5. Women on Boards Flashcards
Accounting returns (firm profitability)
How well a firm utilizes its assets and investments to generate earnings and represents past or short-term financial performance
Market performance
The behavior of a security or asset in the marketplace, reflecting the external perceptions and expectations of a firm’s future or long-term value
Board monitoring
The extent to which boards engage on activities that entail oversight of the firm and seek to control managerial opportunism
Board strategy involvement
The extent to which boards engage in activities related to their strategic advising role and engage in decision making about how the firm should compete the marketplace
Upper echelons theory (UET)
Directors differ in their cognitive frames, and these cognitive frames, in turn, influence firm outcomes.
Cognitive frames (the information-seeking and information-evaluation processes) are contingent on the experiences, knowledge and values
These experiences, knoweldge, and values shape how directors seek and interpret information, shape board decisions, decision-making processes and ultimately firm outcomes
Why females in board influence firm performance?
Because, in general, female and male directors differ in their cognitive frames
Females have
More university degrees
Strengths in marketing and sales
More likely to be non-national
More likely to come from non-businesses backgrounds
More understanding of consumer markets (as the gender gap in earnings has narrowed and women have influence and control in household purchasing decisions)
More diverse set of non-work interests
More interest in philanthropy and community service
Females difference in insights and social networks
Is likely to translate into insights relevant to firms multiple stakeholders
Female differences in values
More likely to value interdependence, benevolence, and tolerance
Diverse groups outperform homogeneous groups due to their tendency to engage in deep discussions of disparate knowledge and information, and to integrate this knowledge and information
Gender-diverse boards may be more stimulated ti deeply and extensively consider, discuss, and integrate the information they hold
Female directors help elicit multiple viewpoints and cultivate deliberativeness in decision making (due to their values)
Improve decision quality by considering multiple perspectives and enhanced deliberativeness.
Thus, improving financial performance
When shareholders benefit from high legal protections and can sue or attempt to replace board directors who do not uphold their fiduciary responsibility
Directors have a stronger incentive to share and draw on the experience, knowledge, and values brought to the board by each director
Gender parity
Gives legitimacy to females on board
Board monitoring and strategy involvement have positive relationships with
Accounting returns and market performance
