Influence of Gender Diversity of Boards and Gender of CEO on Financial Performance: The European Case

Abstract

The objective of this paper is to analyze the performance of the largest listed companies of the European Union between 2010 and 2017, and how they are affected by the gender influence of the Chief Executive Officer (CEO) and the percentage of women on their Boards of Directors. These companies were chosen due to the lack of studies based on companies in the European Union and because the studies related to this subject have ambiguous results. Those ambiguities relate to the finding of positive, negative, or no relationship between gender diversity and company performance. This study is measured utilizing two indicators: ROA and Tobin’s Q. Using a regression model based on a sample of 308 European companies, and the OLS method, a negative relationship was found between having a female CEO and Tobin’s Q. When the ROA is analyzed, this relationship is also negative, but not significant. These results suggest that the fact that the position of CEO is occupied by a woman, has no influence on the company when analyzing the accounting results (ROA). It also negatively influences the market value of the company which can be attributed to gender discrimination, an inequality that is still present in society in general, as well as the labor market. The ratio between the percentage of female board members and the performance indicators is positive, but not significant. This suggests that the percentage of women board members remains too low to allow companies to take advantage of the benefits of gender diversity.