A social capital view of women on boards and their impact on firm performance

Abstract

PurposeThe objective of this paper is to leverage a two-sided view of social capital to develop a model of board gender diversity and firm performance using social capital data from Northeast Regional Center of Rural Development.Design/methodology/approachThe authors examine a large sample of 2,322 US publicly listed firms over the period 1996 to 2009. The final sample consists of 14,634 firm-year observations.FindingsThe authors find that when a firm's social network is not supportive of gender diversity, corporate boards have lower levels of female representation. The strength of a social network's social ties exacerbates the relationship between social capital and board gender diversity. The authors also report a negative relationship between female board membership and firm performance in social networks that are not pro-diversity. Robustness tests reveal that the authors’ social capital view of board diversity also applies to board ethnic diversity.Research limitations/implicationsThis study focuses primarily on blue chip firms due to data constraints. It will be interesting for future researchers to investigate a broader spectrum of firms from a broader perspective of diversity beyond the study’s gender and ethnicity findings. Furthermore, this study assesses the US context, and future research could investigate firm sociability in other national contexts.Practical implicationsThis study contributes new insights to the discourse on gender diversity on corporate boards which stand to inform both policy and practice. The results of the study can inform the position of an industry association on board gender diversity, with guidance on how messaging across networks can be more effective should it account for the hidden bias that the authors uncover in the current study. From a manager's perspective, this study can help those managers and boards trying to enhance board gender diversity by providing a more complete understanding of the factors that can limit progress.Originality/valueThis study contributes a social capital view of board gender diversity to the growing literature of corporate governance, board diversity and local environmental influences on corporate policies.

Does board gender diversity affect firm performance? Empirical evidence from Standard & Poor’s 500 Information Technology Sector

“…According to the similarity-attraction viewpoint, interlocking male executives would prefer males over females for board assignments because men have more confidence and optimism than women (Markoczy et al 2020). Oldford et al (2021) found that for a large sample of US companies, female board affiliation is negatively related to firm performance in social groups that are not pro-diverse. Nielsen and Huse (2010) asserted that a female is self-assured in her fundamental beliefs and is expected to speak up when concerns raised in the board are contrary to her principles.…”

effect of female on the board of directors and intellectual capital on the financial performance of companies in Indonesia

“…In addition to increasing gender equality efforts, the presence of a a female on the board of directors of a company reflects the company's concern for gender equality. According to Oldford et al (2020), companies that support gender diversity will have more females on the board of directors than companies that do not support gender diversity. The presence of females can improve the company.…”

“…However, some researchers found different results. Oldford et al (2020); Kaur & Singh (2019), find that female directors have a negative impact on firm performance. Meanwhile, Thoomaszen & Hidayat (2020); Ionascu et al (2018); Rafinda, et al (2017), did not find a significant correlation between female directors and company performance.…”

Gender on Board and the Impact to Firm Performance through Innovation as Mediating Variable: Evidence from Indonesian non-Financial Firms

“…In addition to increasing gender equality efforts, the presence of women on the board of directors of a company reflects the company's concern for gender equality. According to Oldford et al (2020), companies that support gender diversity will have more women on the board of directors than companies that do not support gender diversity. The presence of women can enhance the company.…”

“…Yet, several researchers have found different results. Oldford et al (2020) and Kaur and Singh (2019) found that female directors have a negative impact on firm performance. Meanwhile, (Amran et al (2014)), Dale-Olsen et al (2012), Shukeri et al (2012), Rose (2007) did not find a significant effect between female directors and company performance.…”