From Critical Mass to 'Voice' - The Effect of Gender Diversity on Financial Reporting Quality

Abstract

Over the last decade, regulators have undertaken considerable efforts to increase the number of women on corporate boards. Nevertheless, research has reported mixed evidence that diversity adds value to a company. Taking a sample of all Polish companies listed on Warsaw Stock Exchange, we investigate the effect the presence of women on supervisory boards on the quality of financial reporting. Our findings support the policy that diversity of the board matters. We show that companies may improve their financial reporting quality by appointing more women to their boards or by giving them a "voice" as chair of the supervisory board. A "voice" may be especially useful when the critical mass effect cannot be achieved. Finally, we also test the characteristics of women as board members. Our results are robust regarding other control variables, industry specifics, and endogeneity issues.

Keywords: corporate governance, women, diversity, management board, supervisory board

JEL Classification: M19, M41, M42