Do Female on Corporate boards impact firm performance in Europe?

Do Women on the Board
Increase the Firm
Performance of
Companies in Europe?
An analysis from Veronica, Davide,
Mohib, Tze and Johannes

Agenda
February 20, 2019 - 2
IBUS 704 - Comparative Corporate Governance
Veronica, Davide, Mohib, Tze, Johannes
Do women on the board increase
the firm performance of companies in Europe?
Executive Summary
Literature Review
Our Research
Conclusion
Q&A
Theoretical Framework
Introduction

Topic Introduction
February 20, 2019 - 4
Over the last few years pressure to introduce women on boards
increased. More and more countries are enacting laws that
establish a minimum quota of women in the board of directors
In Norway, for example, each sex has to represent at least 40
percent of the members of the board.
Moreover, often the pressure is more cultural than coercive.

Topic Introduction
February 20, 2019 - 5
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%
Italy
France
Belgium
Germany
Slovenia
UK
Netherlands
Growth of women on boards, Oct 2010 – Apr 2016
Over the last few years many countries in Europe
have experienced a growth of female board
members that has never been seen before
From October 2010 to April 2016, the share of
women on boards increased of 25.5% in Italy, 24.8%
in France, 16.1% in Belgium, 14.6% in Germany,
14.1% in Slovenia, 13.7% in UK and 13.2% in the
Netherlands.
Some countries, such as Sweden and Finland, have a
high percentage of women on boards even if it is not
required

Theoretical Framework
February 20, 2019 - 6
Echelon theory- emphasizes how the cognitive frames of
members in top management teams (TMTs) are important
determinants of a firm outcome.
Assumption- characteristics such as gender shape a
leader’s experiences and values in ways that influence
what information they process and how they process it.
Cognitive frames- personalized interpretations of
circumstances that stem from individuals’ experiences,
values, and personalities.
Diversity: a double-edge sword- the presence of women
in leadership teams may not have positive performance
implications if the rest of the team excludes rather than
includes the female members and their contribution
Is this upward trend relevant?
Do women on board influence
performance in Europe?
How does the percentage of women on
board influence performance in Europe?

Literature Review
February 20, 2019 - 7
• The literature shows controversial findings about the impact that women on boards have on
performance.
• Some research, such as the one conducted by Credit Suisse in 2012 testing 2360 companies for
6 years, has found a positive relation between the percentage on board and firm
performance (Credit Suisse, 2012).
• Other research, such as the one conducted by the Italian agency responsible for regulating the
Italian financial market, has found that the relation follows a U-shape, positive only when the
percentage of women on boards exceeds the threshold of 17-20% (Consob, 2018)
• Moreover, different research suggests that the impact of women on firm performance is
significant only in small and badly governed firms (Ionascu, Scarin, Minu, 2018)
• Some meta-analyses suggest that there is no significant correlation between the presence of
women on boards and firm financial performance, but there is a positive relation with a firm
non-financial performance (Velte, 2017)1.
• Others have found that female board representation is positively related to accounting return
but not to market return (Post, Byron, 2015)2.
1 – Conducted at the Leuphana University of Lueneburg combining the results of over 200 studies.
2 – Conducted by two professors from the Georgia State University and Lehigh University
Controversial
Less Significant
Limited Circumstances

Our Research – By Country
February 20, 2019 - 8
• Measuring performance through Return On Total Assets
(ROTA)
• On average, all 3 countries (France, Germany, UK) have
more than 1 woman on the board and a positive ROTA
• Slightly positive relationship (correlation) between the
two variables, females on the board and firm
performance
• But causality not clear (Do more females influence the
ROTA positive or the other way around?)
No. of Females
on the Board
ROTA Correlation (No. of
Females and ROTA)
Mean Mean
France 2.027 0.0642 0.007410769
Germany 1.007 0.0477 0.046982725
UK 1.058 0.0902 0.023955770
Europe 1.240 0.0494 0.028931964
Average Number of
Female Board Members
by Country

Our Research – By Country
February 20, 2019 - 9
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0 1 2 3 4 5 6 7 8 9
AverageROTA
Number of Females on the Board
Average ROTA per Number of Females on the Board
Europe Germany France UK
- Firms from Germany, France and the UK perform
better than the average European company
- Specifically companies with 4 and 8 woman on the
board did well
- Just considering between 0 and 9 females on the
board
- UK: just unitary board system
- Germany: just dual tier board system
- France: choice between 1- or 2-tier system

Our Research – By Industry
February 20, 2019 - 10
Average Number of Female Board Members by Industry
No. of Females
on the Board
Females and ROTA)
Mean Mean
Basic Materials 1.094 0.0321 0.011928032
Consumer Goods 1.345 0.0457 0.026693062
Consumer Services 1.459 0.0664 0.059003281
Health Care 1.231 -0.0129 0.116063146
Industrials 1.124 0.0621 0.002206249
Oil & Gas 1.255 0.0417 0.027258805
Technology 0.997 0.0465 0.116101904
Telecommunications 1.858 0.0869 -0.043897875
Utilities 1.464 0.0456 0.052795648
- Technology businesses are the only businesses which have on average
less than one woman on the board, but highest correlation
- Health Care companies had a negative performance
- Mostly positive correlations besides Telecommunications
- Telecommunications: Although only industry with negative correlation,
highest number of females and highest ROTA
Highest number
Lowest number

Our Research – By Family and Non-family firms
February 20, 2019 - 11
Average Number of
Female Board Members
by Company Type
No. of Females
on the Board
Females and ROTA)
Mean Mean
Family Firms 1.168 0.0409 0.014693868
Non-Family Firms 1.280 0.0540 0.055927905
Average ROTA
by Company Type
• Both firm types have on average more than 1 woman on the
board
• On average, there are approx. 10% more females on the
board in non-family firms
• Non-family firms outperform family-firms considering the
average ROTA (approx. 30%)
• Positive correlation between the number of females on the
board and ROTA for both firm types

Our Research
February 20, 2019 - 12
y = 0.0075x + 0.04
R² = 0.0008
-2
-1.5
-1
-0.5
0
0.5
1
0 1 2 3 4 5 6 7 8 9 10
ROTA
Number of Females on the Board
ROTA per Number of Females on the Board
• Positive correlation (0.029) between the number
of females on the board and the ROTA
→ there is a small relationship
→ no information about causality
• Orange trendline equals the linear regression line
(maybe not a linear relationship?)
→number of females has little impact on
performance (causality!)
• R2 is very low → Model does not explain the real
relationship of variables very well
• Control for other variables, which also influence
the relationship, to get a better model
No. of Females on Board ROTA
No. of Females on Board 1
ROTA 0.028931964 1

Conclusion
February 20, 2019 - 13
Board size R&D Expenses
- Controversial findings in the literature
- Mainly small positive relationships (correlations) between the number of females on the board and firm performance (ROTA) in
different countries, different industries, and in different firm types
- One negative relationship in Telecommunications industry
- Overall highest correlation in the Technology industry
- Linear regression estimates relationship not good enough (very low R2) → Which other factors have an impact?
Firm size
?

Do women on the board increase the firm performance of companies in Europe?
February 20, 2019 - 14
Thank you - Q&R Session

Appendix
Do Women on the Board
Increase the Firm
Performance of

Appendix - Dataset
February 20, 2019 - 16
14230 Company Datasets
2213 Different Companies
Between 2007 and 2015 812 Family Firms
24 European Countries
9 Industries

Appendix - Dataset
February 20, 2019 - 17
Average Females on the Board ROTA
Count Mean Std. Dev. Min Max Mean Std. Dev.
France 1313 2.026656512 1.563704907 0 9 0.064273811 0.102992905
Germany 1798 1.006674082 1.375903591 0 9 0.047749714 0.112982354
UK 2554 1.057948316 1.016399729 0 6 0.090235981 0.423118174
Europe 14209 1.240481385 1.282002364 0 9 0.049349382 0.334071389
Number of Samples of All Countries in the Dataset
• Austria 274
• Belgium 440
• Croatia 50
• Cyprus 21
• Czech 59
• Denmark 372
• Finland 529
• France 1313
• Germany 1798
• Greece 1430
• Hungary 43
• Ireland 194
• Italy 982
• Netherlands 405
• Norway 629
• Poland 173
• Portugal 210
• Romania 40
• Slovenia 99
• Spain 605
• Sweden 909
• Switzerland 722
• Turkey 358
• UK 2554
Number of Female
Board Members per
Country According to
the Dataset

Appendix - Dataset
February 20, 2019 - 18
Count Mean Std. Dev Mean Std. Dev
Basic Materials 1180 1.094067797 1.143836407 0.032119697 0.662253307
Consumer Goods 2317 1.344842469 1.279483189 0.045676811 0.594968381
Consumer Services 2074 1.458534233 1.357286165 0.066422259 0.150287758
Health Care 1032 1.230620155 1.248515084 -0.012884063 0.319646578
Industrials 4490 1.123608018 1.240369230 0.062113074 0.092900604
Oil & Gas 883 1.254813137 1.349253192 0.041671236 0.124349560
Technology 1359 0.997056659 1.096247525 0.046468989 0.157524037
Telecommunications 346 1.858381503 1.615200166 0.086913518 0.070777221
Utilities 528 1.464015152 1.442980975 0.045645270 0.068917557
Grand Total 14209 1.240481385 1.282002364 0.049349382 0.334071389
Mean Std. Dev. Mean Std. Dev.
Family Firm 1.168283508 1.199914107 0.040859061 0.500541073
Non-family Firm 1.280301376 1.323482949 0.05403213 0.186899326
Grand Total 1.240481385 1.282002364 0.049349382 0.334071389
• Data structured according to industries
• Displays for every industry the average number
of females on the board and its standard
deviation (Std. Dev.)
• Displays for every industry the average Return
On Total Assets (ROTA) and its standard
deviation (Std. Dev.)
• Data structured according to family and non-
family firms
• Displays for every type the average number of
females on the board, the ROTA and their
standard deviations (Std. Dev.)

Appendix - Dataset
February 20, 2019 - 19
• Over time (between 2007 and 2015), the
average number of females on the board
rose in the dataset
• This trend goes along with several other
research observations
Average No. of
Females on the Board
2007 0.839
2008 0.881
2009 0.890
2010 1.004
2011 1.159
2012 1.298
2013 1.471
2014 1.596
2015 1.844
Grand Total 1.240
Average Number of Female Board Members Over Time

Regression Statistics
Multiple R 0.028931964
R Square 0.000837059
Adjusted R Square 0.00076673
Standard Error 0.333943293
Observations 14209
Coefficients Standard Error t Stat P-value Lower 95% Upper 95%
Intercept 0.039997077 0.003898358 10.25998014 1.30061E-24 0.032355785 0.04763837
No. of Females on Board 0.007539254 0.002185332 3.449935278 0.000562349 0.003255717 0.011822791
Appendix - Dataset
February 20, 2019 - 20
• The coefficient for No. of Females on Board is very low → slightly positive relationship
• Regression model does not explain relationships of variables well (low (Adjusted) R Square)
• Other factors, which impact the relationship, have to be included in the analysis to get
better prediction
Regression Output

Appendix - Methodology
February 20, 2019 - 21
Research Question:
Do Women on the Board Increase the Firm Performance of
Performance Measure ROTA:
• Operating income / total assets
• ROTA instead of ROE since we are not just considering
shareholders (ROTA considers debt as well)
Analysis of current trends and state of the art research
Descriptive Statistics and Correlation for the overview
1. Data divided by countries (Germany, France, UK)
2. Data divided by industries (8 different industries)
3. Divided by company type (family and non-family firm)
→ Linear regression for first interpretation (bad model)
→ Model has to be adjusted
Presentation Research Paper
… build on prior findings
Adjusting the regression Model
(include more factors; multiple regression)
• Board size
• Firm Size
• R&D expenses
• Firm age
• …..
Expected Outcomes of the Research
• If possible, try to explain why woman have a positive,
negative, no impact on the firm performance
• Find out “optimal” woman count for performance, if
there is one
• Compare our findings with literature findings

Bibliography
February 20, 2019 - 22
Bruno, A. Ciavarella, N. Linciano. (2018). Boardroom gender diversity and performance of listed companies in Italy. CONSOB. Retrieved on February 18, 2019, from
http://www.consob.it/documents/46180/46181/wp87.pdf/d733b58a-44b4-42de-98c7-3c89a82a0182
Catalyst. (2018). Women on Corporate Boards. Catalyst. Retrieved February 18, 2019, from https://www.catalyst.org/knowledge/women-corporate-boards
Chadwick, I. C., & Dawson, A. (2018). Women leaders and firm performance in family businesses: An examination of financial and nonfinancial outcomes. Journal of
Family Business Strategy, 9(4), 238-249. doi:10.1016/j.jfbs.2018.10.002
Credit Suisse. (2012). Gender diversity and corporate performance. Credit Suisse. Retrieved on February 18, 2019, from https://www.calstrs.com/sites/main/files/file-
attachments/csri_gender_diversity_and_corporate_performance.pdf
European Commission. (2018). Quotas get more women on boards and stir change from within. Horizon. Retrieved February 18, 2019, from https://horizon-
magazine.eu/article/quotas-get-more-women-boards-and-stir-change-within.html
Hambrick, D. and Mason, P. (1984). ‘Upper echelons: the organization as a reflection of its top managers’. Academy of Management Review, 9, (2), pp.193–206.
Institutional Shareholder Services, Inc. (2017). Harvard Law School. Retrieved February 18, 2019, from https://corpgov.law.harvard.edu/2017/01/05/gender-parity-on-
boards-around-the-world/
Ionascu, M., Ionascu, I., Sacarin, M., & Minu, M. (2018). Women on Boards and Financial Performance: Evidence from a European Emerging Market. Sustainability,
10(5), 1644. doi:10.3390/su10051644
Post, C., & Byron, K. (2015). Women on Boards and Firm Financial Performance: A Meta-Analysis. Academy of Management Journal, 58 (5), 1546-1571.
doi:10.5465/amj.2013.0319
Velte, Patrick. (2017). Do Women on board of directors have an impact on corporate governance quality and firm performance? A literature review. International Journal
of Sustainable Strategic Management, 5 (4), 302-346. doi:10.1504/IJSSM.2017.089125

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