Women in the boardroom and financial performance: an analysis of JSE listed companies.

Abstract

Despite the awareness created around gender inequality and the diverse strengths women bring to the business world, progress in gender diversity has been negligible. In South Africa, despite employment equity policies being established in 1998, after 21 years, women in post-apartheid South Africa do not occupy even close to an equal share of executive positions in business as compared to men. This study explored the association between female representation on company boards and an organisation’s financial performance. Unlike previous South African studies, this study utilized a longer period of time, from 2007 to 2016, and included a period during which gender diversity has increased in pervasiveness and there is a higher proportion of women in executive positions. The Johannesburg Stock Exchange (JSE) Top 40 listed companies were selected as the sample for this study. The data of listed companies on the JSE were sourced from the IRESS and the Bloomberg database. A dynamic linear regression model with generalized method of moments (GMM) estimation was used to conduct a robust analysis. This study found a positive and statistically significant relationship between the accounting based financial measures (return on assets and return on equity) as well as the market-based performance measure (Tobin’s Q) and board gender diversity, measured as the proportion of women on the board of directors. This implies that firms with a well gender-diversified board perform better financially. The study contributes to existing literature on whether achieving gender diversity at a board level does in fact add significant benefit to shareholders wealth and a firms’ bottom line. It influences an important policy debate and will be of interest to academics and stakeholders including directors, investors, regulators and women’s rights advocates.