More women on the board, more profits

Having more women on boards is improving the financial performance of the companies who elect them, new La Trobe research shows.

In the largest study of its kind to be conducted in Australia, La Trobe Business School Accounting researchers, Alireza Vafaei, Kamran Ahmed and Paul Mather collated data on the relationship between board diversity and firm performance in the top 500 ASX-listed companies over a seven-year period.

The study looked at the performance of the 500 firms on a yearly basis from 2005 to 2011 and found a positive and significant association between female non-executives on boards and firm financial performance.

It also found larger firms are more likely to have women on their boards and that the percentage of female directors has increased since 2010 – the year amendments were made to ASX Corporate Governance Council principles to increase board diversity.

The findings, published in the Australian Accounting Review, represent the most conclusive evidence to date of the positive impact increased board diversity is having on Australian firms' financial performance.

Head of La Trobe Business School and report co-author Professor Paul Mather said that one of the study's main findings is that there was a causal relationship.

"Board diversity is affecting performance, it's not that better performing firms are recruiting more women," he said.

He said the study sought to address some of the limitations of previous research by increasing the number of ASX firms included in their sample size and looking at performance over a longer period. The study also employed multiple measures of firm performance.

Mather said the study had implications for future board practices and regulation.

"Showing that women on boards is associated with enhanced firm performance supports the business case for the recent Australian regulatory change, informs board nomination committees and complements equity arguments for increasing the number of women on boards."

Media contact

For interviews with Professor Paul Mather, phone media and communications officer Renee Thompson on 03 9479 2315 or email r.thompson@latrobe.edu.au

Image credit: iStock

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