Women in the Boardroom, Firm Innovations and Performance: Evidence from European Family Firms

The current work is devoted to the study of the form of dependence of the financial and innovative performance of European family firms on the share of women board members. Family firms play a crucial role in the modern global economy, creating a significant part of the GDP of many countries. The existing literature provides many evidences that family firms have many distinctive features from non-family companies. Besides, there is a growing interest in research on gender differences within the Board of Directors and their impact on corporate performance. However, the topic of the effect of board gender diversity on the performance of family businesses has not been widely studied, especially in the context of corporate innovative performance. Thus, this paper fills this gap in the literature applying two instrumental variable techniques aimed at eliminating endogeneity, which is always a severe problem for similar studies. The work is based on data from 8 developed European countries, which are characterized by a high concentration of family businesses and the presence of gender board quotas. Unlike most similar papers, which do not focus on possible quadratic relationship between variables of interest, the results of the current paper show that there is an inverted U-shaped relationship between women board share and corporate financial and innovative performance. This relationship is affected by the quota type, implying that on average voluntary quotas correspond to the higher maximum performance that can be achieved with a lower female board share compared to mandatory quotas. Besides, it was revealed that family companies are on average characterized by a higher maximum of both financial and innovative performance that corresponds to a lower optimal women board fraction compared to non-family firms. Furthermore, the maximum performance of family firms is higher for the case of a woman CEO compared to a man CEO, and it is achieved with a smaller optimal women board share for financial metrics, however, it is reached with a higher optimal women board share for innovative performance indicators. Overall, the unique findings of this article can be considered to be robust ones, therefore, they can serve as essential recommendations for the strategy of forming the structure of the Board of Directors of family firms, indicating the importance of maintaining the gender balance. Keywords: family business, the board of directors, board structure, female leadership, gender diversity, gender quotas, corporate performance, financial performance, innovative performance, female directors, female CEOs.