Gender Diversity in Boards and Performance of Philippine Publicly Traded Firms: Do Women Matter?

• Main Authors: Unite, Angelo A., Shi, Ailyn A., Sullivan, Michael J.
• Format: text
• Published: Animo Repository 2016
• Subjects: Gender diversity; Boards of directors; Corporate governance; Firm performance; Philippine publicly listed firms; Gender and Sexuality; Gender, Race, Sexuality, and Ethnicity in Communication
• Online Access: https://animorepository.dlsu.edu.ph/res_aki/70; https://animorepository.dlsu.edu.ph/cgi/viewcontent.cgi?article=1051&context=res_aki
• Institution: De La Salle University

The issue of gender diversity in corporate boards has been attracting research interest in various countries because of the many socioeconomic contributions women directors are purported to confer to the firm, some of which involve improved board monitoring quality and a more ethical and democratic form of leadership. This rationale forms part of the “economic case” for women’s participation in boards, apart from the usual grounds of social or equality considerations. We examine this board-level gender diversity issue for the case of the firms traded in the Philippine Stock Exchange during the period 2003 to 2014. Using an unbalanced panel of 2,645 firm-years, we find that greater gender diversity in boards, which in the case of our sample firms also indicates the presence of more female directors in the board, does not significantly affect short-term firm performance as alternatively measured by ROA and ROE, but seems to drive down long-term firm value as measured by Tobin’s Q. Our results are robust with respect to board-level gender diversity measures and are based on estimates that take into account the effects of unobserved individual effects and potential endogeneity of gender diversity. Our findings are consistent with the investor bias theory, which argues that investors collectively drive down the market value of firms with more gender-diverse boards because they have a perceptual bias against women as capable firm leaders and directors. Our results put to question the economic rationale of imposing any minimum gender quota on boards of, at least, Philippine publicly listed firms, similar to the practice in most European countries. We suggest that policy makers must be cautious in proposing quotas that seek to promote gender parity in boards of directors of publicly traded firms based on a claim that it will significantly improve firm performance and shareholder value. Instead, enforcing board-level gender quotas may have to be justified in terms of social equality, business reputation, and purely ethical grounds.