Top management team composition and financial performance: Examining the role of gender diversity

Abstract

Despite the growing research on the effect of top management team gender diversity on company financial performance, the results remain inconclusive. The theoretical framework guiding this study includes the upper echelons theory and critical mass theory. Under the upper echelons theory framework, the study investigates whether female participation in top management teams positively influences company financial performance. Based on critical mass theory, the study attempts to determine what percentage of women in a top management team constitutes a critical mass. Unlike most previous studies, both theories are applied to only the context of 823 small-and medium-sized enterprises (SMEs) with a workforce between 50 to 250 employees in the manufacturing sector in the Czech Republic. The findings indicate that the premises of the upper echelons theory are also applicable to SMEs. At the same time, the findings show limited support for critical mass theory. More specifically, this study does not support a linear relationship between the number of women in top management team and financial performance and only partially supports a U-shaped curvilinear relationship. The implications of the findings and suggestions for future research are also discussed. In sum, this study brings new insight to the area of gender diversity in top management and advances the gender diversity literature’s understanding of the relationship between top management team composition and company financial performance. Moreover, the study provides a better understanding of the key role of a critical mass in top management teams.