Does board gender diversity influence firm profitability? A control function approach

Rey Đặng (1) , L’hocine Houanti (2) , Krishna Reddy (3) , Michel Simioni (4)

1 ISTEC - Institut supérieur des Sciences, Techniques et Economie Commerciales
2 Sup de Co La Rochelle - Ecole Supérieure de Commerce de la Rochelle
3 Toi Ohomai Institute of Technology
4 UMR MOISA - Marchés, Organisations, Institutions et Stratégies d'Acteurs

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).

Mots clés: Women; Board of directors; Econometrics; Control function; Firm performance

Domaines: Economies et finances

Rey Đặng, L’hocine Houanti, Krishna Reddy, Michel Simioni. Does board gender diversity influence firm profitability? A control function approach. Economic Modelling, 2020, 90, pp.168-181. ⟨10.1016/j.econmod.2020.05.009⟩. ⟨hal-02618276⟩