Gender diversity and financial implications: endogeneity issues and critical mass of females on corporate boards.

  • Lee Lee Ong

Student thesis: Doctoral Thesis


This study investigates the relationship between board gender diversity and company financial performance in Australia’s ASX200 public listed companies from 2008 to 2015. It finds the conflicting findings in previous board gender diversity and company financial performance studies are caused by the endogeneity concerns and prior inadequate attempts to address the causality relationship. This study employs a comprehensive range of econometric techniques to demonstrate the confounding impacts of endogeneity. It highlights the consequences of previously applied econometric techniques in examining the causal relationship of a gender-diverse board on company financial performance. A novel external instrumental variable that fulfils both relevancy and exogeneity tests is used with dynamic GMM estimation that is robust to all potential source of endogeneity. This study shows no evidence that female board representation has any negative effects on company financial performance, as measured by Tobin’s Q. This indicates that the significant correlations between board gender diversity and company financial performance as suggested by the OLS and fixed effects estimations are spurious as they fail to fulfil the strictly exogeneity assumptions between the dynamic nature of board characteristics and company financial performance measures. The inadequate attempts to address the endogeneity problems may lead to a spurious and biased inference of the relationship between the variables. The findings of this study show that board gender diversity has no significant relationship with company financial performance. Partitioning the sample into progressive increment of female board representation also suggests there is no negative or adverse impact on company financial performance. The evidence suggests that increasing the number of female board members does not reduce company financial performance. In the absence of significant relationship between board gender diversity and company financial performance, this study does not provide strong support to the Australian authorities to impose mandatory gender quotas in the public listed companies.
Date of Award16 Feb 2019
Original languageEnglish
SupervisorSimone Kelly (Supervisor) & Keitha Dunstan (Supervisor)

Cite this