Cogent Economics & Finance

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Gender diversity in boardrooms – A literature

review

Sudheer Reddy & Aditya Mohan Jadhav |

To cite this article: Sudheer Reddy & Aditya Mohan Jadhav | (2019) Gender diversity
in boardrooms – A literature review, Cogent Economics & Finance, 7:1, 1644703, DOI:
10.1080/23322039.2019.1644703

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Reddy & Jadhav, Cogent Economics & Finance (2019), 7: 1644703
https://doi.org/10.1080/23322039.2019.1644703

FINANCIAL ECONOMICS | REVIEW ARTICLE

Gender diversity in boardrooms – A literature
review
Sudheer Reddy1 and Aditya Mohan Jadhav1*

Received: 03 January 2019 Abstract: This paper examines the advancement of literature on gender diversity
Accepted: 14 July 2019
on corporate boards (board gender diversity). We discuss important management
First Published: 28 July 2019
theories cited in the literature and examine the factors that affect board gender
*Corresponding author: Aditya Mohan
Jadhav, T A Pai Management diversity. We present evidence from developed and emerging markets based on
Institute, P.B No:9, Manipal 576104, a review of studies to show how board gender diversity impacts a firm performance.
India
E-mail: [email protected] We also review growing literature on the gender quota legislation that mandates
Reviewing editor:
the appointment of female director(s) on corporate boards. Research on board
Yogesh Pai P, Manipal Institute of gender diversity reveals director characteristics, firm size, board size, board diver-
Management, Manipal Academy of
Higher Educationn, Manipal, India sity, industry, type of ownership, customer base, and social and cultural character-
Additional information is available at
istics as the factors that influence representation of female directors on corporate
the end of the article boards. Studies on the impact of board gender diversity on firm performance
present inconclusive results. In a similar vein, studies on the impact of gender quota
legislation on firm performance also present mixed results. Our study contributes to
the growing literature on board gender diversity and provides a further under-
standing of factors that influence gender diversity on corporate boards. It also
offers insights to regulators on potential limitations and the benefits of gender
quota legislation.

Subjects: Corporate Finance; Strategic Management; Corporate Governance

Keywords: Board gender diversity; gender quota; female directors

ABOUT THE AUTHORS PUBLIC INTEREST STATEMENT

Sudheer Reddy is Associate Professor in Finance The primary function of a board of directors in
at the T A Pai Management Institute, Manipal, a corporation is to monitor the actions of man-
India. His research interests include Corporate agers and to protect the interests of shareholders.
Governance and Corporate Finance. In recent times, there is an increased focus on the
Aditya Mohan Jadhav is Professor in Finance presence of women directors on corporate boards
at the T A Pai Management Institute, India. His (board gender diversity) as evidence shows
research interests include Corporate Governance a positive impact of women directors on firm
(Minority Shareholder Expropriation, Board performance. In this review paper, we examine
Characteristics and Disclosure Utility) and various aspects of board gender diversity. Review
Corporate Finance (Firm Performance and Firm of studies shows that board gender diversity has
Valuations, Project Valuations, Capital Structure a positive impact on firm performance and prof-
and Firm Financing and Infrastructure Project itability but as the proportion of women increase,
Financing). He has published articles, among the benefits begin to diminish. We also review
others, in Economic & Political Weekly and studies to evaluate the decision of countries that
Treasury Management. have made it mandatory for firms to appoint
women directors on the boards. We find that
mandatory board gender diversity is not neces-
sarily beneficial for firms.

© 2019 The Author(s). This open access article is distributed under a Creative Commons
Attribution (CC-BY) 4.0 license.

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1. Introduction
Research on gender diversity on corporate boards (board gender diversity) is a topical subject that
continues to attract considerable research attention. Women directors are under-represented and
in response, several countries have enacted the gender quota legislation to mandate appointment
of women directors on corporate boards. An increase in the number of female directors has
garnered significant research on board gender diversity. In this article, we review the evolution
of literature on board gender diversity in areas related to corporate governance and corporate
finance. Specifically, we review the studies on the representation of gender diversity on corporate
boards, the factors that affect board gender diversity and the impact it has on firm decisions and
firm-specific issues. Finally, we review the growing literature on the impact of gender quota
legislation and present future avenues for research.

Bulk of the literature on board gender diversity is empirical in nature and sources its theoretical
underpinnings from management literature. Management theories cited in prior studies on board
gender diversity are at three levels; individual, board and the firm. The often-cited theories include
human capital theory, social identity theory, social network and social cohesion theory, resource
dependency theory, and agency theory. Human capital theory (Becker, 1985) examines the effect
of an individual’s cumulative repository of skills, education, and experience in developing produc-
tive and cognitive capabilities, which in turn, benefit the individual and his/her organization. In the
context of corporate governance, diverse and unique human capital of a corporate board is viewed
as a key resource for the firm. Turner and Tajfel (1986) social identity theory examines the role of
group membership in groups, such as gender, race, class, and occupation on an individual’s
identity. These identities create group boundaries and may provide higher evaluations of in-
group members, further reinforcing higher entry barriers for out-group members. For example,
a male-dominated board may strengthen group boundaries and exclude women from board
directorship. Pfeffer and Salancik (2003) use the resource dependence theory perspective to
argue that board linkages provide counsel, legitimacy and communication channels. An extension
of resource dependence theory suggests that diverse directors provide diverse beneficial resources
to the firm. Agency theory examines the role of information asymmetry and divergent objectives
on the relation between principals and agents. Given the misalignment of objectives between
managers (agents) and shareholders (principals), managers may not pursue the outcomes that are
in the interest of shareholders (Eisenhardt, 1989; Jensen & Meckling, 1976). Given the organization
structure is aimed at obtaining and utilizing resources via contracts (Berle & Means, 1932), the
resource dependency theory and agency theory are the most common cited management theories
in the literature on board gender diversity.

1.1. Resource dependence theory

Resource dependence theory is an influential management theory related to organization and
strategy. The theory characterizes the corporation as an open system, which is dependent on
contingencies in the external environment. Prior literature on the board of directors suggests that
resource dependence theory is an effective framework to understand and examine boards. Pfeffer
and Salancik (2003) suggest that directors bring four benefits to organizations: (a) information in
the form of advice and counsel, (b) access to channels of information between the firm and
environmental contingencies, (c) preferential access to resources, and (d) legitimacy. Based on
the various resources they provide to a firm, Hillman, Cannella, and Paetzold (2000) classify those
four benefits into director types, namely, business experts, insiders, community influentials, and
support specialists.

Hillman et al. (2000) extend the resource dependence theory to suggest that a more diverse
board represents a valuable set of resources and may help achieve better economic outcomes.
Resource dependence theory framework presents several arguments to promote board diversity.
For instance, diverse directors act as a bridge to important constituencies in the external environ-
ment, resulting in greater access to more talent. Diverse directors also hold unique information
that can potentially improve board advisory to managers and help in better decision-

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making. Board diversity also sends important positive signals to the product and labor markets. As
non-insiders and non-business experts, diverse directors may help to bring diverse perspectives
and non-traditional approaches to problems. Prior literature on board diversity has considered
gender and ethnicity as separate dimensions under resource dependence theory. However, recent
studies on board diversity grounded in resource dependence theory focus on gender, and more
specifically on the impact of gender on economic outcomes (Carter, D’Souza, Simkins, & Simpson,
2010; García-Meca, Garcia-Sanchez, & Martínez-Ferrero, 2015; Isidro & Sobral, 2015; Low, Roberts,
& Whiting, 2015; Lückerath-Rovers, 2013; Reguera-Alvarado, de Fuentes, & Laffarga, 2017).

1.2. Agency theory

Agency theory examines the relation between incentives and self-interest and suggests that much
of organizational life is based on self-interest. Given that an information asymmetry exists
between managers and shareholders, managers can filter the information they share with the
shareholders. Such control over critical information complicates the problem between managers
(agents) and shareholders (principals). The role of the board of directors is to become a source of
reliable information for the shareholders of large corporations resulting in the effective monitoring
of managers (Fama & Jensen, 1983).

Propagation of richer and reliable information from boards to shareholders may align managers’
behavior that is consistent with shareholders’ interests. Some of the metrics used to quantify the
richness of board information are number of board subcommittees, number of board members
with managerial and industry experience, number of board members with long tenure, frequency
of board meetings, and number of board members representing specific ownership groups. Prior
studies have adopted the agency theory framework to examine the impact of board gender
diversity on firm decisions (Carter, Simkins, & Simpson, 2003; Francoeur, Labelle, & Sinclair-
Desgagné, 2008; Chapple & Humphrey, 2014; Ararat, Aksu, & Tansel Cetin, 2015; Nguyen, Locke
& Reddy 2015; Ntim, 2015).

Our review paper has the following structure. In the following section, we present the literature
that initiated conversations around board gender diversity to explore various reasons cited to
explain the under-representation of gender diversity on corporate boards. In sections III and IV,
we review the empirical studies on the impact of board gender diversity on firm value and on firm-
specific issues. In our conclusion section, we review the growing literature on the impact of gender
quota legislation and also present future avenues for research.

2. Women on corporate boards

In 1983, based on the 10-year growth rate of the ranks of women directors, Elgart (1983) forecast
that it could take about 200 years for women to attain equal representation in top corporate board-
rooms. The author investigates the reason for the under-representation of women in Fortune 500
corporations and finds that 43% of the companies that did not have even a single women director on
their boards claimed “already filled with qualified candidates” as a reason. Such an argument is not
convincing enough considering the average director term and the number of director resignations.

Kesner (1988) in her broader study on directors’ characteristics examines 250 Fortune 500
boards covering 27 different industries and concludes that extensive experience is required to
serve on a board’s influential committees. The author specifically attributes lack of experience as
the reason for the under-representation of women directors in corporate boards. However,
Bilimoria and Piderit (1994) challenge Kesner’s (1988) work in several ways; detailed examination
of differences in men’s and women’s experience expanded the range of director characteristics
and a larger set of influential board committees. The authors study 300 Fortune 500 companies to
find evidence for systematic sex-based bias against women director membership.

Women directors are acutely aware of gender bias that exists on corporate boards. Attitudes of
existing male board members play a significant role in nurturing this gender bias. Burke (1997)

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analyses 278 survey responses from women directors serving on Canadian boards to study their
views onboard gender membership. The respondents attribute the under-representation primarily
to the attitudes of male CEOs and Board Chairmen. The respondents viewed, “Male CEOs were seen
as thinking that women were not qualified, they were afraid to take on new and untried women or
were fearful that women might have a women’s agenda.” [Burke (1997), p.913].

There are several theoretical perspectives that explain the persistent barriers to women’s
advancement to the director level. Singh and Vinnicombe (2004) find that women director mem-
bership in the UK’s top 100 companies is very low despite the existence of equal opportunities and
equal pay legislation. The authors explain their results with the help of two theoretical perspec-
tives. First, they employ social identity theory to explain male directors’ behavior to define
themselves as directors, reinforcing group boundaries that exclude women. The authors also use
social networks theory to explain that power aggregation of directors’ network may be the reason
for male senior executives in one company holding non-executive director positions in another
company. Wide-ranging external and internal factors affect board gender diversity with varied
impact. In the following three sub-sections, we summarize prior literature on the factors that
affect board gender diversity.

2.1. External factors

External factors, such as firm size, board size, industry, type of ownership, customer base, and
social and cultural characteristics influence gender diversity on corporate boards. Brammer,
Millington, and Pavelin (2007) focus on a firm’s external business environment and its customer
base to explain board gender diversity. The authors examine firms that represent corporate boards
of 243 firms listed on the London Stock Exchange to analyze board diversity, size, and composition.
They find significant cross-sector variation in gender diversity, with a higher representation of
women directors in industries such as Retail, Utilities, Media, and Banking that predominantly serve
end-consumers. Hillman, Shropshire, and Cannella (2007) study US firms and find that large firms
have a significantly greater likelihood of women director membership. They also find that when
a firm is linked to other firms with women directors, it is more likely to have women representation
on its own board of directors. De Cabo, Gimeno, and Nieto (2012) study European banks to
examine if organizational characteristics affect board gender diversity. They focus on factors,
such as riskiness of the bank, size of the boards, and growth orientation. Banks with lower risk,
larger boards, and growth orientation tend to include women on their boards.

Terjesen and Singh (2008) explore the impact of social, political and economic structures of
individual countries on board gender diversity by performing a cross-country analysis using data
from 43 countries. Social structure analysis reveals board gender diversity is significantly high in
countries with a high proportion of women in the legislature, senior official and management
positions. However, the authors find significant under-representation of women on boards in
countries with a longer history of woman political representation. Finally, their results indicate
that countries that have income gender equality are likely to have a better representation of
women on boards. Carrasco, Francoeur, Labelle, Laffarga, and Ruiz-Barbadillo (2015) use the
cultural dimensions proposed by Hofstede and Bond (1984) to study the impact of cultural
characteristics on women director membership in 32 countries. They find evidence that countries
with lower board gender diversity have the greatest tolerance for inequalities in the distribution of
power. In addition, countries that tend to value the role of men generally exhibit lower women
board membership. Low et al. (2015) consider cultural differences across countries to examine the
impact of board gender diversity on firm performance. The authors conclude that a country’s
attitude towards women moderates the impact of a gender-diverse board on firm performance.

Family ownership has a positive impact on board gender diversity. Nekhili and Gatfaoui (2013)
study French corporate boards and find that family ownership and board size strongly influence
board gender diversity. Apart from establishing a strong influence of family connection on women
director membership in Italian boards, Bianco, Ciavarella, and Signoretti (2015) also find that

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majority of the gender-diverse boards tend to have at least one women director who is connected
to the controlling stakeholder. Ruigrok, Peck, and Tacheva (2007) examine firms listed in SWX
Switzerland and find evidence that women directors are less likely to be independent and more
likely to be affiliated to firm management through family ties.

2.2. Impact of director characteristics on board gender diversity

Prior literature on director characteristics has not established any association between director
characteristics and the appointment of female directors. Characteristics such as education, busi-
ness background, insider, network linkages, etc., play a limited role in director membership. Most
studies merely describe the skill sets of the women who have succeeded in becoming members of
a corporate board. Hillman, Cannella Jr and Harris (2002) study Fortune 500 boards to provide
evidence that most women directors come from non-business backgrounds and hold advanced
degrees. Burgess and Tharenou (2002) describe several traits, such as public relations, self-
promotion, media management, strong network, training, and career development, which help
women attain board membership. In their cross-country study, the authors perform a descriptive
analysis of directors’ education, age, marital status and the number of children.

Ruigrok et al. (2007) show evidence that women directors in Swiss firms are more likely to be
outsiders and hold non-business degrees. Nekhili and Gatfaoui (2013) find demographic attributes,
such as professional services, valuable skills, and network links influence women director appoint-
ments on French corporate boards. Adams and Funk (2012), in their survey-based study of Swedish
directors, find evidence that women directors care more about benevolence, universalism and
stimulation, and care less about power, security, conformity, and tradition. They also find that they
are slightly more risk-loving in contrast to their male counterparts.

2.3. Impact of board gender diversity on women director appointments

An investigation into the relation between gender and director appointments reveals how board
gender diversity influences the appointment of women directors. Farrell and Hersch (2005) exam-
ine a set of Fortune 500 firms to provide evidence that board selection is not gender-neutral. They
find that the probability of appointment of a woman director in a given year is negative and
significantly related to the percentage of women on those boards in the previous year. In addition,
departure of a women director more likely results in an appointment of women director as
a replacement. Matsa and Miller (2011) investigate if women help women in corporate America.
They find evidence that firms with more women on board also have more women top executives.
Hutchinson, Mack, and Plastow (2015) study top 500 listed Australian firms and find evidence that
the presence of women directors in a nomination committee positively affects board gender
diversity.

Prior research on board gender diversity also provides evidence for an increase in the number of
female directors. Farrell and Hersch (2005) document a growing trend in the percentage of US
female director membership of the average firm from 5.6% in 1990 to 12.26% in 1999. In addition,
in 1999, 87% of the US corporate boards had at least one female director compared with 53% in
1990. On the boards of large listed companies in 2015, about 21% of directors were women in the
European Union and about 20% were in the United States (Kirsch, 2018). As the boards got more
diverse, researchers focussed their attention on finding whether a more diverse board is a better
monitor of management and, which is less likely to subvert the interest of shareholders.

3. Impact of board gender diversity on firm performance

A bulk of prior literature on gender diversity on corporate boards has focussed on the impact of
board diversity on firm performance. Carter et al. (2003) investigate US boards to study the impact
of board diversity on firm value. The authors find a positive relation between the presence of
a woman director and firm performance as measured by Tobin’s Q. Their findings prompted
a series of studies to examine the evidence in various country settings. The results, however,
remain inconsistent.

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3.1. Evidence from North America

Erhardt, Werbel, and Shrader (2003) study the impact of demographic diversity on the board of
directors. The independent variable, demographic diversity, is measured in terms of both ethnic
and gender representation on boards. The authors find a positive association between financial
indicators of firm performance and demographic diversity in the US board of directors. Francoeur
et al. (2008) study the impact of gender diversity on corporate boards in firms having high betas,
and high-market-to-book ratios or analysts’ forecasts standard deviation. The authors find evi-
dence that having more women on the board may not have an impact on stock returns. Carter
et al. (2010) study gender diversity on board committees and US boards. They find neither
a positive nor a negative effect on firm financial performance.

Miller and Del Carmen Triana (2009) examine the impact of innovation and firm reputation on
the relation between board gender diversity and firm performance. The authors find no relation
between board gender diversity and firm performance. However, the results show a positive
relation between board gender diversity and innovation (in the form of R&D expenditure) but
none with reputation. In their seminal work, Adams and Ferreira (2009) analyze the impact of
gender diversity on governance metrics and firm performance. The authors find that women
directors are less likely to have attendance problems than men. Women directors are also more
likely to sit on monitoring-related committees than male directors. In particular, women directors
are more likely to be assigned to audit, nominating, and corporate governance committees.
Further, the authors find that gender-diverse boards are more likely to hold CEOs accountable
for poor stock price performance. Board gender diversity has beneficial effects in companies with
weak shareholder rights, where it is plausible that additional board monitoring can enhance firm
value, but have a detrimental effect on companies with strong shareholder rights.

3.2. Evidence from Europe, Australia, and Asia

Rose (2007) finds that women board representation on Danish boards has no significant link with
firm performance as measured by Tobin’ Q. However, in case of Spain, Campbell and Mínguez-
Vera (2008) find a positive effect of the percentage of women on board on firm value. The
evidence from Germany suggests that gender diversity negatively affects firm performance
initially and after a “critical mass”, affects positively (Joecks, Pull, & Vetter, 2013). Nguyen
et al. (2015) show evidence from Vietnam that the marginal positive performance effect of
board gender diversity ceases when the percentage of female directors reaches a breakpoint
of about 20%. In a study based in China, Liu, Wei, and Xie (2014) find a positive and significant
relation between board gender diversity and firm performance. However, the relation is insignif-
icant in case of Chinese state-controlled firms. Authors find women executive directors to be
more effective than women-independent directors. Chapple and Humphrey (2014) take an
aggregate (market-level) approach to compare the performance of portfolios of firms with
gender-diverse Australian boards to find no evidence of an association between diversity and
performance. However, there is some weak evidence of a negative correlation between having
multiple women on the board and performance.

Low et al. (2015) study firms in Hong Kong, South Korea, Malaysia, and Singapore. Controlling for
potential endogeneity between board gender diversity and firm performance, the authors find that
the increasing numbers of women directors on the board have a positive effect on firm perfor-
mance. They also show that the country’s attitude towards women-at-work moderates this rela-
tion. Abdullah, Ismail, and Nachum (2016) study Malaysian firms to find a varied impact across
different performance indicators, firms’ ownership, and boards’ structure. The authors find that
board gender diversity positively affects accounting performance and negatively influences market
performance. Type of firms’ ownership (government or family) significantly moderates this rela-
tion; government ownership is significant and family ownership is insignificant. Evidence from
Europe, Australia, and Asia is also inconsistent necessitating further research in this area.

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4. Impact of board gender diversity on firm decisions

Researched topics that are not related to firm performance include firms’ corporate social respon-
sibility ratings, informative-ness of stock prices, high-quality earnings, financial restatement,
financing and acquisition decisions, corporate social performance, analysts’ earnings forecast
accuracy and dispersion, mergers and acquisitions, strategic change, corporate opacity, and firm
risk. In a US setting, Bear, Rahman, and Post (2010) study the effect of board gender diversity on
firms’ Corporate Social Responsibility (CSR) ratings to find a positive effect on their CSR ratings. In
addition, the authors also find that CSR ratings mediate the relation between board gender
diversity and firm’s reputation. Nielsen and Huse (2010) examine the impact of board gender
diversity on keyboard processes in the Norwegian setting. The authors find a positive association
between board gender diversity and board strategic control and a positive impact on board
development activities. Gul, Srinidhi, and Ng (2011) find that stock prices of US firms with gender-
diverse boards reflect more firm-specific information due to increased public disclosure. Srinidhi,
Gul, and Tsui (2011) examine US boards to find that firms with greater female participation on their
boards exhibit higher earnings quality.

Abbott, Parker, and Presley (2012) find a significant association between board gender diversity
and a lower likelihood of financial restatement in US firms. Huang and Kisgen (2013) examine the
relation between gender-diverse boards and financing or acquisition decisions. The authors find
evidence in US firms that suggests women do not exhibit relative overconfidence in significant
corporate decision-making compared to men. Hagendorff and Keasey (2012) examine whether
gender diversity affects firm risk using a sample of US firms. The authors find that a board with
a higher proportion of female directors is no more or less risk taking than a more male-dominated
board.

Hafsi and Turgut (2013) find that gender-diverse US boards have a significant effect on
Corporate Social Performance. Boulouta (2013) finds that due to the stronger “empathic caring”
exhibited by women directors, more gender-diverse boards in the US exert a stronger influence on
the Corporate Social Responsibility metrics that focus on negative business practices. Gul,
Hutchinson, and Lai (2013) study the relation between board gender diversity and analysts’ earn-
ings forecast accuracy and dispersion in US firms. The authors find that gender-diverse boards
have higher analysts’ earnings forecast accuracy and lower analysts’ earnings forecast dispersion.
Gregory, Jeanes, Tharyan, and Tonks (2013) explore the market reaction to trading activities of
women directors in UK firms. The authors conclude that in the short term, markets react less
favorably to trades by female directors, but in the long term, they recognize that the female
executives’ trades are informative.

Triana, Miller, and Trzebiatowski (2013) examine US firms to study how board gender diversity,
firm performance, and the power of women directors interact to influence the amount of strategic
change. The authors find that in case of an absence of low firm performance threat and women
directors having greater power, the influence of board gender diversity on strategic power is the
most positive. However, in case of the presence of low firm performance threat and women
directors having greater power, the influence of board gender diversity on strategic power is the
most negative. Levi, Li, and Zhang (2014) study the impact of board gender diversity on mergers
and acquisitions in US firms and find that firms with female directors are less likely to make
acquisitions, and if they do, pay lower bid premia.

Upadhyay and Zeng (2014) develop an opacity index based on analyst following, analyst fore-
cast error, bid–ask spread, and share turnover to measure corporate opacity. The authors find that
gender-diverse US firms are more transparent. Liao, Luo, and Tang (2015) examine the impact of
board gender diversity on the voluntary disclosure of greenhouse gas (GHG) emissions in the form
of a Carbon Disclosure Project report in UK firms. The authors find a significant positive association
between gender diversity and the propensity to disclose GHG information, as well as the exten-
siveness of that disclosure. Perrault (2015) investigates how women on US boards contribute to

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board effectiveness by breaking up all-male directors’ networks. The author finds that women
directors enhance perceptions of the board’s instrumental, relational, and moral legitimacy
through real and symbolic representations. This leads to increased perceptions of the board’s
trustworthiness, which in turn, fosters shareholders’ trust in the firm.

5. Conclusion
It is abundantly clear that women directors are under-represented on corporate boards. In
response, several countries have enacted gender quota legislation to mandate the appointment
of women directors on corporate boards. Gender quota legislation tries to address the ethical
aspect that women are under-represented despite equal competence (Terjesen, Aguilera, &
Lorenz, 2015). Across countries, gender quota legislation takes a variety of forms but generally
consists of a set gender quota (percentage of board size), time period, and penalties for non-
compliance. The Norwegian government was the first to establish a 40% female quota in 2003,
Spain established 40% female quota in 2007. The growing list of countries to join the bandwagon
are Belgium, Finland, France, Iceland, Israel, Italy, India, and Kenya.

Recent studies have focussed on the impact of gender quota legislation. Evidence from
Norway is unique given the huge exogenous gender quota shock. Norway passed the gender
quota legislation in December 2003 and enforced the law in January 2006, with a two-year
transition period. By 2008, all public limited Norwegian boards complied with 40% gender
quota. Bøhren and Strøm (2010) study Norwegian firms over the period 1989–2002, prior to
the implementation of the gender quota legislation. They intentionally choose the sample
period to explore whether the regulator could have used observable board characteristics in
the unregulated period. The authors find no convincing economic reason for a quota legislation
that enforces a minimum fraction of the firm’s directors of a certain gender. Wang and Kelan
(2013) empirically examine the influence of gender quota on Norwegian boards over the period
of 2001–2010. The authors find that an increase in women director membership positively
affects the appointments of women in top leadership positions. The authors also document
that the independent status of women directors has a positive impact on the likelihood of
a board chaired by a women director.

Ahern and Dittmar (2012) extensively study the impact of board gender diversity on firm value in
the context of Norwegian gender quota legislation. They collect data for all firm-years over 2001 to
2009 to provide a complete picture of the transformation of Norwegian boardrooms and show that
the quota-driven board gender diversity has a large negative effect on firm performance as
measured by Tobin’s Q. The authors document a significantly different stock price reaction to
the announcement of the quota legislation for those firms with no women directors compared to
those with at least one woman director. They also find that the quota-led firms grow in size, make
more acquisitions, and realize worse accounting returns.

Evidence from Spain indicates a positive impact of gender quota legislation. Lucas-
Pérez, Mínguez-Vera, Baixauli-Soler, Martín-Ugedo, and Sánchez-Marín (2015) show that gender
diversity positively affects the effectiveness of Spanish boards, resulting in positive firm perfor-
mance, and conclude that Spanish legislative actions aimed at increasing the presence of women
on boards of directors are justified for reasons of economic efficiency. The authors find that gender
diversity on boards leads to a greater diversity of knowledge and skills, as well as to a greater
variety of appropriate criteria for making decisions.

However, a cross-country study by Labelle, Francoeur, and Lakhal (2015) shows that the regula-
tion of board gender diversity through a legislative (enabling) approach negatively affects the
relation between gender diversity and firm performance. The authors argue that a fast-tracked
increase in the demand for more female directors can create a shortage of women with sufficient
business experience, forcing firms to appoint less experienced women. Impact analysis of gender

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quota policy has motivated research in understanding the need for policy, underlying institutional
factors, and ethical tensions.

Terjesen et al. (2015) study 10 countries to outline an integrated model of three key institutional
factors to explain the establishment of gender quota legislation. The key institutional factors are
left-leaning political government coalitions, female labor market and gendered welfare state
provisions, and path-dependent policy initiatives for gender equality. Ferreira (2015) argues that
current research neither supports nor provides a case against board gender quotas. The author
concludes that causal effects are too hard to estimate and that a study on the potential benefits to
larger society is more important than focus on narrow measures of firm profitability. Using data
qualitative interviews, Seierstad (2016) explores how women in senior positions justify gender
quotas and their use in helping them attain board positions. The author finds that women use both
individual justice argument and economic case to rationalize gender quotas.

Following other countries around the world, India also legislated its gender quota policy in 2014.
The quota policy mandates at least one female director for listed companies, effective since
1 October 2014. Accordingly, all listed companies with equity capital more than USD 1.5 million
and net worth exceeding USD 3.8 million1 come under the new quota policy in India. There are
proposals for gender quotas in listed firms in Denmark, Ireland, Netherlands, South Africa, and
Sweden. Voluntary targets are in place in several countries including Poland and Austria. Serious
policy debates are taking place in many countries. Future research may focus on the potential
limitations and benefits of gender quota legislation to larger society and explore what factors
might help countries to pass their gender quota legislation.

Author details Corporate Governance: An International Review, 23

Sudheer Reddy1 (2), 83–103.
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