Board of Director Gender Diversity and Its Impact on Firm Performance—A Re-examination of Taiwanese Firms

• In Event: Accounting, Behavior and Organizations 2

Abstract

Prior studies show that the appointment of female directors may improve the quality of corporate governance. However, no consensus has reached regarding the effect of female directorship to enhance firms’ financial performance. Thus, the main purpose of this study is to re-examine the characteristics of firms with the appointment of female directors, and further examine the associations of these firms with their shareholding of foreign institutional ownership, with their innovation capability, with their financial performance, and provide the empirical evidence from an emerging market in Taiwan. Results show that family-controlled firms are more likely to appoint female directors, while firms mainly controlled by the professional managers are less likely. Additionally, firms’ R&D expense ratio is inversed with those with female directors. We argue the finding may be related to the female characteristics with the tendency of risk aversion and more conservative in nature. Our study finds that firms with female director are those consisting of lower foreign institutional ownership, suggesting foreign institutional investors do not recognize the significance that boardroom gender diversity will improve firm value. This result, instead, demonstrates that foreign institutional investors are likely to reduce their investments to these firms due to stereotype. Lastly, our test result does not support the relationship of female directorship and firm performance improvement, it reflects as a reverse association but not statistically significant. This study contributes to the literature on board gender diversity to business investment behaviors, and it also provides some empirical evidence to emerging markets on corporate governance related issue.

Authors

• Ling-Ling Chang, Ming-Chuan University

• Fujen Hsiao, University of Minnesota, Duluth