Gender Diversity on Corporate Boards and Financial Performance: An Empirical Analysis of Gender Diversity and Financial Performance in Northwestern European Large Firms

Martine Ramstad Høge & Ingrid Fossen

Student thesis: Master thesis


There has been an increased focus on environmental and societal concerns during recent years, and investors are raising attention to socially responsible investments. According to stakeholder theory, it is reasonable to assume that gender diversity on corporate boards and executive positions support better leadership and governance, as diversity contributes to enhanced performance. Consequently, the financial effects of gender diversity are relevant for a company and its shareholders. The purpose of the thesis is to investigate the relationship between gender diversity and financial performance, with an empirical analysis of large companies in Northwestern Europe. This is done by analyzing the stock returns of companies applying gender diversity as a screen and constructing portfolios of high and low levels of gender diversity. The portfolios’ risk-adjusted returns have been analyzed by applying three traditional asset pricing models, namely the CAPM, Fama & French threefactor model, and Carhart’s four-factor model. Additionally, the stock returns are analyzed on an individual stock level to consider company-specific information. Further, this study considers the political landscape of the countries, as some require obligatory gender quota on corporate boards and others do not. Hence, this thesis analyze if such regulations lead to more gender diversity, and if the financial effect of gender diversity supports legislation of female quota. This study has also investigated if companies with a high degree of gender diversity are more likely to have women in executive positions, and if gender diversity leads to a higher ESG score. The major findings show an indifferent relationship between gender diversity and stock performance. At the portfolio level, our study finds neither an advantage nor a disadvantage of gender diversity. On the individual stock level, the results show a negative but insignificant relationship. Additionally, the thesis finds that countries without legislation have a higher average female presence on corporate boards than those with legislation. Nevertheless, a high female share in both board of directors and management boards makes it more likely that high leadership positions are filled by women. The thesis does not find sufficient evidence to establish a connection between gender diversity and ESG score. From a shareholder perspective, our results do not find that an investor should invest in companies with great gender diversity instead of companies with low gender diversity, nor the opposite. However, in today’s business world, the stakeholder view has settled as a vital perspective. From a stakeholder perspective, our results do not find any argument for not encouraging gender diversity.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2021
Number of pages121
SupervisorsSøren Plesner