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What We Did
We used 9 years of data for 73 NZX-listed firms to test the proposition that more gender diversity on company boards causes better financial performance. A common problem with such studies is the potential for reverse causality. We solve this problem by exploiting the 2012 NZX listing rule change that exogenously mandated the disclosure of gender diversity in NZ boards of directors. This allowed us to proceed in two steps. First, for each company, we estimated the change in female directors directly attributable to the listing rule change. Second, we analysed the inter-company relationship between the rule-induced change in female directors and company performance. This provided no support for the proposition: across five measures of financial performance, firms that appointed the greatest number of new female directors subsequently performed no better than firms that appointed the fewest.
Who Was Involved
University of Canterbury
Why It Matters
NZ commentators, journalists and regulators frequently claim that more gender diversity on company boards would lead to better financial performance, and that this may justify the introduction of government-mandated quotas for female directors. Our research suggests such a move would be dangerous. If voluntary appointments of well-qualified female directors have no impact on firm performance, then a further enforced increase that takes no account of ability and qualifications could well have a negative impact.
Learn More
This study received the Outstanding Research with Practical Application Award from NZX at the 2019 NZ Finance Colloquium. The authors published this work in the academic journal, Pacific Accounting Review:
Boyle G., Hong S., and Foley, M (2020). The Impact of the 2012 NZX listing rule change on board composition and company performance. Pacific Accounting Review, vol. 32, pp543-562. http://dx.doi.org/10.2139/ssrn.3371269
