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Gender diversity of directors Gender

diversity and
and financial performance: financial
performance
is there a business case?
Subba Reddy Yarram and Sujana Adapa 147
UNE Business School, University of New England, Armidale, Australia
Received 21 January 2022
Revised 28 March 2023
Abstract Accepted 17 April 2023
Purpose – Do women contribute to performance of companies on which they serve as board of directors?
Many prior studies examine this issue, but no consensus is reached on the benefits of women taking on
leadership positions. The present study considers this thorny issue from a slightly different perspective. Does
the association between gender diversity and business performance vary across sectors and economic cycles?
Design/methodology/approach – The sample for this study was derived from the firms included in the
S&P Australian Securities Exchange (ASX) 300 Index, and the study period of 2004–2016 allowed authors to
consider the effects of different sectors as well as different economic cycles on the relationship between gender
diversity of boards and business performance. The authors consider the Australian context, which is
somewhat unique from the other Western countries, as quotas on boards of directors are not made mandatory
and the corporate governance practices are principle-based rather than rule-based.
Findings – Employing panel data models, at the aggregate level, the authors find no evidence of board gender
diversity impacting business performance. Consideration of sectoral differences and economic cycles in the
empirical analyses yielded additional insights. In particular, gender diversity has a beneficial association with
performance for businesses in the services and financial sectors after the changes to corporate governance
guidelines relating to diversity in 2010. These economic benefits, however, are not evidenced in the resources
sector.
Research limitations/implications – These findings offer support for critical mass and resource dependence
theories.
Practical implications – The findings of this study have implications for inclusion and diversity policies of
businesses and the society. Specifically, the findings offer support for gender diversity of corporate boards of
directors.
Originality/value – This study highlights that women bring their unique skills and experiences to create
economic value in sectors where they traditionally have more experience and opportunities.
Keywords Board diversity, Gender, Firm performance
Paper type Research paper

Introduction
The relationships between board diversity and business performance are analyzed in the
literature from two perspectives – ethical and economic – and with two aims – equal
opportunity and equal representation (Brammer et al., 2007). The ethical arguments contend
that it is wrong for certain genders or groups to be excluded from boards. Equal
representation is considered an end in itself rather than a means to an end. The economic
arguments of equal opportunity posit that firms excluding a certain gender or a group are
missing an opportunity. Therefore, any management setting that excludes certain groups
leads to sub-optimal outcomes for the business. The economic arguments for equal
representation contend that firms benefit from diversity both directly and indirectly, as more
informed communication with stakeholders is facilitated. Board diversity leads to improved
motivation and productivity. The indirect benefits are realized as external stakeholders such
International Journal of Managerial
Finance
Vol. 20 No. 1, 2024
The authors would like to thank Diana Billimoria, Alison Sheridan and Nam Hoang for constructive pp. 147-167
feedback on an earlier draft. The authors also would like to thank The Editor and an anonymous referee © Emerald Publishing Limited
1743-9132
for their constructive feedback on the original manuscript. Usual disclaimers apply. DOI 10.1108/IJMF-01-2022-0035
IJMF as institutional investors and pressure groups show a positive inclination toward firms that
20,1 improve board diversity.
Robinson and Dechant (1997) highlight the importance of an economic case for diversity.
A well-supported business case for inclusion leads to the acceptance and pursuit of strategies
to attain diversity and inclusion goals more broadly, thus leading to achieving not only
economic outcomes but also ethical outcomes of equal representation for all groups. Previous
studies yielded inconclusive results on the association between gender diversity and financial
148 performance, and the economic case for women’s representation on boards is still not well
established (Carter et al., 2010; Chapple and Humphrey, 2014; Sila et al., 2016; Vafaei et al.,
2015). Given the recent initiatives in Australia aimed at improving board gender diversity
and the inconclusive evidence in previous studies on the association between gender
diversity and performance of boards, the present study sets out to obtain answer for the
following primary research question:
RQ1. How are board gender diversity and corporate financial performance related?
The findings of this study contribute to an evaluation of the business case for gender
diversity. The Australian Institute of Company Directors (AICD, 2017) has been underscoring
the significance of gender diversity in Australia in its quarterly reports. A self-regulatory
approach is adopted in Australia with regard to board gender diversity as stated in the
Australian Securities Exchange (ASX) Corporate Governance Principles and
Recommendations (Principle 1.5, p. 11). Unlike Norway, Iceland, Israel and Spain, where
mandated quotas are employed, a voluntary approach is recommended in Australia that is
similar to Sweden, Finland, the UK and the USA (Sheridan et al., 2015). A number of initiatives
relating to gender diversity in corporate boards in Australia gained momentum after the
introduction of diversity recommendations by the ASX in 2010. The Corporate Governance
Recommendations 3.2, 3.3, 3.4 and 3.5, as amended in 2010, set out the guidelines in terms of
diversity policies and disclosures. Recommendation 3.2 states as follows: “Companies should
establish a policy concerning diversity and disclose the policy or a summary of that policy. The
policy should include requirements for the board to establish measurable objectives for achieving
gender diversity and for the board to assess annually both the objectives and progress in
achieving them” (ASX, 2010, p. 47). Recommendation 3.4 requires companies disclose
information on “the proportion of women employees in the whole organization, women in senior
executive positions and women on the board” (ASX, 2010, p. 47).
A few Australian previous studies have shown a positive relationship between gender
diversity and financial performance of Australian firms (Bonn, 2004; Galbreath, 2018;
Nguyen and Faff, 2007). However, these studies considered either a limited time span or
pertain to an earlier period when there is limited representation of women on boards of
Australian companies. It is difficult to rule out the possibility that the observed positive
association between diversity and performance is due to the fact that high-performing
companies were able to appoint one or more female directors to their boards. In addition,
using the later period of 2004–2011, Chapple and Humphrey (2014) find no evidence to
support a business case for gender diversity in Australia, while Vafaei et al. (2015) find a
positive association between board gender diversity and economic performance for a sample
of 500 firms for the period 2005–2011. Therefore, there is mixed evidence to establish the
association between gender diversity and business performance based on recent literature in
Australia. Further, the time periods included in these two studies (Chapple and Humphrey,
2014; Vafaei et al., 2015) largely pertain to the pre-GFC or Global Financial Crisis (GFC), with
only one year following the introduction of diversity initiatives by ASX and the AICD. While
the GFC did not impact the overall Australian economy significantly, it did have an impact on
some firms in the financial sector given their exposure to overseas credit conditions. Williams
et al. (2015) find evidence of increases in the appointment of independent directors and female
directors by companies in Australia after the GFC. Thus, a study incorporating the recent Gender
period after the diversity recommendations are introduced by the ASX in 2010 is warranted diversity and
in examining the association between gender diversity and corporate financial performance
in Australia. This leads to the second research question as stated below:
financial
performance
RQ2. Has the association between gender diversity of boards of directors and corporate
financial performance been similar or different across the different time periods of
pre-GFC, GFC and the post-GFC when new initiatives on diversity are undertaken? 149
The sectoral composition of Australian economy is a relevant consideration when examining
the role of boards and female representation on boards. While the services sector is large in
Australia, the resources sector has become a dominant segment of the economy, surpassing
the manufacturing sector during the first decade of this century (Bashar, 2015). The gender
pay gap is still a concern in Australia, as women in senior executive positions in Australian
companies received on average 23% less pay (in terms of base pay and incentives pay) for the
period of 2002–2013 (Hutchinson et al., 2017). Furthermore, the gender pay gap varies across
different segments of the services sector, with health care displaying a narrow gap while
utilities and telecommunications have wide gaps (Hutchinson et al., 2017). Given this
evidence, it is important to consider different sectors of the economy when examining
the relationship between gender diversity of boards and economic performance. This leads to
the following research question:
RQ3. Are there any visible sectoral differences in understanding the association between
board gender diversity on business performance?
Context is highly relevant for understanding the relationship between gender diversity and
financial performance. The impact of gender diversity on financial performance can vary
depending on the specific context, including factors such as industry, country and
organizational culture. Moreno-G
omez and Calleja-Blanco (2018) examine the relationship
between women’s presence in corporate positions and firm performance in Colombia, finding
a positive relationship between gender diversity and firm performance. The study suggests
that the impact of gender diversity on firm performance may be context-dependent, with
different countries and industries exhibiting varying results.
It is anticipated that the ethical or economic stance that the firms take may be linked to the
token or critical mass representation of gender on boards, which may have a profound impact
for business performance. The remainder of the paper is organized as follows. The following
section presents an overview of extant literature related to board gender diversity and firm
performance along with various theoretical frameworks of importance. The subsequent
section of the paper presents the methodology adopted and the rationale for the selection of
sample companies for the study. Next, the results obtained from the empirical analysis of
panel data are presented. Following the results, a discussion of findings is presented. Finally,
the conclusions of the article are presented and research limitations are outlined. Theoretical,
practical and methodological implications and avenues for further research from the study
are also discussed in the final section.

Literature review
Boards engage in performing complex tasks, and board diversity presents many challenges
alongside opportunities. Board diversity may enhance board independence and better
monitoring (Adams et al., 2010). Consequently, board diversity is often linked to financial
outcomes of the firm. Board diversity has gained attention in the academic scholarly
literature as a response to the occurrence of many corporate scandals around the world. As a
result, corporate boards are more scrutinized than before, with a visible impact on board
IJMF configuration and its composition. Of various types of diversities represented on boards,
20,1 gender diversity attracted greater attention in scholarly academic research due to the unique
skills and experience that women bring to the effective functioning of boards (Brammer et al.,
2007; Campbell and M
ınguez-Vera, 2008; Hillman et al., 2002). Many countries focus on
embracing initiatives to increase board diversity. The legislative requirements in certain
countries require companies to include women directors on boards. For example, gender
quotas have been created on boards in 14 countries alongside gender codes in another 16
150 countries to enhance board performance. The gender quotas introduced in Norway and
France are due to ethical and social motives in order to promote equality, diversity and
inclusive outcomes.
Previous research on board gender diversity and corporate financial performance has
considered multiple theoretical frameworks drawn from the fields of economics, psychology
and organizational studies (Carter et al., 2010; Terjesen et al., 2009). These theories include
resource dependence theory, human capital theory, agency theory and social psychological
theory. While all these identified theoretical frameworks add value in unpacking the impact
of board gender diversity on business performance, specific attention needs to be directed
toward understanding the criticality of resource dependence and gender representation on
boards in the form of tokenism or critical mass.
The economic case for board gender diversity is supported by many theories whereby
board diversity is linked to board size and composition. Diversity, board size and composition
enhance the board effectiveness resulting in increased firm performance and productivity
(van der Walt and Ingley, 2003). Carter et al. (2010) find a positive and significant relationship
between board gender diversity and firm value measuring Tobin’s Q for publicly traded
Fortune 1,000 companies. Similarly, Adams and Ferreira (2009) find a significant association
between board gender diversity and firm performance in a sample of US-based companies.
Adams and Ferreira (2009) suggest that gender diversity on boards improves board
attendance at meetings and leads to effective board monitoring, but they find no support for
mandated quotas as these reduce the value of well-governed firms. Similarly, Yang et al. (2019)
find that the mandated quotas in Norway have a negative impact on financial performance.
The boards of directors monitor the actions of the CEO and the executive team and perform
the stewardship role for shareholders and other stakeholders. Carter et al. (2010) note that
women directors have the power to better monitor the company’s progress. Similarly, Dang
et al. (2018) identify that women directors effortlessly carry out monitoring duties in contrast
to their male counterparts. Terjesen et al. (2009) outline that women display higher levels of
accountability. Women also prepare better for board meetings. Many scholars emphasize that
women directors bring new perspectives to boards and possess unique skillsets and
competencies that enhance board performance (Francoeur et al., 2008). Campbell and M
ınguez-
Vera (2008) find that gender diversity in Spanish companies generates economic growth and
that investors do not penalize companies that increase their gender diversity.
Diverse boards help improve openness in corporations, leading to better disclosure and
reduced exploitation of insider information. Higher quality information helps investors to
discover prices more efficiently. Gul et al. (2011) find that stock prices of firms with greater
gender diversity incorporate more information particularly in the case of firms with weaker
corporate governance suggesting that gender diversity compensates for weak corporate
governance.
However, other studies (Farrell and Hersch, 2005; Nina et al., 2006; Rose, 2007; Shrader
et al., 1997) report no evidence to support the association between board gender diversity and
firm performance. For a sample of the US companies, Carter et al. (2010) find no significant
influence of board diversity on financial performance. Their results do not show any support
for either a positive or a negative relationship between board diversity and performance,
suggesting that making a business case for or against board diversity is fraught with
many complexities. Previous studies in Australia are largely based on the period prior to Gender
2010. In an earlier study, Sheridan (2001) documents the paucity of women on the boards for diversity and
the year 2000 and observes that the basis for appointment is “who you know, not what you
know.” Public profiles and family connections dominated the appointment process rather
financial
than business acumen as the primary consideration in the appointment of board members performance
(Sheridan and Milgate, 2005). For the year 2003, Kang et al. (2007) find that for a sample of 100
companies, 33 companies did not have any female directors, while 51 companies had only one
female director. Dimovski et al. (2016) examine the corporate boards of real estate companies 151
in Australia. From a total of 167 board members in 35 companies for the year 2011, they find
only 8 women.
Bonn (2004) finds a significant positive association between gender diversity and financial
performance of a sample of manufacturing firms for the year 2004. Similarly, for the period
2004–2005, Galbreath (2018) finds a positive relationship between gender diversity and
financial performance for a sample of ASX300 firms. Another study considers the
relationship between gender diversity and market valuation of Australian firms. Nguyen
and Faff (2007) find that for a sample of large 500 Australian companies for the period
2000–2001, firms with one or more women directors are associated with a higher valuation
compared to firms without any women directors. The studies conducted by Adams and
Ferreira (2009), and Matsa and Miller (2011) report both positive and negative associations
between the variables of board gender diversity and firm performance. In summary, the
empirical results relating to the influence of board gender diversity and firm performance are
mixed and, therefore, inconclusive. This is similar to the observations of Eagly (2016) who
summarizes that the previous research findings of the relationship between gender diversity
and financial performance are mixed.

Theoretical predictions and hypotheses

Figure 1 describes the conceptual framework and hypotheses examined in this study. Boards of
directors provide four important functions in improving decision-making in organizations
(Preffer and Salancik, 1978). These four functions are: (1) providing expertise and knowledge
about external uncertainties, (2) establishing communication channels with external networks

No female directors Token representation A critical mass Balanced board

Gender Diversity

Visibility ASX Participative boards

Polarisation Diversity Monitoring and problem-
Assimilation Initiatives solving
Global Competitive advantage
Financial
Crisis
Disharmony and conflict
Slow decision-making
Financials H1
H2
H5 Resources Sectors H3
Services
H4

Negative/No association Positive Figure 1.

Gender diversity,
Corporate Financial Performance (CFP)
board behavior and
corporate financial
performance
Source(s): Authors own creation/work
IJMF and stakeholders, (3) gaining support or commitment from external parties and (4) developing
20,1 legitimacy for the firm with external stakeholders. Extensions made by Hillman et al. (2000) to
resource dependence theory suggest that diversity in board membership helps companies
realize diversity of expertise in understanding and dealing with complex and uncertain external
environment. Different types of diversity may bring different types of benefits depending on the
specific context and culture. In countries with a greater proportion of homogenous population,
gender diversity is more important than other forms of diversity, and improvements in gender
152 diversity may bring more benefits (compared to other forms of diversity) leading to improved
financial performance (Carter et al., 2010). Women directors with networks to external
organizations help managers to gain access to external resources and information, improve
communication with external and internal stakeholders, and help develop legitimacy through
sustained commitment to social objectives and financial prudence. Resource dependence theory
predicts that gender diversity of boards has a positive consequence for business performance.
Social psychological theory emphasizes the role of group dynamics and suggests that
board behavioral integration determines the effectiveness of board functioning. The degree of
group cohesion or conflict may result in a positive or a negative relationship between board
gender diversity and corporate financial performance. Related to group dynamics are
theories of tokenism (Kanter, 1977) and critical mass (Dahlerup, 2006). Tokenism refers to a
situation where a member may be appointed from a specific demographic category to satisfy
demands for such representation. Kanter (1977) argues that tokenism leads to problems of
visibility, polarization and assimilation. Given their lone or small group status, tokens may
feel a sense of increased visibility. This may lead tokens to believe that they are under greater
scrutiny at all times and that even a small mistake may lead to a bigger consequence,
subjecting tokens to performance pressures. Tokenism may also influence the behavior of the
majority group who may consciously or unconsciously exclude tokens from social networks
thus leading to polarization of board members. Tokens in their efforts to assimilate may take
on stereotypical roles and thus the value of their unique skills and experiences may not be
realized. The problem of tokenism is alleviated as a critical mass of female directors leads to
more participative boards. The positive benefits of a critical mass are highlighted in previous
research on board composition and business performance (Joecks et al., 2013; Torchia et al.,
2011) and gender diversity and sustainability (Boulouta, 2013; Cook and Glass, 2018; Konrad
et al., 2008). Therefore, the null hypothesis examined in this study is that gender diversity of
boards has a direct association with business performance of the Australian firms.
H1. Gender diversity is positively associated with corporate business performance.
Moreno-G
omez and Calleja-Blanco (2018) suggests that the impact of gender diversity on firm
performance may be context-dependent, with different countries and industries exhibiting
varying results. Porcena et al. (2020) argue that corporate ethics plays a significant role in the
relationship between diversity and firm performance. The study suggests that corporate
ethics acts as a mediator between diversity and performance, such that a strong ethical
culture enhances the positive impact of diversity on firm performance. Lee and Thong (2023)
focus on the tourism industry and find that board gender diversity has a positive effect on
firm performance and reduces corporate financial distress risk. The study suggests that
gender diversity on corporate boards can help improve risk management and decision-
making, leading to better financial outcomes. Pandey et al. (2022) provide a complexity theory
perspective on the relationship between gender diversity and firm performance. They argue
that the relationship is complex and nonlinear, and that the impact of gender diversity on firm
performance depends on various factors, such as organizational culture and leadership style.
Overall, these articles highlight the importance of context in understanding the
relationship between gender diversity and firm performance. Given these arguments, we
posit that gender diversity can have a positive impact on firm performance, but the nature
and extent of this impact may depend on specific contextual factors and other organizational Gender
characteristics. diversity and
The diversity initiatives introduced by the ASX in recent years are likely to impact board
gender diversity in a positive manner in Australia. Similarly, it is important to consider the
financial
influence of business sectors on the association between gender diversity and corporate performance
financial performance. Women may be represented more in certain sectors based on the
demographic characteristics of customers rather the workforce, and board diversity may be
influenced by the external business environment and proximity to final consumers. Brammer 153
et al. (2007) find that in the UK, boards of firms in sectors such as retail, financial services,
media and utilities have relatively more female participation compared to other sectors such
as resources, construction and engineering, and business services.
Consistent with Lee and Thong (2023), the association between gender diversity and
corporate financial performance may be positive or negative depending on the sector and
time period under consideration. In certain sectors such as resources, gender diversity may or
may not lead to positive performance before or after the introduction of diversity initiatives
by the ASX. However, in other sectors, such as the financial and services sectors, given the
human capital of women in Australia, there is likely to be a positive association particularly in
recent periods when a critical mass of female directors are appointed. A token representation
may cause problems of visibility, polarization and assimilation leading to a negative
association with corporate performance. As gender diversity increases and a critical mass of
female directors is achieved, boards may become more participative and balanced boards
may provide better monitoring and problem-solving. Balanced boards through creativity and
innovation help firms achieve competitive advantage in times of complexity. Thus, in
financial and services sectors, it is hypothesized that there is a positive association between
gender diversity and business performance, particularly after the introduction of diversity
initiatives in Australia, while the effect is expected to be negative in the resources sector.
H2. Gender diversity is positively associated with business performance in the services
sector.
H3. Gender diversity is positive associated with business performance in the financial
services sector.
H4. Gender diversity is negatively associated with business performance in the
resources sector.
Williams et al. (2015) find evidence of increases in the appointment of independent directors
and female directors by companies in Australia after the GFC. The evidence presented by the
AICD also shows that the number of women directors was small before the changes to the
ASX Corporate Governance Principles in 2010. Without visible representation of women on
boards, the impact on corporate financial performance cannot be justified. The representation
of women on boards is commonly explained by tokenism and critical mass approaches
(Adams and Ferreira, 2009). Firms with token women representation on boards struggle to
convince the corporate hierarchy (Brammer et al., 2007). However, when women are
represented in critical mass on boards, they are more confident in putting forward their points
and challenging their male counterparts in senior positions (Adams and Ferreira, 2009). The
findings obtained from extant studies using tokenism or critical mass approaches are less
than conclusive and present varied results across sectors and industries. The role that board
gender diversity plays in financial institutions and within risky situations such as GFC are
underexplored. This leads to the final hypothesis:
H5. Gender diversity is negatively associated with business performance in the period
prior to the Global Financial Crisis.
IJMF Empirical methodology
20,1 Sample and study period
This section describes the sample and analytical approach used in this research. The sample
is derived from the ASSET 4 database of Refinitiv and includes all Australian firms covered
in the database from 2004 to 2016. The sample includes the constituents of the ASX300 Index
(including the additions and deletions) for the period 2004–2016 are covered as part of the
ASSET 4 database for Australia. The final sample consists of 3,040 firm-years with sample
154 firms spread over all sectors. The largest sector (with 24.5% of the sample) is basic materials,
followed by financials (16.7%), energy (14%), industrials (12.5%), then, consumer cyclical and
non-cyclicals (18%). Two important changes occurred during the study period: the GFC and
the introduction of diversity guidelines by the ASX. The empirical analysis incorporates the
interaction of time periods and sectors to consider these major developments and sectoral
differences. Our sample derived from the firms included in the S&P ASX 300 Index and the
study period of 2004–2016 allows us to consider the effects of different sectors as well as
different economic cycles on the relationship between gender diversity of boards and
business performance. We consider the Australian context, which is somewhat unique from
the other Western countries, as quotas on boards of directors are not made mandatory and
the corporate governance practices are principle-based rather than rule-based. Financial and
resources sectors have a huge share of market capitalization in Australia. New initiatives
relating to diversity and inclusion were introduced in Australia in 2010 requiring listed firms
to improve performance in diversity and inclusion.

Measurement of variables
In this study, return on assets (ROA) is employed as a measure of business performance. ROA
is calculated as profit after tax before extraordinary items and discontinued operations
divided by the value of total assets. ROA indicates the ability of a firm to generate income
employing the assets in place. The use of ROA is consistent with many previous studies on
gender diversity and performance (e.g. see Carter et al., 2010). In addition, Tobin’s Q is
employed as an alternative measure in robustness analysis. Tobin’s Q is computed as a ratio
of a firm’s market value of equity, preference shares and book value of debt to its book value
of assets following Chung and Pruitt (1994). This measurement is consistent with Campbell
and M
ınguez-Vera (2008).
Board gender diversity is captured as a percentage of female directors (BGDIV) to total
number of directors on a board. In addition, consistent with previous literature (e.g. see
Campbell and M
ınguez-Vera, 2008), two diversity indices – Blau Index and Shanon Index –
are computed based on proportions of male and female directors to account for variety and
balanced representation for male and female directors on boards.
 
Blau Index ¼ 1  F 2 þ M 2

where, F is proportion of female directors, and M is proportion of male directors.

Shanon Index ¼ −½F * lnðFÞ þ M * lnðM Þ

where, F is proportion of female directors, and M is proportion of male directors.

A 0.5 value of Blau Index implies a completely balanced board with 50% female and 50%
male board members. Shanon Index on the other hand requires a value of 0.69 for a
completely balanced board and any small differences in gender proportions on boards give
rise to a higher or smaller index value and is thus is a more sensitive measure (Baumg€artner,
2006; Campbell and M
ınguez-Vera, 2008).
 A number of factors may determine the type of association between board gender Gender
diversity and business performance. Prior research identifies that board characteristics in diversity and
terms of board size and board independence as well as organizational characteristics such as
firm size, growth and leverage influence both gender diversity and business performance
financial
(Campbell and M
ınguez-Vera, 2008; Chapple and Humphrey, 2014). Consistent with prior performance
studies such as Campbell and M
ınguez-Vera (2008), Carter et al. (2010), Chapple and
Humphrey (2014), Vafaei et al. (2015), board size (BRDSIZE), director independence
(BRDIND), growth (GROWTH), firm size (SIZE) and leverage (LEVERAGE) are employed as 155
control variables. Director independence is calculated as the proportion of independent
directors to total directors. Firm size is measured using total assets. Leverage is computed as
the ratio of total debt to total assets.

Quantitative methods employed

Prior literature employs a variety of econometric models to examine the relationship between
gender diversity and performance. Given the possibility of interrelationships between gender
diversity, performance and governance, this study employs panel data models. Fixed-effects
panel data models that account for unobserved heterogeneity are employed as base models
examining the relationship between board gender diversity and financial performance. These
models account for endogeneity under specific circumstances. It is also possible that gender
diversity and corporate financial performance may be determined simultaneously and may
affect each other. The generalized method of moments (GMM) is a statistical technique
commonly used in econometric analysis to address endogeneity problems that can arise in
cross-sectional and panel data analyses. Endogeneity occurs when the explanatory variables
in a regression model are correlated with the error term, which can bias the estimated
coefficients and lead to spurious results. In the context of examining the relationship between
gender diversity and financial performance, endogeneity can arise due to various factors,
such as selection bias, reverse causality and omitted variables. For example, firms that
perform well may be more likely to have higher gender diversity, or it may be the case that
firms with higher gender diversity are more likely to adopt practices that lead to better
financial performance. In both cases, the relationship between gender diversity and financial
performance may be spurious and not reflect a true causal relationship. GMM is particularly
useful in addressing endogeneity problems in panel data analyses, where the same firms are
observed over multiple time periods. GMM allows for the estimation of dynamic panel data
models that consider the possibility of endogeneity, by using lagged values of the
explanatory variables as instruments. To address the issues of interrelationships, two-step
system GMM models with Windmeijer correction are also employed in this study.
Separate models are employed for each of the measures of diversity. In addition, in the
GMM models, interactions relating to various sectors and the GFC sub-periods are also
incorporated. The impact of GFC on the relationship between diversity and performance is
analyzed by employing the pre (2004–2007), during (2008–2010) and post (2011–2016) GFC
periods. The post-GFC period also captures the impact of diversity initiatives on the
association between board gender diversity and business performance. The next section
describes the sample characteristics, main results and a discussion of the findings.

Results and discussion

Descriptive statistics
Table 1 presents descriptive statistics for the variables employed in this study. For the study
period of 2004–2016, sample Australian firms have an average of approximately 12%
female directors. This represents an improvement compared to the 10.35% reported by
Kang et al. (2007) for a sample of 100 large firms in 2003. More than half of the Australian
IJMF Observations Minimum p25 p50 Mean p75 Maximum Skewness Kurtosis SD
20,1
BGDIV 3,040 0.000 0.000 0.125 0.119 0.200 0.714 0.712 3.020 0.120
Blau Index 3,040 0.000 0.000 0.219 0.181 0.320 0.500 0.137 1.535 0.166
Shanon Index 3,040 0.000 0.000 0.377 0.282 0.500 0.693 0.054 1.338 0.251
BRDSIZE 3,040 3.000 5.000 7.000 6.866 8.000 20.000 0.837 4.466 2.074
BRDIND 2,994 0.000 0.500 0.667 0.607 0.800 1.000 0.819 3.112 0.230
TOBINSQ 4,914 0.395 0.781 1.126 1.797 1.869 4.888 1.622 4.919 1.158
156 ROA 5,136 0.486 0.037 0.053 0.007 0.108 0.245 1.389 4.554 0.177
GROWTH 5,246 0.410 0.990 1.660 2.327 2.960 7.710 1.504 4.526 1.916
Total assets 5,380 0.009 0.100 0.415 2.408 3.948 19.180 2.653 9.135 4.737
LEVERAGE 5,369 0.000 0.006 0.173 0.192 0.315 0.577 0.584 2.288 0.177
Note(s): BGDIV is computed as the percentage of female directors to total directors. The Blau Index and
Shanon Index are computed based on proportions of female and male directors to account for balanced
representation for male and female directors on boards. BRDSIZE is the total number of directors on a board.
BRDIND captures the proportion of independent directors to total number of directors. TOBINSQ is measured
as a ratio of a firm’s market value of equity, preferred stock and book value of debt to its book value of assets.
ROA is net income before extraordinary items and discontinued operations divided by the total assets.
GROWTH is calculated as the ratio of market value to book value. Total assets are in $billion. LEVERAGE is
Table 1. calculated as the ratio of total debt to total assets
Descriptive statistics Source(s): Authors’ own creation/work

firms have at least one female board of director, and that about 15% of the firms have a sole
female director and approximately 24% of the firms have more than one female board of
directors.
The diversity indices – Blau Index and Shanon Index – show average values of 18% and
28% (Table 1) whereas target indices are respectively 50% and 69% for a completely
diversified board with equal representation for male and female directors. Gender diversity,
as measured by both the Blau Index and Shanon Index, declined from 0.178 to 0.112 and 0.289
to 0.182, respectively, between 2005 and 2010 (trends not reported, but available from
authors). These trends indicate continued progress from the levels observed for 2004 to 2011
by Chapple and Humphrey (2014).
Sample Australian firms have on average seven board members, and that around two-
thirds of these are independent directors. Compared to this, Kang et al. (2007) for a relatively
smaller sample from one year (2003) find a board size of 8.19 and a board independence of
85%. Accounting performance (ROA) of Australian firms is less than 1% for the sample
period, and the average Tobin’s Q value is 1.797. Sample firms have on average 19% long-
term debt in their capital structure and hold $2.4 billion in assets.
Table 2 provides a comparison between firms with and without female directors on their
boards. Firms with board representation for women have larger boards, more independent
directors, lower Tobin’s Q and higher business performance. Firms with female board
members have higher growth opportunities, are larger in size and have employed more long-
term debt. These characteristics of sample firms are consistent with the observations of
Adams and Ferreira (2009) who find that boards with female representation are larger, less
volatile have lower stock returns and higher profitability, and have larger boards for a sample
of 1939 US firms for the period 1996–2003.
Table 3 shows differences in gender diversity across different sectors and before,
during and after the GFC. Firms in the resources sector in general have lower levels of
diversity compared to firms in services and in financial sector. These observations are
consistent with Brammer et al. (2007) in the UK. As mentioned earlier, during the GFC,
gender diversity lost its momentum; however, the progress is restored during the post-GFC
period.
 Gender
Without female With female diversity and
N Mean N Mean Difference t-value financial
BRDSIZE 1,263 5.863 1777 7.579 1.715*** 24.612 performance
BRDIND 1,245 0.550 1749 0.648 0.098*** 11.747
TOBINSQ 1,222 1.532 1736 1.361 0.172*** 4.167
ROA 1,251 0.005 1742 0.039 0.043*** 7.760 157
GROWTH 1,198 2.156 1727 2.329 0.173** 2.429
Total assets (in $billion) 1,260 1.298 1772 5.481 4.182*** 21.537 Table 2.
LEVERAGE 1,255 0.180 1769 0.224 0.044*** 7.317 Comparison of firms
Note(s): Variable descriptions are provided in Table 1. *** indicates significance at 0.01 level with and without
Source(s): Authors’ own creation/work female directors

BGDIV Blau Index Shanon Index

Panel A: Select sectors

Resources 0.073 0.115 0.184
Financials 0.160 0.239 0.370
Services 0.146 0.219 0.340
Panel B: GFC
Pre 0.112 0.181 0.294
During 0.077 0.123 0.200
Post 0.132 0.197 0.304
Note(s): BGDIV is the percentage of female directors to total directors. The Blau Index and Shanon Index are Table 3.
diversity based measures of board gender diversity. GFC periods refer to pre (2004–2007), during (2008–2010) Board gender diversity
and post (2011–2016) Global Financial Crisis across sectors and
Source(s): Authors’ own creation/work around GFC

Table 4 presents correlations among independent variables employed in the study. Even
though correlations are significant among some of the variables, the sizes of these coefficients
are not high enough to indicate potential issues relating to multi-collinearity. Further, all
independent variables are winsorized at 1% to avoid the undue influence of outliers on the
estimated coefficients in empirical models.

ln(BRDSIZE) BRDIND TOBINSQ ROA GROWTH SIZE LEVERAGE

ln(BRDSIZE) 1
BRDIND 0.173* 1
TOBINSQ 0.052 0.012 1
ROA 0.184* 0.112* 0.047 1
GROWTH 0.014 0.014 0.009 0.097* 1
SIZE 0.579* 0.315* 0.015 0.120* 0.074* 1
LEVERAGE 0.221* 0.07 0.024 0.161* 0.083* 0.224* 1
Note(s): Size is measured as log transformed total assets. Descriptions for other variables are provided in
Table 1. * indicates significance at 10% Table 4.
Source(s): Authors’ own creation/work Correlations
IJMF Gender diversity and performance – fixed-effects analysis
20,1 Table 5 presents findings of the role of gender diversity on performance. Separate models
were used to examine the influence of each of the gender diversity measures on performance.
Panel fixed-effects models show that board gender diversity has no significant influence on
the accounting performance of the sample of Australian firms during the study period. These
findings are consistent with Chapple and Humphrey (2014) who employed a portfolio return
as a proxy for performance for the study period 2004–2011 for a sample of Australian firms
158 but inconsistent with Vafaei et al. (2015) who employed for the period 2005–2011. However,
the findings of fixed-effects analysis are not robust given that dynamic relationships among
key factors are not addressed. Board size and the leverage of the firm have significant
negative influences on accounting performance. On the other hand, firm size and growth
opportunities have significant positive influences.
While panel data models address the issue of unobserved heterogeneity, they do not
address the interrelationships between board gender diversity, performance and governance
factors. The present study, therefore, employs GMM models to control for endogeneity and to
incorporate dynamic relationships between diversity, performance and other factors.

Diversity and performance – dynamic panel data analysis

Results from the two-step system GMM models are presented in Tables 6 and 7. It is
important to verify the validity of instruments employed in these models before examining
estimated coefficients and their significance. Both autocorrelation tests, and Sargan and

Model 1 Model 2 Model 3

BGDIV 0.016
(0.39)
Blau Index 0.013
(0.41)
Shanon Index 0.009
(0.45)
ln(BRDSIZE) 0.058*** 0.058*** 0.058***
(3.23) (3.20) (3.17)
BRDIND 0.008 0.008 0.008
(0.41) (0.41) (0.41)
GROWTH 0.012*** 0.012*** 0.012***
(3.57) (3.57) (3.57)
SIZE 0.062*** 0.062*** 0.062***
(8.16) (8.16) (8.16)
LEVERAGE 0.293*** 0.293*** 0.293***
(8.93) (8.94) (8.95)
Year Yes Yes Yes
Industry Yes Yes Yes
Intercept 1.054*** 1.054*** 1.054***
(7.11) (7.11) (7.11)
Firm-years 2,851 2,851 2,851
Adj. R2 0.148 0.148 0.148
Log-likelihood 2648.174 2648.196 2648.225
F-statistic 12.303 12.328 12.341
Table 5. Probability 0.000 0.000 0.000
Panel analysis of ROA Note(s): t or z statistics in parentheses
and the role of gender *** indiates significance at 1%
diversity Source(s): Authors’ own creation/work
 Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9

ROAt-1 0.378** 0.384** 0.389** 0.356** 0.385** 0.470*** 0.351** 0.385** 0.465***
(2.34) (2.41) (2.47) (2.20) (2.39) (3.09) (2.17) (2.42) (3.05)
BGDIV 0.085 0.080 0.053 0.085 0.079 0.093 0.085 0.075 0.108
(1.50) (1.41) (0.84) (1.49) (1.39) (1.37) (1.48) (1.34) (1.49)
ln(BRDSIZE) 0.103* 0.100* 0.097 0.099* 0.100* 0.090 0.099* 0.101* 0.094
(1.70) (1.66) (1.63) (1.67) (1.67) (1.45) (1.67) (1.67) (1.53)
BRDIND 0.008 0.010 0.003 0.007 0.010 0.006 0.006 0.009 0.005
(0.19) (0.22) (0.07) (0.16) (0.23) (0.13) (0.13) (0.21) (0.12)
GROWTH 0.007** 0.007** 0.007** 0.008*** 0.007** 0.007** 0.008*** 0.007** 0.006**
(2.52) (2.58) (2.46) (2.61) (2.56) (2.42) (2.61) (2.57) (2.34)
SIZE 0.010* 0.009* 0.009* 0.009* 0.009* 0.008 0.009* 0.009* 0.009
(1.72) (1.67) (1.68) (1.70) (1.68) (1.48) (1.71) (1.68) (1.57)
LEVERAGE 0.032 0.030 0.032 0.029 0.030 0.030 0.029 0.030 0.033
(1.36) (1.30) (1.39) (1.23) (1.33) (1.35) (1.24) (1.29) (1.49)
PreGFC X BGDIV X RES 0.150
(0.67)
GFC X BGDIV X RES 0.005
(0.04)
PostGFC X BGDIV X RES 0.139
(1.52)
PreGFC X BGDIV X FIN 0.140**
(1.97)
GFC X BGDIV X FIN 0.020
(0.66)
PostGFC X BGDIV X FIN 0.189**
(2.22)
PreGFC X BGDIV X SER 0.148**
(2.29)
GFC X BGDIV X SER 0.049
(1.40)
PostGFC X BGDIV X SER 0.128**
(2.24)

(continued )
performance

159
diversity and
Gender

analysis of ROA and

Table 6.
financial

directors (BGDIR)
Dynamic panel

percentage of female
 20,1

160
IJMF

Table 6.
Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9

Number of observations 2,752 2,752 2,752 2,752 2,752 2,752 2,752 2,752 2,752
F-statistic 10.384 10.398 12.039 10.684 10.653 12.725 11.126 11.483 13.602
Probability 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
AR(1) 4.011 4.082 4.113 3.910 4.052 4.606 3.890 4.090 4.560
Probability 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
AR(2) 0.738 0.755 0.752 0.667 0.758 1.011 0.648 0.758 0.986
Probability 0.460 0.450 0.452 0.505 0.448 0.312 0.517 0.449 0.324
Number of Instruments 40.000 40.000 40.000 40.000 40.000 40.000 40.000 40.000 40.000
Hansen 40.117 40.418 40.365 39.261 40.297 42.342 38.890 41.003 42.121
Probability 0.154 0.146 0.147 0.176 0.149 0.104 0.187 0.132 0.109
Sargan 33.872 34.052 34.517 33.045 33.717 33.639 32.816 34.164 33.855
Probability 0.377 0.369 0.348 0.416 0.384 0.388 0.427 0.364 0.378
Note(s): Two-step dynamic panel data models with Windmeijer correction are employed to examine the association between performance and gender diversity
t statistics in parentheses
***, ** and * indicate significance at 1%, 5% and 10%
Source(s): Authors’ own creation/work
 Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9

ROAt-1 0.349** 0.359** 0.362** 0.326* 0.358** 0.464*** 0.321* 0.361** 0.454***
(2.09) (2.19) (2.20) (1.94) (2.16) (2.99) (1.92) (2.21) (2.91)
Blau Index 0.094** 0.087* 0.079 0.093** 0.086* 0.085 0.093** 0.081* 0.097*
(1.99) (1.85) (1.48) (1.97) (1.84) (1.65) (1.97) (1.75) (1.75)
ln(BRDSIZE) 0.110* 0.105* 0.106* 0.107* 0.106* 0.096 0.107* 0.106* 0.098
(1.78) (1.72) (1.74) (1.76) (1.73) (1.52) (1.78) (1.72) (1.55)
BRDIND 0.012 0.013 0.009 0.011 0.014 0.008 0.009 0.013 0.008
(0.26) (0.28) (0.19) (0.22) (0.29) (0.17) (0.19) (0.27) (0.19)
GROWTH 0.008*** 0.008*** 0.008*** 0.008*** 0.008*** 0.007** 0.008*** 0.008*** 0.007**
(2.66) (2.72) (2.67) (2.75) (2.71) (2.56) (2.76) (2.70) (2.44)
SIZE 0.011* 0.010* 0.010* 0.010* 0.010* 0.009 0.010* 0.010* 0.009
(1.81) (1.74) (1.77) (1.79) (1.74) (1.54) (1.81) (1.73) (1.59)
LEVERAGE 0.029 0.027 0.029 0.026 0.028 0.029 0.026 0.027 0.032
(1.20) (1.15) (1.19) (1.06) (1.16) (1.27) (1.07) (1.14) (1.40)
PreGFC X Blau Index X RES 0.122
(0.92)
GFC X Blau Index X RES 0.022
(0.26)
PostGFC X Blau Index X RES 0.047
(0.74)
PreGFC X Blau Index X FIN 0.110**
(2.32)
GFC X Blau Index X FIN 0.007
(0.32)
PostGFC X Blau Index X FIN 0.150**
(2.43)
PreGFC X Blau Index X SER 0.115***
(2.72)
GFC X Blau Index X SER 0.042*
(1.70)
PostGFC X Blau Index X SER 0.098**
(2.47)

(continued )
performance

161
diversity and
Gender

analysis of ROA and

financial

(Blau Index)
Table 7.

gender diversity
Dynamic panel
 20,1

162
IJMF

Table 7.
Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9

Number of observations 2,752 2,752 2,752 2,752 2,752 2,752 2,752 2,752 2,752
F-statistic 9.472 9.560 10.498 10.060 9.713 11.680 10.679 10.630 12.596
Probability 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
AR(1) 3.782 3.876 3.862 3.676 3.841 4.503 3.658 3.894 4.423
Probability 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
AR(2) 0.609 0.640 0.635 0.531 0.639 0.972 0.509 0.649 0.929
Probability 0.542 0.522 0.526 0.595 0.523 0.331 0.611 0.517 0.353
Number of Instruments 40.000 40.000 40.000 40.000 40.000 40.000 40.000 40.000 40.000
Hansen 38.373 38.951 39.079 37.390 38.887 41.783 36.934 39.770 41.633
Probability 0.203 0.185 0.182 0.235 0.187 0.115 0.251 0.163 0.119
Sargan 34.029 34.375 34.616 32.964 34.040 34.394 32.648 34.610 34.681
Probability 0.370 0.355 0.344 0.420 0.370 0.354 0.435 0.344 0.341
Note(s): Two-step dynamic panel data models with Windmeijer correction are employed to examine the association between performance and gender diversity
t statistics in parentheses
***, ** and * indicate significance at 1%, 5% and 10%
Source(s): Authors’ own creation/work
Hansen tests are considered. No statistically significant second order autocorrelation was Gender
found in the models. Similarly, both Sargan and Hansen tests show that the instruments are diversity and
valid. Given the validity of instruments, it is appropriate to consider the individual variables
and their significance for performance.
financial
Results presented in Table 6 show that gender diversity as measured by percentage of performance
female directors has no significant association with financial performance for the aggregate
study period of 2004–2016. However, results presented in Table 7 show that gender diversity
as measured by the Blau Index has a significant negative association with performance for 163
the aggregate study period. Similar results were observed with the Shanon Index as a proxy
for gender diversity (not reported, but available upon request). The findings in this study,
therefore, reject the H1.
Given the evidence from previous studies on sectoral differences and the impact of the
GFC on gender diversity, as well as corporate performance it is possible that at the aggregate
level the benefits of gender diversity are not realized in the Australian context. To consider
possible sectoral differences in the association between diversity and performance and to
consider the impact of recent diversity initiatives in Australia starting from 2011, additional
analysis is undertaken by including interactions of sector, gender diversity and time periods
representing the pre-GFC, GFC and the period representing post-GFC and the time of
implementing new diversity initiatives.
Results presented in Tables 6 and 7 support H2 and H3 and show that in both service and
financial firms, board gender diversity has a significant positive influence, specifically during
the pre-GFC period and the post-GFC period when diversity initiatives came into force.
Tables 6 and 7 also incorporate the effects of sector and time period on the relationship
between gender diversity and financial performance. No association between gender
diversity and performance in the resources sector for the pre-GFC, GFC and post-GFC periods
is identified. The findings, therefore, do not support H4 and H5. These findings imply that
there is no inherent economic case for board gender diversity, especially in the resources
sector.

Robustness check
To examine the validity of these findings, Tobin’s Q is employed as an alternative measure of
financial performance. Findings (not presented, but available from authors) provide evidence
of a significant negative association between gender diversity and performance in the
resources sector in the pre-GFC period. However, in the post-GFC period, gender diversity of
boards has a direct association with performance both in the financial and services sectors.
Overall, the results show that in both services and financial firms, board gender diversity has
a significant positive association with business performance, particularly after the diversity
initiatives undertaken by the ASX in 2010.

Discussion of results
Results for the aggregate sample contradict the findings of Vafaei et al. (2015) who find a
positive association between gender diversity and financial performance for the study period
of 2004–2011. In other words, at the aggregate level the full potential of women directors is
not realized in the Australian corporate sector particularly in times of economic uncertainty.
It is plausible that diversity has not led to improved monitoring as the views of a single or a
low proportion of female board members are ignored in the Australian context. It is also
possible that board dynamics have not improved following addition of women directors on
Australian boards as predicted by social psychological theories (Lau and Murnighan, 1998).
Given the lower levels of representation of women on Australian boards during the study
IJMF period particularly across the aggregate sectors, these findings may be considered as
20,1 supporting token theory as proposed by Kanter (1977). At the aggregate level, the problems of
visibility, polarization and assimilation lead to a negative association between gender
diversity and business performance of Australian firms.
Overall, the findings relating to H2 and H3 provide support for the business case for board
gender diversity in the Australian context. These results are consistent with the findings of
Brammer et al. (2007) that women are represented more in sectors such as retail where there is
164 a close proximity to the final consumer. Gender diversity helps firms in navigating a complex
and uncertain external business environment in sectors where they can bring additional
attributes and where their views are not marginalized. Given the positive association between
gender diversity and performance in the financial and services sectors and the increased
appointment of women on the boards of companies in these sectors recently, these findings
may be considered as offering support for a critical mass theory and social psychological
theory. Female directors have proximity to the final customer in the financial and services
sectors, so they are able to play an important role without problems of visibility, polarization
and assimilation by contributing to board effectiveness.
Overall, our findings provide evidence supporting the role that contextual factors (such as
sector and macro-economic conditions) play in the relationship between gender diversity and
financial performance. In sectors such as resources sector gender diversity did not make a
significant effect on financial performance. However, in other sectors, such as the financial
and services sectors given the expertise of women, a positive effect of gender diversity is
realized on financial performance particularly in recent periods when a critical mass of female
directors are appointed. Token representation of women in the resource sector gives rise to
problems of visibility, polarization and assimilation leading to a lack of significant impact of
gender diversity initiatives on corporate performance. As gender diversity increases and a
critical mass of female directors is achieved in financial and services sectors, boards become
more effective through improved participation as well as better monitoring and problem-
solving capabilities of boards. Balanced boards through creativity and innovation help firms
achieve competitive advantage in times of complexity and, therefore, the findings of this
study highlight the positive role contextual factors play determining the relationship between
gender diversity and corporate performance.

Conclusion
This study examines the relationship between board gender diversity and financial performance
of a sample of Australian firms for the period 2004–2016. ROA is used as the primary measure of
business performance, while board gender diversity is measured using two alternative measures.
The study period incorporates pre-GFC, and GFC periods, and a post-GFC period during which
ASX diversity initiatives were implemented. In this study, dynamic panel data models that control
for unobserved heterogeneity and interrelationship among key variables are employed.
In addition, sectoral differences are also captured with the help of interaction variables. For the
aggregate set of firms, the findings show evidence of either a negative association between board
gender diversity and performance in some models or a no association in other models. For the
aggregate set of firms for the study period, there is no evidence of a positive association between
gender diversity and corporate financial performance. However, incorporation of factors that
capture sectoral associations and pre-GFC, GFC and post-GFC periods clarify in finer detail the
associations between board gender diversity and business performance. ASX diversity initiatives
have a significant impact on the association between gender diversity of boards and business
performance. In financial and services sectors, gender diversity of boards has a direct effect on
performance, particularly after the introduction of ASX diversity initiatives. However, evidence
does not support a positive association between gender diversity and business performance in the
resources sector. These findings offer support for a business case for gender diversity of boards in Gender
the financial and services sectors. These findings have implications for theory and policy. The diversity and
theoretical implications of a positive effect of context in the relationship between gender diversity
and financial performance are significant. The findings of this study challenge the idea that gender
financial
diversity is universally beneficial for financial performance and highlights the need for a more performance
nuanced understanding of how gender diversity interacts with contextual factors to influence
organizational outcomes. The findings of the study also underscore the importance of considering
the complex mechanisms through which gender diversity affects financial performance. For 165
example, gender diversity may impact organizational culture, decision-making processes and
innovation, which in turn affect financial performance. Given the support for a business case in
some sectors in the recent period, it is justified to support diversity initiatives by ASX, AICD and
others without necessarily having to resort to a rule-based mandated quota. However, caution is to
be exercised as policymakers should consider developing policies that are tailored to the specific
contexts in which organizations operate. For example, policies that work well in one industry or
region may not be effective in another, and policies that promote gender diversity in one
organizational culture may be less effective in another. Therefore, policymakers should take a
nuanced and context-specific approach to promoting gender diversity in organizations, and that
collaboration between stakeholders is essential to achieve this goal. Future studies may consider
the role of attributes of directors, and the relationships between specific attributes and corporate
financial and social performance, considering contextual factors.

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Corresponding author
Subba Reddy Yarram can be contacted at: syarram@une.edu.au

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