Gender diversity in the Italian boardroom and firm financial performance

Purpose: This study aims to analyse the relationship between board gender diversity and firm financial performance in Italy, where the recently enforced Law 120/2011 prescribes gender quotas for boards of directors. Design/methodology/approach: Panel data analysis was used to examine the gender diversity–firm financial performance relationship in an unbalanced panel of 918 Italian listed companies during the years 2011-2014. Findings: Gender diversity, as measured by the percentage of women on a board and by the Blau and the Shannon indices, has a positive and significant effect on Tobin’s Q, while the presence of one or more women on the board per se has an insignificant effect on firm financial performance. Practical implications: The results suggest that board gender diversity is not a simple “numbers game”, greater gender diversity may generate economic gains, greater gender diversity does not destroy shareholder value, investors do not penalize companies that increase female representation on their boards and Italian companies should focus their efforts on the right mix of men and women rather than on simply the presence of at least one woman on a board of directors. Originality/value: Most articles on this topic use data from countries with a legal system based on common law; this paper analyses Italy, a country with a civil law system. This is almost certainly the first study to examine the effect of board gender diversity on firm financial performance in the Italian market.