Does boardroom gender diversity matter? Evidence from a transitional economy

- A dynamic modelling approach is employed to investigate the effect of board gender diversity on firm performance.
- Board gender diversity positively affects firm value.
- Although two or more female directors are better, even one female director can make a difference.
- The marginal effect of board gender diversity ceases when the percentage of female directors reaches a breakpoint of 20%.

This research investigates the relationship between board gender diversity and firm financial performance in the context of a transitional economy characterised by an underdeveloped corporate governance system. Using a sample of 120 publicly listed companies in Vietnam covering a 4-year period from 2008 to 2011, we examine this relationship in a dynamic modelling framework, which controls for potential sources of endogeneity. We find that board gender diversity appears to have an effect on firm performance. This finding remains robust when alternative proxies for gender diversity are employed and is consistent with the perspectives of agency theory and resource dependence theory. The number of female directors in the boardroom also matters, supporting the view that if female board representation affects firm outcomes, this effect is more pronounced when the number of female directors increases. It is observed, furthermore, that the marginal positive performance effect of board gender diversity ceases when the percentage of female directors reaches a breakpoint of about 20%. This finding suggests that there is perhaps a potential trade-off between the costs and benefits of board gender diversification. Our findings significantly contribute to the growing literature of non-US based studies, by providing robust empirical evidence from a transitional economy in East Asia.