THE IMPACT OF BOARD GENDER DIVERSITY ON FINANCIAL PERFORMANCE AT HIGH-PERFORMING AND LOW-PERFORMING FIRMS

Abstract

The impact of corporate board gender diversity on firm financial performance has been topical for at least the last five decades; however, there is still no clear answer regarding whether gender diversity has a significant effect on organizational performance. Recent academic research (2010-2022) from different countries provides contradictory results in terms of the positive or negative effect of women’s representativeness on corporate boards. Our paper contributes to the understanding of this issue based on a sample of the top 500 Latvian firms, analysing financial performance during a three-year period. As an indicator, we took the two accounting-based measures most frequently used in other research – return on assets (ROA) and return on equity (ROE) – and correlated it to female presence on company boards. 

The findings are based on quantile regression analysis and show a statistically significant positive impact on both ROA and ROE. Quantile regression demonstrates a stronger impact on ROA at high-performing companies. It also shows a positive impact on ROE, which grows together with higher firm performance.

The results suggest that the gender diversity effect is not homogeneous and has a significantly larger positive impact at high-performing firms relative to low-performing firms.   

The paper contributes to the scientific debate on the impact of board gender diversity and provides the basis for broader research on different aspects of board gender diversity and firm performance going beyond financial indicators. 

JEL Classification M14, L25