Does Board Gender Diversity Matter? Evidence from Indian Listed Firms

Abstract

The purpose of underlying study is to improve the understanding that in which way women directors may influence firm corporate outcomes. To conduct this study, data taken from Indian listed firms on National stock exchange for the period of 20082014 to examine the impact of board gender diversity on the firm’s corporate outcomes. Particularly, this study investigates the influence of board gender diversity on three different constructs, firm’s market performance, risk taking and strategic change. First, this study investigates that how market respond to presence of women on corporate boards. Second, this study investigates influence of women directors on firm’s risk taking. Risk taking tendency of women directors may propel or dispel corporate strategy initiatives of the firm in line with internal or external environment of the firm. Therefore, impact of board gender diversity on corporate strategic change is also investigated.

Drawing on the role congruity theory, this study hypothesize that the nature of the high-tech sector is consistent with the gender roles culturally defined for women in this sector. This notion is tested by using a panel dataset of Indian high-tech and nonhigh-tech firms. The results show a positive and significant impact of women directors on market performance of firms in the high-tech sector, while this impact is negative on the firms’ performance in the non-high-tech sector. However, the positive effect of women directors on market performance in the high-tech sector does not hold in family-owned tech firms. Thus, study conclude that performance consequence of women directors hinges on the (in) congruity between societal defined female gender role and expected characteristics of leadership. Drawing on the contingency framework, this study further contend that the influence of women executives on firm outcomes like risk taking depends largely on the organizational context of the firm such as the industry in which it operates. To investigate this proposition, this study compares the influence of board gender diversity on firm risk-taking level in high-tech and in non-high-tech sectors. Findings indicate that female executives operating in high-tech sectors take more risk than their counterparts female executives who operate in non-high sector. Interestingly, analysis also reveals that family ownership negatively moderates the impact of female executives on risk-taking in high-tech firms.

Drawing on upper echelon theory, investigation for board gender diversity and strategic change is carried out in high-tech and non-high-tech industry. Results reveal that women directors positively affect strategic change in high-tech firms and negatively affect the strategic change in non-high-tech industry. Furthermore, findings suggest that financial slack positively moderate the relationship of board gender diversity and strategic change across both high-tech and non-high-tech sector. This study offers new insight to managers and policy makers that strategic involvement of women directors enables board to deal effectively industry environmental changes in high-tech firms suggesting that women directors’ contribution in board strategy is contingent upon industry of the firm.