The Influencers: Dr Lina Li

Women on boards

Businesses with women on their boards do better when it comes to enhancing the effect of strong corporate social responsibility on financial performance, according to recently published research.

The research utilised data from 1507 US firms over a 10-year period and found that the effect of good corporate social responsibility on market-assessed firm value, is incrementally more positive for firms with greater female representation on their boards, compared to firms with no female members.

Prior research has looked at how a commitment to corporate social responsibility activities, such as supporting positive employee relations and community and environmental outcomes, can improve and enhance firm value, such as share prices and financial performance.

We looked at how gender diversity might affect the relationship between those two factors – corporate social responsibility and firm value, finding that when there is gender diversity on boards, this effect is stronger.

Our findings suggest firms that display gender diversity at the board level are penalised more strongly by the market when they perform poorly in terms of their social and environmental goals.

This could be because women on boards often signal better corporate social responsibility, so when things don’t go well, there’s an element of shock.

The net effect, however, is that socially responsible companies benefit from having more women on their boards.