Women on Boards in Portuguese Listed Companies: Does Gender Diversity Influence Financial Performance?

Corporate sustainability integrates financial performance with environmental, social, and governance (ESG) performance. Due to their personal characteristics, women can play an important role in promoting sustainable actions and strategic decision-making, creating positive effects on a company's financial performance. The main objective of this paper is to analyze the effect of Board gender diversity on financial performance, in the context of Portuguese listed companies. Financial performance was measured through an accounting-based measure, the return on assets (ROA), and a market-based measure, the Tobin's Q. Board gender diversity was proxied through several measures identified in the literature and the information needed to construct them was manually collected from the corporate governance reports. A regression analysis was conducted on panel data consisting of 29 companies from the period from 2010 to 2019. The results show that female presence is positively related with ROA when there are at least two women on the Board, or when the proportion of women is, at the least, 20%. A positive relationship was also found between the Tobin's Q and the presence of at least 20% women on the Board. The results confirm the existence of the positive effects of Board gender diversity on financial performance, as predicted by resource dependence theory and agency theory, but only when a critical mass of women is reached. In general, we conclude that, although gender diversity promotion measures underlying Portuguese legislation are not yet fully consolidated, the imposed threshold of 20% women on Boards is a signal sent to the market and one that is valued by investors.