The Value Relevance of Board Gender Diversity for NZX Listed Firms and its Association with Growth Options

Abstract

Our study examines the relationship between board gender diversity and firm value and, in particular, whether the value relevance of female directors is affected by the level of growth options relative to assets-in-place. Using a sample of 865 firm-years covered by 125 firms listed on the New Zealand Exchange during the period 1998-2007, we found that board gender diversity is value enhancing when applying linear modelling. This relationship is strongest for firms with high levels of growth options. We also explore the possibility that the relationship between board gender diversity and firm value is non-linear. This analysis supports the existence of a concave non-linear relationship with the turning point being the appointment of one female director. This suggests that in New Zealand the benefit gained from board gender diversity can be captured with the appointment of one female director. Given the current overseas regulatory developments promoting the appointment of female directors on boards, our findings suggest that there is a value optimising number of women on boards.