Additions to Corporate Boards; the Effect of Gender
Journal of Corporate Finance 11 (2005) 85 – 106 www.elsevier.com/locate/econbase
Additions to corporate boards: the effect of gender
Kathleen A. Farrell a,*, Philip L. Hersch b a Department of Finance, University of Nebraska-Lincoln, Lincoln, NE 68588-0490, USA b Department of Economics, Wichita State University, USA Received 1 November 2003; accepted 1 December 2003 Available online 20 April 2004
Abstract During the decade of the 1990s the number of women serving on corporate boards increased substantially. Over this decade, we show that the likelihood of a firm adding a woman to its board in a given year is negatively affected by the number of woman already on the board. The probability of adding a woman is materially increased when a female director departs the board. Adding a director, therefore, is clearly not gender neutral. Although we find that women tend to serve on better performing firms, we also document insignificant abnormal returns on the announcement of a woman added to the board. Rather than the demand for women directors being performance based, our results suggest corporations responding to either internal or external calls for diversity. D 2005 Elsevier B.V. All rights reserved.
JEL classification: G30; G34; J16 Keywords: Board of directors; Board composition; Diversity; Gender
1. Introduction Diversity in the workforce has been an issue receiving a tremendous amount of attention both in academia and in the popular press. Much of the initial focus and research relates to impediments to promotion of women at lower and middle management levels, often referred to as a glass ceiling effect. More recently, research has begun to focus on female representation in top management positions and corporate boardrooms (e.g., Kesner, 1988; Bilimoria and Piderit, 1994; Daily et al., 1999; Carter et al., 2003). In the past decade, women have increased their representation on corporate boards of
* Corresponding author. Tel.: +1-402-472-3005;
Additions to corporate boards: the effect of gender
Kathleen A. Farrell a,*, Philip L. Hersch b a Department of Finance, University of Nebraska-Lincoln, Lincoln, NE 68588-0490, USA b Department of Economics, Wichita State University, USA Received 1 November 2003; accepted 1 December 2003 Available online 20 April 2004
Abstract During the decade of the 1990s the number of women serving on corporate boards increased substantially. Over this decade, we show that the likelihood of a firm adding a woman to its board in a given year is negatively affected by the number of woman already on the board. The probability of adding a woman is materially increased when a female director departs the board. Adding a director, therefore, is clearly not gender neutral. Although we find that women tend to serve on better performing firms, we also document insignificant abnormal returns on the announcement of a woman added to the board. Rather than the demand for women directors being performance based, our results suggest corporations responding to either internal or external calls for diversity. D 2005 Elsevier B.V. All rights reserved.
JEL classification: G30; G34; J16 Keywords: Board of directors; Board composition; Diversity; Gender
1. Introduction Diversity in the workforce has been an issue receiving a tremendous amount of attention both in academia and in the popular press. Much of the initial focus and research relates to impediments to promotion of women at lower and middle management levels, often referred to as a glass ceiling effect. More recently, research has begun to focus on female representation in top management positions and corporate boardrooms (e.g., Kesner, 1988; Bilimoria and Piderit, 1994; Daily et al., 1999; Carter et al., 2003). In the past decade, women have increased their representation on corporate boards of
* Corresponding author. Tel.: +1-402-472-3005;
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