Library Dissertation Showcase

Does increased female board representation strengthen a firm’s financial performance in FTSE350 companies?

  • Year of Publication:
  • 2022

The focus of this research is to consider whether increasing female board representation strengthens a firm’s financial performance using the UK’s FTSE350. This study is considered important as the underrepresentation of women on the boards of companies has long been a concern. Various countries have implemented quotas, both mandatory and voluntary, in order to work towards increasing representation. However, it has been shown to be a slow process to work towards equal representation. The UK has improved its position in this regard over recent years, which provides a useful source of data, and the UK is underrepresented in current research with the majority based on US data therefore it is felt that this study will help UK firms to understand the financial benefit of increasing board gender diversity. The research considers how increased female board representation can strengthen financial performance and whether there is a correlation between the number of women on the board and financial performance in the UK. The research methods utilised were a literature review examining the context of the importance of corporate governance and diversity and also evaluating the existing research on financial performance and female board representation. This was the followed by a collection of data from FTSE350 companies which was analysed by applying panel regression techniques to show the relationship between financial performance and gender diversity on the board. The findings of this research confirm a significant positive relationship between the two variables. This relationship strengthened substantially once a critical mass of three or more women on the board was reached, with firms significantly improving their financial performance. Critical mass was identified as a key theme in the literature review that warranted further examination for UK firms. This research recommends that UK firms continue to work towards increasing female board representation, but further this, to the levels that meet critical mass, in order to benefit from increased financial performance through a stronger, more diverse board.

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