Investing with Prejudice: the Relationship Between Women's Presence on Company Boards and Objective and Subjective Measures of Company Performance

Abstract

This paper presents a comprehensive archival examination of FTSE 100 companies in the period 2001-2005, focusing on the relationship between the presence of women on company boards and both accountancy-based and stock-based measures of company performance. Consistent with work by Adams, Gupta and Leeth this analysis reveals that there was no relationship between women's presence on boards and 'objective' accountancy-based measures of performance (return on assets, return on equity). However, consistent with 'glass cliff' research there was a negative relationship between women's presence on boards and 'subjective' stock-based measures of performance. Companies with male-only boards enjoyed a valuation premium of 37% relative to firms with a woman on their board. Results support claims that women are found on the boards of companies that are perceived to be performing poorly and that their presence on boards can lead to the devaluation of companies by investors. Yet the findings also indicate that perceptions and investment are not aligned with the underlying realities of company performance.

Female Directors and Firm Performance: Evidence from UK Listed Firms

“…Haslam et al (2010) reports that there is no association between the presence of female directors on a board and firm performance for FTSE100 companies. Gregory- Smith et al (2013) did not find evidence that the presence of females on boards is associated with higher firm performance.…”

Interlocking directorships and firm performance in highly regulated sectors: the moderating impact of board diversity

“…Boards confront the task of eliciting true information about managerial performance. Therefore, board composition and proceedings signal the firm's reputation in financial markets and have been demonstrated to have more impact for stock-based than for accounting-based measures of firm performance (Haslam, Ryan, Kulich, Trojanowski and Atkins, 2010;cf. Oxelheim and Randøy, 2003).…”

“…The firm's market value is calculated as the book value of assets minus the book value of equity plus the market value of an equity (De Andres and Vallelado, 2008). This way, Tobin's q compares the market value of company with the replacement value of its assets, and therefore represents an estimate of the efficiency of a company's use of its assets in the perception of investors (Haslam et al, 2010). Tobin's q has a quality of reflecting the value of investments in technology and human capital, and its positive value can be ascribed to the intangible value of intellectual capital which is not captured by traditional accounting systems.…”

25 Years On: Reflecting on the Past and Looking to the Future in Gender and Management Research

“…These have included how men manage gender in non-traditional occupations (Lupton, 2000); the experiences of women in international management (Linehan and Walsh, 2001); sexuality at work (Fotaki, 2011); issues surrounding flexibility (Stavrou and Ierodiakonou, 2011;Swan and Fox, 2009); and the ongoing debates around the 'glass cliff' phenomenon (Adams, Gupta and Leeth, 2009;Haslam et al, 2010;Haslam, 2005, 2009). A special issue (Gender in Management: New Research Directions) dedicated itself to contemporary concerns including gender subtexts in organizational discourse (Bendl, 2008), women's behaviour to each other in organizations (Mavin, 2008), enactments of gender and sexuality by lesbian managers (Pringle, 2008), issues of ethnicity, gender and work-life balance (Kamenou, 2008), implications of space for the gendering of emotion management practices (Lewis, 2008), as well as the recognition of women's exploitation at work via visual representation in art (Kosmala, 2008).…”