Abstract
The objective of this study is to verify the effect of gender diversity on the board of directors (BD) and the executive committee (EC) of participating Canadian firms with regard to the financial performance and the mediating role of environmental, social, and governance (ESG) orientation in this relationship. The study sample was composed of 133 Canadian firms, and the data cover an 18 year timeline (2002–2019), with 925 observations. This paper provides empirical support for the effect that gender diversity in turnover has on the financial performance of firms and explains 53% of its variance. In addition to supporting the beneficial effect of gender diversity on performance, the study reveals the mediating mechanism through the ESG orientation of companies explaining almost 4% of the total effect of gender diversity on performance. By analyzing two levels of diversity, the study revealed the superiority of the effect of gender diversity in BDs as compared to ECs. We discuss the theoretical and empirical implications of the results found, as well as the limitations and future prospects of research on the subject.
Highlights
Governance has been the subject of growing interest within both public administrations and private companies, those listed on the stock exchange
The objective of this study was to test the effect of gender diversity on boards of directors (BDs) and on executive committees (ECs) on corporate financial performance in the Canadian context from 2002 to 2019
Based on the cognitive theory, the UET, and the stakeholder theory, the study began with the idea that characteristics of the board/EC, such as gender diversity, are a proxy for the cognitive frameworks of the board/EC members, and from the idea that the actions of board members, such as ESG orientation, are manifestations of these cognitive frameworks explaining the financial performance of firms
Summary
Governance has been the subject of growing interest within both public administrations and private companies, those listed on the stock exchange. Corporate governance refers to the art of governing, i.e., the ability of a company’s executive committee to assume responsibilities such as the management, direction, and control of a company. A BD should be the outcome of a regulatory system (e.g., Canada, France, Spain, Norway) or the manifestation of corporate conformism, but a true value creator in terms of principal-agent problem solving (agency problems) [1] and strengthening the social legitimacy of the company and its performance, in the private sector. Given the variety of skills and the scope of knowledge that board members should have in order to better govern in an increasingly complex business context, a number of studies have focused on the effectiveness of a board through the effect of some of its endogenous variables, such as diversity [1], i.e., the variety of the profiles of the board members in terms of age, gender, seniority (as a board member), nationality, education, experience or personality
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