Board Gender Diversity and Firm Performance: Evidence from Supply-Side Shocks in China

62 Pages Posted: 14 Nov 2019

See all articles by Yangming Bao

Yangming Bao

Capital University of Economics and Business

Di Lu

Goethe University Frankfurt; Johannes Gutenberg University Mainz

Date Written: November 4, 2019

Abstract

This paper identifies a positive causal effect of board gender diversity on firm performance by utilizing unique historical events in China. Specifically, the Famine resulted in an evident gender gap in the supply of qualified directors of certain cohorts. Since the shocks differ in both gender and cohorts, we construct a novel "Diff-in-Diff'" instrumental variable and a Bartik instrument for board gender representation. We find that a 10% increase in board female representation can lead to a 2.38% increase in return on assets (ROA). Moreover, our results support the critical mass theory and indicate that female directors are beneficial by lowering risk levels and improving solvency.

Keywords: board gender diversity, firm performance, causal effect, instruments

JEL Classification: G32, M14

Suggested Citation

Bao, Yangming and Lu, Di, Board Gender Diversity and Firm Performance: Evidence from Supply-Side Shocks in China (November 4, 2019). Available at SSRN: https://ssrn.com/abstract=3474413 or http://dx.doi.org/10.2139/ssrn.3474413

Yangming Bao

Capital University of Economics and Business ( email )

International School of Economics and Management
Beijing, 100070
China

Di Lu (Contact Author)

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Johannes Gutenberg University Mainz ( email )

Saarstr. 21
Jakob Welder-Weg 4
Mainz, 55122
Germany

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