Who run the boards? : A quantitative study on the effects of board gender diversity on firm financial performance

Abstract: Purpose: This thesis aims to explain the relationship between board gender diversity, measured as the proportion of women on boards and different board categories, and firm financial performance.  Methodology: This study was conducted through a quantitative method with a deductive and cross-sectional approach. It aims to explain the relationship between the independent variable board gender diversity and the dependent variable firm financial performance through the measures of return on equity, return on assets, and Tobin’s Q. Data were collected from annual reports of all firms, excluding banks, listed on the Swedish Stock Exchange on small, mid, and large-cap for 2014 and 2020. The data were analysed through t-tests, Spearman’s rho, and ordinary least squares regressions with the control variables board size, firm size, industry, and financial year.  Theoretical perspective: Several different theories were used for hypothesis formulation and for interpreting the findings, which were: critical mass, upper echelons theory, human/social capital theory, and agency theory. Findings: The findings of this study indicate that there exists a positive relationship between board gender diversity and return on assets and return on equity. The largest difference in performance seems to be between the groups that have reached at least a threshold of 30% of the underrepresented gender and those that have not. Further, boards with no women had the worst return on assets. The results are not consistent between different tests or performance measures; however, the conclusion could be drawn that board gender diversity does not affect firm financial performance negatively.