Does Board Gender Diversity Influence Firm Profitability? A Control Function Approach

29 Pages Posted: 5 Jun 2020

See all articles by Rey Dang

Rey Dang

ISTEC Ecole Supérieure de Commerce et de Marketing

L'Hocine Houanti

La Rochelle Business School

Krishna Reddy

Toi Ohomai Institute of Technology

Michel Simioni

National Institute for Agricultural Research (INRA) - ESR; Universite de Toulouse

Date Written: June 8, 2017

Abstract

We investigate the relation between board gender diversity and firm profitability using the control function (CF) approach recently suggested by Wooldridge (2015). The CF method takes account of the problem of endogenous explanatory variables that have potential to bias the results. Using a sample of firms that made up the S&P 500 over the period 2004-2015, we find that the presence of women on corporate boards (measured either by the percentage of female directors on corporate boards or the Blau index of heterogeneity) has a positive and significant (at the 1% level) effect on firm profitability (measured by the return on assets). We compare our results to more traditional approaches (such as pooled OLS or the fixed-effects model). Through this study, we shed light on the effect of women on corporate boards on firm performance, as it is still a controversial issue (Post and Byron, 2015).

Keywords: Women, Board of Directors, Econometrics, Control Function, Firm Performance

JEL Classification: G30, G34, J1

Suggested Citation

Dang, Rey and Houanti, L'Hocine and Reddy, Krishna and Simioni, Michel, Does Board Gender Diversity Influence Firm Profitability? A Control Function Approach (June 8, 2017). Economic Modelling, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3598154

Rey Dang (Contact Author)

ISTEC Ecole Supérieure de Commerce et de Marketing

128 Quai de Jemmapes
Paris, 75010
France

L'Hocine Houanti

La Rochelle Business School ( email )

102 rie de Coureilles
Les Minimes
La Rochelle, 17024
France

Krishna Reddy

Toi Ohomai Institute of Technology

Rotorua
New Zealand

Michel Simioni

National Institute for Agricultural Research (INRA) - ESR ( email )

Univeriste des Sciences Sociales
21, Allee de Brienne
Toulouse 31000
France

Universite de Toulouse ( email )

Place Anatole France
Toulouse Cedex, F-31042
France
+1 33 5 61 28 52 66 (Phone)
+33 5 61 28 53 72 (Fax)

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