The effect of gender board diversity across market quotation on firm performance: Evidence from the UK

Abstract

This paper examines the impact of gender board diversity on firm performance for companies registered on the London Stock Exchange (LSE). The data has been collected from a unique set of 644 financial companies in the Main (MAIN) market and Alternative Investment Market (AIM) for the period 1999–2016. The firm performance has been measured using return on equity (ROE) and Tobin’s Q. The main independent variable is the female board diversity, which was distinguished into executive and non-executive females. In the MAIN market, the executive female directors negatively affect the firm’s financial performance; however, the non-executive female directors positively impact the firm’s financial performance. Furthermore, the positive effect of non-executive female directors in the bad market is higher than in the good market. Whereas the negative effect of the executive female directors in the bad market is lower than in the good market. To the best of our knowledge, this paper contributes to the corporate governance literature in two folds. First, this paper explores the effect of executive and non-executive female directors on the board on the firm performance. Second, the paper also scrutinizes such associations in two different regimes of the financial market.