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Boardroom gender diversity and performance of listed companies in Italy
Literature Item
Author Information:
Abstract:
The proportion of women in boardroom has traditionally been low around the world. Over the last decades, several jurisdictions have adopted legislative actions in order to trigger a tangible progress in female representation, also moving from the assumption that gender balanced boards result in improved corporate governance and performance. The investigation of the relationship between female boardroom representation and firm value is therefore key on policy grounds. The empirical evidence gathered so far is however inconclusive, given that potential reverse causality may bias results. In Italy, the Law 120/2011 envisaged mandatory quotas for the three board appointments subsequent August 2012, by setting out a minimum objective of one-third of the corporate board seats for members of the under-represented gender, lowered to one-fifth for the first term. The Italian law has introduced an exogenous shock in board composition, which may enable to overcome the endogeneity problem potentially impairing the analysis of boardroom diversity. This paper contributes to the literature by analyzing both the effectiveness of the Law in terms of its impact on boardroom gender diversity and on other board attributes, and by analyzing the impact of gender quotas on the profitability of listed Italian firms over the period 2008-2016. The analysis confirms a positive impact of the reform: it is estimated an instant reform effect on the percentage of female directors of 17 percentage points and a follow-up effect of 11percentage points. As for the impact on firms performance, results are not significant when static models are used. Different- ly, when a dynamic model is considered, female representation is estimated to yield a positive effect on different measures of performance when it exceeds a certain threshold, ranging between about 17% and 20% of the board members, roughly equivalent to at least two seats held by women, given that the average board size over the sample period is around ten members. This evidence supports the idea underpinning the critical mass theory, i.e., the hypoth- esis that women may influence board decisions and consequently firm performance when a minimum weight is achieved.
Keywords:
Gender diversity, gender quotas, board diversity, firms performance, critical mass theory, corporate governance.
Dates:
Sept. 30, 2018 - None
Source Specificity:
None, None, None
Website:
https://www.eticanews.it/wp-content/uploads/2018/10/qdf87.pdf
Power Domains:
Economic
Methods Tools:
Competence development, Awareness-raising, Monitoring
Country:
IT
City:
None
Implementation Scale:
national
Language:
English
Other Links:
ISSN 2281-1915 (online), ISSN 1121-3795 (stampa)
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