The issue ofgenderdiversityin corporate boards has been attracting research interest in various countries because of the many socioeconomic contributions women directors are purported to confer to the firm, some of which involve improved board monitoring quality and a more critical and democratic form of leadership. This rationale forms part of the “economic” case for women‘s participation inboards, apart from the usual ground of social or equality considerations. We examine this board-level genderdiversity issue for the case of the firmstradedin the Philippine Stock Exchange during the period 2003-2014. Using an unbalanced panel of 2,645 firm-years, we find that greater genderdiversityinboards, which in the case of our sample firms also indicates the presence of more female directors in the board, does not significantly affect short-term firm performance as alternatively measured by ROA and ROE, but seems to drive down long-term firm value as measured by Tobin‘s Q. Our results are robust with respect to board-level genderdiversity measures and are based on estimates that take into account the effects of unobserved individual effects and potential endogeneity ofgenderdiversity.
Our findings are consistent with the investor bias story, which argues that investors collectively drive down market value firms with more gender-diverse boards because they have a perceptual bias against women as capable firm leaders and directors. Our result put to question the economic rationale of imposing any minimum gender quota on boardsof, at least, Philippinepublicly listed firms, similar to the practice in most European countries. We suggest that policy makers must be cautious in proposing quotas that seek to promote gender parity inboardsof directors ofpubliclytradedfirms based on a claim that it will significantly improve firm performanceand shareholder value. Instead, enforcing board-level gender quotas may have to be justified in terms of social equality, business reputation, and purely ethical grounds.