Board Gender Diversity and Firm Performance: Integrating Agency and Institutional Theory

Introduction

The presence of women among boards has been researched extensively in recent years. Ever since Norway adopted a quota law to promote women among its corporate boards, many countries followed this action which generated fruitful avenues for researchers to explore board gender diversity, its determinants and implications from different perspectives and levels of analysis (Marinova et al., 2015). Research about board gender diversity and firm performance has not reached a conclusive evidence yet. The argument that board gender diversity has economic profitability or what is known “business case” of board gender diversity has received criticism for narrowing an issue of justice and equality. There is a growing need to expand the business case of board gender diversity into much wider perspective combing utility and justice rationales to understand this phenomena (Seierstad, 2016).

From a theoretical perspective, almost all studies concerned in board gender diversity and firm performance limited their analysis to board level theories such as: Agency theory, Resource dependence theory and stewardship theory. (Abdulah et al., 2014, Abdullah et al., 2016, Erhardt et al., 2003 and Marinova et al., 2015). The firm is prone to many players who draw its strategies and managerial practices. Relying on understanding the role of players from inside the firm environment only such as management or shareholders would provide a distorted image. Many studies have indicated the role of institutional players in the presence of women in boards from a national level of analysis (Allemand & Brullebaut, 2014, Grosvold,2011 and Grosvold and Brammer, 2011), however how these institutional elements affect firm performance is a less explored area in the literature. This study attempts to integrate two broad theories used extensively in the business literature which are agency theory and institutional theory in an effort to provide better understanding for the effect of board gender diversity on performance of the firm. Since firms are not isolated units from the external and national institutions as they are prone to external elements that would affect their strategies and performance at the end. The remaining of this paper is organized as follows: Literature review and theoretical background, followed by conceptual framework of the study and finally, discussion and conclusion.