Gender diversity influence on board effectiveness and business performance

Abstract

PurposeThe purpose of this paper is to analyze the mediating role of board effectiveness (understood as the capacity to efficiently manage and control all functions to guarantee the company’s prosperity) in the relationship between board diversity and firm performance.Design/methodology/approachThe authors use partial least squares methodology to test the direct and indirect relationships between gender diversity in boards of directors and business performance.FindingsAlthough the relationship between the presence of women on the board and the board’s effectiveness is statistically significant, this relationship is negative. However, board effectiveness (measured by the three constructs: strategic control, organizational innovation and decision-making) has a positive and statistically significant effect on business performance. Finally, there is a positive, but not statistically significant, relationship between gender diversity and firm performance.Research limitations/implicationsThe study has a small sample size, and most of the boards of directors analyzed are unequal with only a few companies achieving gender parity.Social implicationsPublic institutions must promote actions to achieve a critical mass of women directors and managers, so that women transcend a merely “symbolic” role on a board and are able to develop their skills and characteristics, thereby improving a board’s effectiveness and business performance.Originality/valueThis paper makes a theoretical contribution to the diversity and governance literature by providing a better understanding of the relationship between board gender diversity and firm performance. It considers the influence of women on the board through a holistic framework, analyzing the mediating role of the board’s effectiveness.