The Influence of Gender-Diversity-Valuing Institutional Investors on Female Executive Representation

Abstract

Despite increasing stakeholder pressures, the number of female executives within the corporate upper echelons remains low relative to the number of female directors. We address this so-called “gender diversity gap” by examining the role that gender-diversity-valuing institutional investors (GDVIIs), who are amongst the most prominent stakeholders advocating for gender diversity today, play in channeling managerial attention toward increasing female executive representation. Drawing on stakeholder and performance feedback theories, we propose that top managers may maintain the support and cooperation of GDVIIs by increasing female executive representation at their firms but that such efforts are subject to managers’ limited attention as they attempt to balance GDVIIs’ dual priorities of gender diversity and financial performance. We find that GDVII ownership is positively associated with increases in female executive representation but that financial performance and female board representation both at peer firms and historically within the focal firm weaken this relationship, thereby shedding light on the relative lack of progress toward gender diversity in the executive ranks.