Influence of female board members on financial performance of listed companies in New Zealand

Abstract

Many governments are under pressure to introduce quotas for women on corporate boards. This paper explores the rationale for quotas. A panel dataset is employed comprising 47 of the 50 companies listed on the New Zealand Stock Exchange (NZSX50) to test the effect of female directors on firm financial performance. First, a Poisson regression model is run to examine selection bias where women select to join firms that perform well financially. Second, a fixed effects model is estimated to explore whether firm financial performances are enhanced by the number of female board directors and their length of service. No evidence is found for self-selection bias. Nor is there evidence to suggest female directors improve financial performance. Equity arguments for quotas are also considered. Very little theoretical or empirical work exists on the equity debate, yet, it has implications for determining quotas and their size. More research is recommended on what constitutes equity.