management and workforce practices. This combination of results questions the importance of the board of directors in the process of corporate value creation, which may have serious implications for existing state and corporate policies.