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Do gender diverse boards enhance managerial ability?

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posted on 2023-03-02, 02:37 authored by Ghasan BaghdadiGhasan Baghdadi, Md SafiullahMd Safiullah, Mariano LM Heyden

We examine the link between board gender diversity and managerial ability to transform corporate resources into revenue. Drawing on a sample of U.S firms during the period 2001–2016, we find a positive and economically meaningful association between female directors on boards and managerial ability, particularly when female directors are in monitoring roles on the board. The documented effect is stronger when using a tenure weighted measure of female representation on boards; and more pronounced for firms that have three or more women on the board of directors, in line with the critical mass hypothesis. We uncover that critical mass of female directors in monitoring roles is particularly conducive to enhancing managerial ability. Our channel analysis tests further reveal a distinctive tendency of firms with more gender diverse boards to shape the human capital of the firm by promoting managers with more generalist managerial skills. We find consistent results when we employ propensity score matching estimates and difference-in-differences using sudden deaths of female directors as a potential shock to address endogeneity concerns. We discuss implications for theory and policy. 

History

Publication Date

2023-04-01

Journal

Journal of Corporate Finance

Volume

79

Article Number

102364

Pagination

28p.

Publisher

Elsevier

ISSN

0929-1199

Rights Statement

© 2023 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).

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