Does gender diversity on the board of directors affect the financial performance? : A study of Swedish companies registered on Stockholm NASDAQ OMX

Abstract: This master thesis examines if gender diversity on corporate boards affect the financial performance for large, mid and small cap firms on the Swedish OMX during the years 2005-2013. In corporate governance, the board of directors is an important control mechanism that could enhance the company’s financial performance. Board of directors have the potential to render valuable service to the company in shaping of its strategic development. Traditionally, main parts of the boards have been and are dominated by men, the boards are not balanced in the gender diversity perspective. In Sweden, there is a debate about introducing quota systems to increase the gender diversity on boards for public companies. There are many motivational factors why the number of women on boards should be increased. A gender diverse board could be considered as a competitive advantage that leads to developed knowledge base, and improved creativity and innovation, increased competition, new perspectives in the decision process or an attractive working environment. However, there are also research that indicates that homogeneous groups are the most efficient in decision making and consensus. This thesis investigates if the representation of women on the board of directors has any effect on the company’s financial performance and if the effect is positive or negative. Hence, the research question is: "Does gender diversity on the board of directors affect the financial performance?" The majority of the most cited research articles in this research field report from other countries than Sweden. Moreover, the research articles on the Swedish market either lack statistical significance, did not investigate long term effects or did not perform a fundamental regression analysis. In this thesis we examine the relationship between women on the board of directors and financial performance in public companies listed on the Stockholm NASDAQ OMX stock exchange in Sweden during 2005-2013. The data in this thesis was collected from 250 public companies. The data was processed through a data analysis methodology in order to extract useful information to extract valid data for the regression analysis. We provide an in-depth statistical analysis in this thesis. We use correlation analysis and regression analysis using data averaged over the following three time periods; 2005-2007, 2008-2010 and 2011-2013. Four different financial performance measures were evaluated for each of the three time periods; Return on Equity, Return on Invested Capital, Return on Sales and Return on Assets. A stepwise backwards elimination model was used to achieve at least a 95% confidence interval for the results in the model. The regression analysis shows that the research question is valid on a 0.05 significance level. Hence, this thesis shows that women on the board of directors affect financial performance positively for all financial performance measures. The results of this thesis supports the research question that gender diversity on the board of directors affect the financial performance positively.