Gender diversity in boards and performance of Philippine publicly traded firms: Do women matter?

The issue of gender diversity in corporate boards has been attracting research interest in various countries because of the many socioeconomic contributions women directors are purported to confer to the firm, some of which include improved board monitoring quality and a more ethical and democratic form of leadership. This rationale forms part of the “economic case” for women’s participation in boards, apart from the usual grounds of social or equality considerations. We examine this board-level gender diversity issue for the case of the firms traded in the Philippine Stock Exchange during the period 2003 to 2014. Using an unbalanced panel of 2,647 firm-years, we find that greater gender diversity in boards, which in the case of our sample firms also indicates the presence of more female directors in the board, does not significantly affect both short-term firm performance, as alternatively measured by return on assets (ROA) and return on equity (ROE), and long-term firm value, as measured by Tobin’s Q. Our results are robust with respect to board-level gender diversity measures and are based on estimates that take into account unobserved individual effects and the potential endogeneity of gender diversity.

Our findings seem to support the theory put forward by Rose (2007), which argues that women corporate leaders may have competency levels similar to that of their male counterparts, such that there is no discernible effect on firm performance due to the presence of more women board members. Our results question the economic rationale of imposing any mandatory minimum gender quota on boards of, at least, Philippine publicly listed firms, similar to the practice in most European countries. We suggest that policy makers must be cautious in proposing quotas that seek to promote gender parity in boards of directors of publicly traded firms based on a claim that they will significantly improve firm performance and shareholder value. Instead, enforcing board-level gender quotas may have to be justified in terms of social equality, business reputation, and purely ethical grounds.