The Gender Position Gap and Firm Performance

Abstract

In the workplace, women are less likely than men to hold higher paying positions. We refer to this phenomenon as the gender position gap. While the gender position gap is an important problem that affects millions of women and their families, its implications for firms are unclear. In this paper, we examine the gender position gap of firm employees and its association with future firm performance. We use novel gender and salary data on employees that hold various positions within firms. We find that the gender position gap is wider for firms with larger female–male differences in human capital characteristics (prior work experience and education), fewer female leaders, and weaker monitoring (proxied by institutional ownership, analyst following and firm size). Firms with a larger gender position gap have poorer future performance. This negative association is not driven by employees at the top or bottom end of the corporate hierarchy. The negative association is stronger for firms that rely more on human capital. Firms with a larger gender position gap also have lower future stock returns, which suggests that investors do not fully utilize information about gender position gaps. Overall, our findings are consistent with the view that gender position gaps contain information about future firm performance.

Keywords: gender position gap, female employees, gender diversity, gender equality, firm performance, stock returns

JEL Classification: M40, G10