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The moderating effect of corporate risk-taking and internationalization on the relationship between board gender diversity and firm performance.

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Master Thesis 2018-2019

The moderating effect of corporate risk-taking and

internationalization on the relationship between board gender

diversity and firm performance.

Wouter Markgraaf s2212900

MSc. International Financial Management Faculty of Business and Economics

University of Groningen Supervisor | dr. R.O.S. Zaal

Co-Assessor | dr. A. Dalò June 7, 2019

Field Key Words: Board gender diversity, firm performance, risk-taking behavior, agency theory, resource dependency theory, internationalization.

Abstract

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Table of Contents

1. Introduction ... 3

2. Theoretical Background ... 7

2.1 Board gender diversity ... 7

2.2 Board gender diversity and firm performance. ... 8

2.3 Risk-taking behavior ... 11

2.4 Risk-taking behavior and firm performance in diversified boards. ... 12

2.5 Internationalization ... 13

2.6 Internationalization and firm performance ... 13

3 Data and Methodology ... 16

3.1 Data Sample ... 16 3.2 Descriptive analysis ... 16 3.3 Variables ... 19 3.3.1 Dependent variable ... 19 3.3.2 Independent variable ... 19 3.3.3 Moderating variables ... 20 3.3.4 Control variables ... 21 3.4 Regression Models ... 22 4 Results ... 25 4.1 Descriptive statistics ... 25 4.2 Correlation analysis ... 26

4.3 Results OLS regression analysis ... 28

4.4 Results high and low percentage board gender diversity ... 31

4.5 Robustness analysis ... 35

5. Conclusion ... 39

References ... 42

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1. Introduction

A growing number of female directors in a top position have become an important topic over the last years. Nowadays several countries in de European Union have established gender quotas for the minimum number of female directors for the largest listed companies. As a result of this, the number of women in Europe has increased, but the number of women who reach the top is still very small (Smith et al, 2006). The low percentage of women’s representation is a bit surprising because a diverse board is often linked with higher economic returns and better share prices (Bilimoria, 2006; Terjesen et al. 2009). The research focus on the role of women in management roles grows more and more, because of the probable advances that women will make for a company (Hillman et al. 2007). Gender diversity in boards will also lead to a better process of monitoring and it will increase the corporate governance control (Gull et al., 2011). Besides this, management teams will consider better and more specifically towards a strategic choice when the board is diversified. In addition to this, it has been proven that women are more complete and accurate in collecting information, which ensures that they will occupy a stronger negotiating position relative to customers or partners (Van Knippenberg et al., 2004).

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4 Adams and Kirchmaier (2013) showed in their research that setting a gender quota is the most considerable way to increase the possibility that women will be present on board. In their research, these authors also show that there are two ethical issues. The first issue is the fact that there are fewer women on board in the pre-legislation environment, even if they have the same qualities as men have. The second issue is the post-quota legislation environment, when some women are chosen to be part of the board, but not always have the best competencies. These ethical issues are in line with the results of the research of Bertrand et al. (2018). They found that gender quota will lead to an increase in board diversity, but this diversity will not always positively affect firm performance. This is because they are not chosen on their capabilities, but on the fact that firms have to have women on board. So, they conclude that gender quotas not always have a positive effect on firm performance.

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5 performance. This is essential to investigate because there is still no consensus in the discussion if corporate risk-taking in diversified boards will affect firm performance positively or negatively. Therefore the research objective is to get empirical evidence for this relationship in various countries all over the world.

From different studies about board gender diversity can be made up, that there are several views on the main relationship between board gender diversity and firm performance. One reason for this might be that previous studies have tested this relationship in different countries with different contingency factors what can influence this relation. Boyd et al. (2011) have shown in their research that there is no best way to manage and organize a company as a result of contingency factors. The actions that a company must perform to operate optimally is contingent on the environment and the country in which the firm operates. Following the contingency approach, in various countries, firms will be influenced by country-specific factors which could have an effect on the relationship between board gender diversity and firm performance (Dwyer et al., 2003). Firms will get in touch with this kind of problems when they are using internationalization to ensure economies of scale and scope. More and more firms will use internationalization as a new business strategy, but it is not totally risk-free. Because of this, it is interesting to investigate, whether the level of internationalization impacts the relationship between board gender diversity and firm performance. Together with the first topic of the effect of risk-taking behavior, this leads to the following research question:

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6 In this research, I will focus on the moderating role of corporate risk-taking and internationalization in a multi-country setting, to form a conclusion that is suitable worldwide. Besides this, previous research has mainly focused on one country and not at a worldwide perspective, which will make this research unique. This research is on the other hand interesting for multinationals, who are dealing with gender quotas, which want to diversify their firm in other countries to take advantage of economies of scale and scope. The results should also be relevant for future legislation about the diversification on boards in international markets.

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2. Theoretical Background

The theoretical background of this paper provides an insight into the theories of different empirical studies regarding the relationship between board gender diversity and firm performance and the moderating factors of risk-taking behavior and the level of internationalization. Concepts will be explained and the hypothesis will be developed in this section.

2.1 Board gender diversity

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2.2 Board gender diversity and firm performance.

The relationship between board diversity and firm performance is a very popular topic that has been investigated by several researchers. In addition to board gender diversity, another type of diversity has also attracted the attention of researchers. Ethnic board diversity, because ethnic minorities with the appropriate competencies, nowadays often have the opportunity to take a place on board (Carter et al., 2003). Studies have investigated the relationship between the measurement of ethnic diversity plus gender diversity and firm performance. They used gender diversity and the diversity of ethnic minorities both. Erhardt et al. (2003) found a positive significant relationship between diversity and firm performance. They used a sample that only consisted of US firms. Furthermore, Zahra and Stanton (1988) also used a sample with only US firms. They have tested the relationship between ethnic- and gender diversity and firm performance by making use of multivariate discriminant analysis. In contrast to Erhardt et al. (2003), they found no relationship between the diversity of ethnic minorities plus gender diversity and firm performance. This research focuses solely on investigating the relationship between board gender diversity and firm performance. Noland et al. (2016) have found that boards which are represented by men and women, will beat out their competitors with only men in the board. This research will focus on two theories to explain the relationship between a gender diversified board and the performance of a firm: agency theory and resource dependency theory.

Agency theory

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9 service on their behalf which involves delegating some decision making authority to the agent”. The board composition properties, like gender diversity, board size and the share of directors are essential factors that will influence the decision-making process (Bøhren and Strøm, 2007). Central to this agency theory is the controlling and monitoring functions of the board, to warden the interest of shareholders and stakeholders in a better way (Jensen and Meckling, 1976). This theoretical view does not outline the financial benefits but will look to the benefits of a heterogeneous board. Carter et al. (2003) show that this theory proof that a diversified board would increase the performance and the monitoring functions of directors, because female directors differ in many ways with male directors, in de area of traits, such as background knowledge, personality and risk avoidance. According to this, the functions of monitoring and controlling could be positively affected by female directors. Besides this, they show in their research that heterogeneous boards are less biased and will work more independently in comparison with homogeneous boards. For this reason, gender diversity within the board will probably ensure that the agency problem will decrease.

Resource dependency theory

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10 performance positively. Because of the diversity, firms will create a larger network, which will better secure the resources. Hillman et al. (2000) show in their study an extension of this theory which shows that diversity in boards will lead to more diverse resources, which will increase the financial performance of the firm. Furthermore, Carter et al. (2010) conclude that heterogeneous board, like gender diversity, will provide more benefits, because this kind of board will reduce the dependency of resources. This theoretical view is more focused on the firms’ environment, and the impact of the possible uncertainties of the firm.

In addition to theoretical evidence, various studies have found empirical evidence for a positive relationship between board gender diversity and firm performance. The study of Campbell and Minguez-Vera tested the relationship between board gender diversity and firm performance on a sample with Spanish firms. This study used Tobin’s Q as a measure for firm performance. They have concluded that board gender diversity has a positive relationship with firm performance. Also, Carter et al. (2003) used Tobin’s Q as a proxy for firm performance and have found a positive relationship between board gender diversity and firm performance. Based on the above theoretical and empirical evidence for the relationship between board gender diversity and firm performance, the following hypothesis can be formulated:

H1a: Board gender diversity has a positive effect on firm performance

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11 this follows that the costs for these companies will be higher. Besides the possible higher cost within a heterogeneous board, Smith et al. (2006) have also shown that there is less chance that a diversified board will reach a consensus when they have to make a decision. So, he concluded that this kind of board is less efficient. Furthermore, the study of Rose (2007) has investigated if board gender diversity will affect the Tobin’s Q ratio, but they conclude in their paper that it is hard to say if the relation between board gender diversity and firm performance really exist. There is also a study that is questioning the effectivity of the monitoring function of a gender diversified board because there is a likelihood that members in a diverse board are more marginalized (Carter et al., 2003). In addition to this, Adams and Ferreira (2009) have analyzed US firm and have shown in their study that diversified boards give a lot of attention to monitoring on the one hand, but on the other hand they found in their research a negative relationship between board gender diversity and Tobin’s Q as proxy for firm performance. Because there is also negative empirical evidence of the effect of board gender diversity and firm performance the following hypothesis can be drawn up:

H1b: Board gender diversity has a negative effect on firm performance

2.3 Risk-taking behavior

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12 diversified boards will exhibit different behaviors compared to homogeneous boards. As previously mentioned, male directors and female directors differ from each other in terms of traits. Besides this, Baird and Thomas (1985) make clear in their research that it is almost never the case within boards that all possibilities and possible consequences of decisions are known, which means that risk is often used in the same way as uncertainty. These strategic choices should, therefore, influence the performance of the firm.

2.4 Risk-taking behavior and firm performance in diversified boards.

It has been known for a long time in finance theory that when investors taking more risk, the expected return on investment will be higher (Huang and Litzenberger, 1988). However, multiple studies have shown that men and women will act differently when they approach corporate risk-taking. The study of Roszkowski and Grable (2005) has found some evidence that women are much more risk-averse than men, so this will mean that men are daring to take more corporate risk. Another study has also been proven that men are more risk tolerant and that women are more conservative in the relationship to corporate risk-taking when asking people, men and women, to what extent they will approach corporate risk (Morrison (2012). So it can be assumed that the decision-making process of boards, concerning risk-taking, will be different between homo- and heterogeneous boards assuming the studies. Furthermore, the study of Rountree et al. (2008) indicates that risk-taking behavior impacts the relationship between board gender diversity and firm performance negatively.

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13 in contrast to the finance theory. So the return on investments would be lower. Based on several studies, the following hypothesis can be drawn up:

H2: Risk-taking behavior negatively affects the relationship between board gender diversity and firm performance.

2.5 Internationalization

To ensure economies of scale and scope, firms will use internationalization as a new business strategy. Internationalization is a strategy used by firms to increase customer reach beyond their own national borders and thereby increase access to resources. (Attig et al., 2014). This usually occurs when the home country has a small market without many useable resources for that specific company (Caves, 1996). As mentioned before, according to de stakeholders perspective, firms want to comply with the wishes and goals of stakeholders. However, internationalization makes it more difficult for a firm to comply with all the stakeholder perspective by entering the foreign markets (Mitchell et al., 1997). This is a consequence because several international stakeholders are going to commit to the firm, which in turn have different preferences and interests. As a result of the stakeholder perspective, firm performance depends on how the company complies with the preferences of its stakeholders.

2.6 Internationalization and firm performance

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14 country. This strategy gives the firm a big chance to increase their knowledge base, competitive advantage and the capabilities of the firm (Barkema and Vermeulen, 1998). The most frequently mentioned reason for internationalization is the fact that there are greater business opportunities to increase the value of the company, which will cause the firm to grow strongly.

Additionally is internationalization not totally risk-free. Different studies have shown that this kind of business strategy very costly is and that it brings a lot of big challenges for a company in a completely new environment (Zaheer, 1995). The subsidiaries of the home-country are located in a new working environment, which makes managing more difficult and more complicated. Reasons for this have been given in de study of Ghoshal and Nohria (1989). Managing is complicated because subsidiaries of multinationals are facing many different cultural differences among countries. Every culture has is its own norms and values, what flows to the clients and rivals of a firm, which will act differently in each country and culture. This means that a firm not quickly and easily adapted to its environment. As a result, the manager must realize that he must make time to put the company firmly on the foreign market. These complicated issues will make sure that the workload of managers will be extremely high and as a result, the company must carefully consider the classification of internal processes and the risk factors that come with internationalization.

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15 become a multinational. Due to this, firms will be more professional and are more experienced. The study of Porter (1990) also has found that internationalization is a great strategy mechanism that a firm can use and that the degree of internationalization has risen over the last years. There is also found evidence, for the more negative effect of internationalization on firm performance. Internalization will increase the risk of a company what will decrease the firm performance of the firm (Ruigrok and Wagner, 2003).

H3: Internationalization positively affects the relationship between board gender diversity and firm performance.

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3 Data and Methodology

3.1 Data Sample

To test the hypothesis of this research and to give an answer to the research question, this study did make use of two different datasets. Thomas Reuters DataStream, Asset4 database, is used for financial data and data related to board gender diversity. This data is merged with data from the World Bank, which contains the country-level variables GDP-growth and Investor protection. Data is downloaded for the years 2009 till 2017 and contains a total of 38 countries. Because this study uses a three-year overlapping period to measure the variable of risk-taking behavior, the first two years, 2009 and 2010, of the data sample expire. This means that the final data sample consists of a timeframe of seven years (2011-2017). This timeframe is chosen, because data in this period is not affected by the financial crisis, that has started in 2007. To arrive at a suitable dataset the raw data sample is filtered. The unfiltered dataset consisted of 7,917 firms, but firms are dropped from the sample, which is a utility- (SIC code 4900-4999) or a financial firm (SIC code 6000-6999) (Fama and French, 2001) and firms with missing values are dropped from the sample. This has had the consequences that the final data set consists of 3,897 firms and 17,859 observations in total. All control variables are winsorized at 1% at the top and 1% at the bottom. This is done, to reduce the influence of outliers in the sample and to prevent the skewness of variables.

3.2 Descriptive analysis

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17 Ireland (62). In addition to the number of observations per country, the table also shows the mean of the most relevant variables of this paper per country. In addition, it stands out that Norway has the highest percentage of women on the board (33.3 %). According to the data, which is used, they just do not meet the 40 percent quota as described in the introduction of this paper.

Table 1

This table reports the distribution of the total sample of the unbalanced panel of 17,859 firm-year observations over 3,897 firms. The sample covers the period 2011-2017. Reported is the total number of observations per country, the percentage of the observations relative to the total observations and the cumulative percentage. The mean value of: board gender diversity (BGD), this is the percentage women in a board, firm performance, expressed in the Tobin’s Q ratio, risk-taking behavior,σROA and internalization expressed in the ratio of foreign sales relative to the total sales, are displayed per country. In addition, this table presents the total mean per variable.

Country N % Cum. % BGD

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18 Netherlands 168 0.94% 50.17% 19.36601 % 1.584282 0.0339188 69.05571 Norway 123 0.69% 50.86% 33.33797 % 1.363755 0.0556263 69.74431 New Zealand 74 0.41% 51.27% 20.06649 % 1.76164 0.0227794 24.07041 Peru 21 0.12% 51.39% 8.050000 % 1.2583 0.0503338 45.18048 Poland 81 0.45% 51.85% 10.36000 % 1.341266 0.0582320 33.41926 Russian Fed. 136 0.76% 52.61% 5.512794 % 1.364177 0.0547883 36.5714 Singapore 225 1.26% 53.87% 6.413911 % 1.561918 0.0217111 48.16471 South Africa 473 2.65% 56.51% 19.80471 % 1.816888 0.0365560 28.94556 Spain 164 0.92% 57.43% 15.17232 % 2.056778 0.0290416 57.87177 Sweden 269 1.51% 58.94% 28.45703 % 1.917524 0.0311266 74.69227 Switzerland 279 1.56% 60.50% 11.4553 % 2.335208 0.0274419 78.32014 Thailand 118 0.66% 61.16% 9.456864 % 2.264312 0.0280421 30.35712 Turkey 101 0.57% 61.73% 7.507525 % 1.645737 0.0274251 16.19287 United Kingdom 1487 8.33% 70.05% 15.31699 % 1.895408 0.0371030 53.13759 United States 5348 29.95% 100.00% 14.81312 % 2.234102 0.0330705 33.27697 Total 17,859 100.00% - 12.68202 % 1.856051 0.0345639 39.38425

Table 2 provides the details of the sample by year. The number of observations increases over the years structurally, because there are less missing values in the data set. It is observable that in 2017 the amount of observation has increased to 3,224, what in line is with 82.7 percent of the total firms. In 2011 this was only 52.9 percent.

Table 2

This table reports the distribution of the total sample of the unbalanced panel of 17,859 firm-year observations over 3,897 firms. The sample covers the period 2011-2017. Reported is the total number of observations per year, the percentage of the observations relative to the total observations and the cumulative percentage.

Year No of Obs. % Cum. %

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3.3 Variables

3.3.1 Dependent variable

The dependent variable in this research is firm performance. To measure this variable I will use Tobin’s Q, because this is a globally recognized measure to market-based performance. The Tobin’s Q ratio is calculated by the market capitalization of the firm adding the total liabilities of a firm, divided by the common equity of the firm adding the total liabilities of the firm (Bhagat and Bolton, 2008). Another financial indicator to measure firm performance is the return on assets. The ROA will look to the profitability of the firm relative to the total assets of the firm. It will clarify the company what the earnings are which are obtained from investments. The ROA ratio can be calculated by the net income divided by the total assets. This research will do a robustness check by using ROA as the dependent variable because the first ratio, Tobin’s Q, is focused on the growth performance and future earnings of the firm and the return on assets is focused on the financial performance of the firm (Montgomery and Wernerfelt, 1988).

3.3.2 Independent variable

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3.3.3 Moderating variables

In this research risk-taking behavior and internationalization are the moderators on the relationship between the dependent and the independent variable. To measure the risk-taking behavior of diversified boards, we will estimate the level of risk-taking as the country-adjusted volatility of firm-level earnings (σ(ROA)) (John et al., 2008). To measure the return on assets, the earnings before interest and taxes of a specific firm are divided by the total assets of that firm. In addition to this calculation, the standard deviation of this measure is calculated for every single firm. The volatility of the earnings is measured over a 3-year overlapping period (2015-2017, 2014-2016, …, 2009-2011) (Faccio et al., 2011).

To link risk-taking to board gender diversity and to measure the effect of risk-taking behavior on the relationship between board gender diversity and firm performance, there are several opportunities to use. The most valid and used way is to use the standard deviation of the return on assets, which has been used in this research (Miller and Bromiley, 1990; Bruno and Shin, 2014). The interacting term to make this moderating effect measurable is board gender diversity*risk-taking behavior.

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3.3.4 Control variables

The first control variable I will use in this paper is board size. The board size of firms is calculated by the number of people who are representing the board. This is a control for the group dynamics which possibly will affect the firm performance (Guest. 2009). Xie et al. (2003) stated that the size of the board is linked to the level of profit management. Furthermore, market to book value is used as a control variable to control for firm-level growth opportunities. Growth will increase investments of the firm and risk-taking behavior of the board of directors. The consequence is that this will directly affect firm performance. The market to book value is calculated by the book value relative to the market value (Jurkus et al., 2011). Literature has shown that firm size will impact firm performance and risk-taking behavior (Faccio et al., 2011). Therefore firm size is used as a control variable, which is measured by the logarithm of the total assets of the firm. The study of Bruno and Shin (2014) have used firm leverage as a control because leverage is affecting firm performance. Firms with a low level of leverage will increase their profitability and firm with a high level, will not. Firm leverage is measured as the ratio of total debt to equity. The level of leverage could, therefore, affect the extent of internationalization and risk-taking because it covers the financial risk of the company. The following control variable that is used is board independence. This variable is measured by the percentage of independent board members as reported by the company (Chen et al., 2017). To control for endogeneity problems, all the above control variables are lagged.

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22 that the performance will increase. Therefore firm performance is linked to the growth and fall of GDP.

3.4 Regression Models

To determine the relationship between board gender diversity and firm performance, multiple regression models are constructed. These models also include country-level and firm-level effect variables. GDP growth and Investor protection are variables at a country-level and internationalization at a firm-level. The dataset consists of data from different years, so a panel data analysis is performed. By making use of panel data, it is possible to capture the differences between unique firms and countries. In addition to this, each regression models also include controls for country-, industry- and year fixed effects. As stated earlier, all control variables, except GDP growth and investor protection, are lagged with t-1 to control for the problem of endogeneity. In addition, also the proxy for board gender diversity is lagged with t-1. To test for heteroscedasticity, standard errors are added at the firm-level.

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23 constructed. Relative to model 5, the moderating effect, between board gender diversity and internationalization, is added in this model. Regression model 7 is testing hypothesis 2, which will test the moderating effect of risk-taking behavior on the relationship between board gender diversity and firm performance.

To test the effect of both moderators on the relationship between board gender diversity and firm performance, when they are both present, both moderators are added in model 8.

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24 6. 𝐹𝑖𝑟𝑚 𝑝𝑒𝑟𝑓𝑜𝑟𝑚𝑎𝑛𝑐𝑒𝑖,𝑡 = 𝛼𝑡+ 𝛽1(𝐵𝐺𝐷)𝑖,𝑡−1+ 𝛽2(𝐵𝑜𝑎𝑟𝑑 𝑠𝑖𝑧𝑒)𝑖,𝑡−1+ 𝛽3(𝐹𝑖𝑟𝑚 𝑠𝑖𝑧𝑒)𝑖,𝑡−1 + 𝛽4(𝐹𝑖𝑟𝑚 𝑙𝑒𝑣𝑒𝑟𝑎𝑔𝑒)𝑖,𝑡−1 + 𝛽5(𝑀𝑎𝑟𝑘𝑒𝑡 𝑡𝑜 𝑏𝑜𝑜𝑘 𝑣𝑎𝑙𝑢𝑒)𝑖,𝑡−1 + 𝛽6(𝐵𝑜𝑎𝑟𝑑 𝑖𝑛𝑑𝑒𝑝𝑒𝑛𝑑𝑒𝑛𝑐𝑦)𝑖,𝑡−1+ 𝛽7(𝐺𝐷𝑃 𝑔𝑟𝑜𝑤𝑡ℎ)𝑐,𝑡+ 𝛽8(𝐼𝑛𝑣𝑒𝑠𝑡𝑜𝑟 𝑝𝑟𝑜𝑡𝑒𝑐𝑡𝑖𝑜𝑛)𝑐,𝑡 + 𝛽9(𝐼𝑛𝑡𝑒𝑟𝑛𝑎𝑡𝑖𝑜𝑛𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛)𝑖,𝑡−1+ 𝛽10(𝑅𝑖𝑠𝑘 − 𝑡𝑎𝑘𝑖𝑛𝑔 𝑏𝑒ℎ𝑎𝑣𝑖𝑜𝑟)𝑖,(𝑡,𝑡+2) + 𝛽11((𝐼𝑛𝑡𝑒𝑟𝑛𝑎𝑡𝑖𝑜𝑛𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛)𝑖,𝑡−1∗ (𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑤𝑜𝑚𝑒𝑛)𝑖,𝑡−1) + 𝐼𝑛𝑑𝑢𝑠𝑡𝑟𝑦𝑖+ 𝑌𝑒𝑎𝑟𝑡 + 𝐶𝑜𝑢𝑛𝑡𝑟𝑦𝑐+ 𝜀𝑖,𝑡 7. 𝐹𝑖𝑟𝑚 𝑝𝑒𝑟𝑓𝑜𝑟𝑚𝑎𝑛𝑐𝑒𝑖,𝑡 = 𝛼𝑡+ 𝛽1(𝐵𝐺𝐷)𝑖,𝑡−1+ 𝛽2(𝐵𝑜𝑎𝑟𝑑 𝑠𝑖𝑧𝑒)𝑖,𝑡−1+ 𝛽3(𝐹𝑖𝑟𝑚 𝑠𝑖𝑧𝑒)𝑖,𝑡−1 + 𝛽4(𝐹𝑖𝑟𝑚 𝑙𝑒𝑣𝑒𝑟𝑎𝑔𝑒)𝑖,𝑡−1 + 𝛽5(𝑀𝑎𝑟𝑘𝑒𝑡 𝑡𝑜 𝑏𝑜𝑜𝑘 𝑣𝑎𝑙𝑢𝑒)𝑖,𝑡−1 + 𝛽6(𝐵𝑜𝑎𝑟𝑑 𝑖𝑛𝑑𝑒𝑝𝑒𝑛𝑑𝑒𝑛𝑐𝑦)𝑖,𝑡−1+ 𝛽7(𝐺𝐷𝑃 𝑔𝑟𝑜𝑤𝑡ℎ)𝑐,𝑡+ 𝛽8(𝐼𝑛𝑣𝑒𝑠𝑡𝑜𝑟 𝑝𝑟𝑜𝑡𝑒𝑐𝑡𝑖𝑜𝑛)𝑐,𝑡 + 𝛽9(𝐼𝑛𝑡𝑒𝑟𝑛𝑎𝑡𝑖𝑜𝑛𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛)𝑖,𝑡−1+ 𝛽10(𝑅𝑖𝑠𝑘 − 𝑡𝑎𝑘𝑖𝑛𝑔 𝑏𝑒ℎ𝑎𝑣𝑖𝑜𝑟)𝑖,(𝑡,𝑡+2) + 𝛽11((𝑅𝑖𝑠𝑘 − 𝑡𝑎𝑘𝑖𝑛𝑔 𝑏𝑒ℎ𝑎𝑣𝑖𝑜𝑟)𝑖,(𝑡,𝑡+2)∗ (𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑤𝑜𝑚𝑒𝑛)𝑖,𝑡−1) + 𝐼𝑛𝑑𝑢𝑠𝑡𝑟𝑦𝑖 + 𝑌𝑒𝑎𝑟𝑡+ 𝐶𝑜𝑢𝑛𝑡𝑟𝑦𝑐+ 𝜀𝑖,𝑡 8. 𝐹𝑖𝑟𝑚 𝑝𝑒𝑟𝑓𝑜𝑟𝑚𝑎𝑛𝑐𝑒𝑖,𝑡 = 𝛼𝑡+ 𝛽1(𝐵𝐺𝐷)𝑖,𝑡−1+ 𝛽2(𝐵𝑜𝑎𝑟𝑑 𝑠𝑖𝑧𝑒)𝑖,𝑡−1+ 𝛽3(𝐹𝑖𝑟𝑚 𝑠𝑖𝑧𝑒)𝑖,𝑡−1 + 𝛽4(𝐹𝑖𝑟𝑚 𝑙𝑒𝑣𝑒𝑟𝑎𝑔𝑒)𝑖,𝑡−1 + 𝛽5(𝑀𝑎𝑟𝑘𝑒𝑡 𝑡𝑜 𝑏𝑜𝑜𝑘 𝑣𝑎𝑙𝑢𝑒)𝑖,𝑡−1 + 𝛽6(𝐵𝑜𝑎𝑟𝑑 𝑖𝑛𝑑𝑒𝑝𝑒𝑛𝑑𝑒𝑛𝑐𝑦)𝑖,𝑡−1+ 𝛽7(𝐺𝐷𝑃 𝑔𝑟𝑜𝑤𝑡ℎ)𝑐,𝑡+ 𝛽8(𝐼𝑛𝑣𝑒𝑠𝑡𝑜𝑟 𝑝𝑟𝑜𝑡𝑒𝑐𝑡𝑖𝑜𝑛)𝑐,𝑡 + 𝛽9(𝐼𝑛𝑡𝑒𝑟𝑛𝑎𝑡𝑖𝑜𝑛𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛)𝑖,𝑡+ 𝛽10(𝑅𝑖𝑠𝑘 − 𝑡𝑎𝑘𝑖𝑛𝑔 𝑏𝑒ℎ𝑎𝑣𝑖𝑜𝑟)𝑖,(𝑡,𝑡+2) + 𝛽11((𝐼𝑛𝑡𝑒𝑟𝑛𝑎𝑡𝑖𝑜𝑛𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛)𝑖,𝑡−1∗ (𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑤𝑜𝑚𝑒𝑛)𝑖,𝑡−1) + 𝛽12((𝑅𝑖𝑠𝑘 − 𝑡𝑎𝑘𝑖𝑛𝑔 𝑏𝑒ℎ𝑎𝑣𝑖𝑜𝑟)𝑖,(𝑡,𝑡+2)∗ (𝑃𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑤𝑜𝑚𝑒𝑛)𝑖,𝑡−1) + 𝐼𝑛𝑑𝑢𝑠𝑡𝑟𝑦𝑖 + 𝑌𝑒𝑎𝑟𝑡+ 𝐶𝑜𝑢𝑛𝑡𝑟𝑦𝑐+ 𝜀𝑖,𝑡

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25

4 Results

4.1 Descriptive statistics

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26 of -5.185 and a positive maximum of 8.491. This means that some countries have made a big growth over de last year and some countries a big loss.

4.2 Correlation analysis

The correlation matrix is shown in table 4. This analytic matrix indicates that the percentage of women on board is correlated significantly with firm performance. the dependent variable, firm performance is correlating significantly with all control variables at a level of 5%. In addition, this matrix also shows whether the problem of multicollinearity is present between variables. This problem is noticed when the coefficient is higher than the limit number of 0.7. In this case, none of the presented coefficients exceeds this line and there is, therefore, no question of multicollinearity. Board gender diversity is positive and significantly correlated with firm performance. This would suggest that the main relation between board gender diversity and firm performance will be positive, which is in line with hypothesis H1a.

Table 3

This table reports the descriptive statistics of all variables. The total sample consist of the unbalanced panel of 17,859 firm-year observations over 3,897 firms. The sample covers the period 2011-2017. Appendix A1. provides the definitions of all variables used throughout this paper including their sources. This table reports the total number of observations per variable (N), the arithmetic mean (Mean), the standard deviation (St. dev.), the minimum (Min) and the maximum (Max) of the distribution for each variable.

N Mean St. dev. Min Max

Firm performance 17,859 1.856 1.259 0.609 8.149

BGD 17,859 12.68 11.59 0 45.45

Risk-taking behavior 17,859 0.0346 0.0417 0.000392 0.234

Market to book value 17,859 3.256 3.943 0.320 29.28

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27 Table 4

This table reports the correlation matrix of the correlation between all variables used in the regression models. The total sample consist of the unbalanced panel of 17,859 firm-year observations over 3,897 firms. The sample covers the period 2011-2017. Appendix A1. provides the definitions of all variables used throughout this paper including their sources. The star (*) denotes statistical significance at a 5% level.

1 2 3 4 5 6 7 8 9 10 11 1. Firm performance 1 2. BGD 0.0994* 1 3. Board size -0.0905* 0.1171* 1 4. Firm size -0.2686* 0.0922* 0.5155* 1 5. Firm leverage -0.0749* 0.0472* 0.1086* 0.1804* 1

6. Market to book value 0.6536* 0.1111* -0.0311* -0.1412* 0.3798* 1

7. Board independence 0.1529* 0.2984* -0.1811* -0.0465* 0.0354* 0.1486* 1

8. Investor protection 0.0894* -0.0548* -0.0006 -0.0179* -0.0098 0.0803* 0.0322* 1

9. GDP Growth 0.0296* 0.0125 -0.0285* -0.0099 0.0088 0.0378* 0.2373* 0.0043 1

10. Internationalization -0.0264* 0.0775* 0.0681* 0.1485* -0.0679* -0.0533* 0.0232* -0.1047* -0.0197* 1

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28

4.3 Results OLS regression analysis

In this part, the main results of the regressions will be shown. Table 5 shows the results of the OLS regression between board gender diversity and firm performance and the results of the moderating effect of risk-taking behavior and internationalization on this relationship. The first model (1) is a univariate regression of board gender diversity on firm performance. The result shows a positive significant relationship between these variables with a coefficient of 0.0008. Model (2) shows the results of the multivariate regression between all control variables and the dependent variable, firm performance. It can be seen that only board independence does not have a significant effect on firm performance. Firm size is negative and highly significant with firm performance, which will mean, that when the firm size will increase by one, the Tobin’s Q ratio will decrease with 0.0160. This outcome is as expected from the study of Allayannis and Weston (2001), who had shown that firm size will have a negative effect on firm performance. However, market to book value GDP growth and investor protection will have a positive significant effect on firm performance. The regression model of the main independent variable and all the control variables together on the dependent variable, it can be seen in model (3) that the relationship between board gender diversity and firm performance is no longer significant. Because of the different results between model (1) and model (3), it is uncertainty to say if the relationship really exists between board gender diversity and firm performance. For this reason, hypothesis 1a and hypothesis 1b, must both be rejected.

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29 To test hypothesis 2 of this research, model (7) must be interpreted. In this regression, the moderator of risk-taking behavior is added to test the effect of this moderator on the relationship between the main independent variable and the dependent variable. This regression model shows that the moderating variable, board gender diversity*risk-taking behavior, is negative and highly significant. In addition, this multivariate regression is the only model, which shows a positive significant relationship between board gender diversity and firm performance. As a result of these two significant relationships, hypothesis 2 can be accepted. This will mean that risk-taking behavior affects the relationship between board gender diversity and firm performance negatively.

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30 Table 5

The influence of board gender diversity (BGD) on firm performance.

The table presents OLS regressions of board gender diversity on firm performance, control variables and the moderating effect of internationalization and risk-taking performance. The total sample consists of the unbalanced panel of 17,859 firm-year observations over 3,897 firms. The sample covers the period 2011-2017. Appendix A1. provides the definitions of all variables used in throughout this paper including their sources. Standard errors are clustered at the firm level. *,** and *** indicate significance at the 10%, 5% and 1% level, respectively. Regression models include industry-, year- and country fixed effects.

OLS regression

Dependent variable: Firm Performance – Tobin’s Q ratio

(1) (2) (3) (4) (5) (6) (7) (8) BGD 0.0014* 0.0000 0.0000 0.0005 -0.0006 0.0017** 0.0007 (0.0008) (0.0008) (0.0008) (0.0008) (0.0011) (0.0009) (0.0012) Board size 0.0064** 0.0064* 0.0064* 0.0067** 0.0067** 0.0065** 0.0065** (0.0033) (0.0033) (0.0033) (0.0032) (0.0032) (0.0032) (0.0032) Firm size -0.2520*** -0.2520*** -0.2520*** -0.2690*** -0.269*** -0.271*** -0.271*** (0.0160) (0.0160) (0.0160) (0.0160) (0.0160) (0.0160) (0.0160) Firm leverage -0.0011*** -0.0011*** -0.0011*** -0.0010*** -0.0010*** -0.0010*** -0.0010*** (0.0000) (0.0000) (0.0000) (0.0000) (0.0000) (0.0000) (0.0000)

Market to book value 0.0957*** 0.0957*** 0.0957*** 0.0940*** 0.0940*** 0.0939*** 0.0939***

(0.0023) (0.0023) (0.0023) (0.0023) (0.0023) (0.0023) (0.0023) Board independence 0.0000 0.0000 0.0000 0.0000 0.0000 -0.0000 -0.0000 (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) GDP Growth 0.0251*** 0.0251*** 0.0251*** 0.0231*** 0.0230*** 0.0230*** 0.0230*** (0.0042) (0.0042) (0.0042) (0.0042) (0.0042) (0.0042) (0.0042) Investor protection 0.0160** 0.0160** 0.0160** 0.0143* 0.0138* 0.0138* 0.0133* (0.0073) (0.0073) (0.0073) (0.0073) (0.0074) (0.0073) (0.0074) Internationalization -0.0002 -0.0003 -0.0004 -0.0003 -0.0004 (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) Risk-taking behavior -1.6500*** -1.6510*** -1.2590*** -1.2602*** (0.1370) (0.1370) (0.1840) (0.1840) BGD X Internationalization 0.0000 0.0000 (0.0000) (0.0000) BGD X Risk-taking behavior -0.0338*** -0.0336*** (0.0107) (0.0107) Constant 1.930*** 5.107*** 5.107*** 5.110*** 5.453*** 5.465*** 5.472*** 5.483*** (0.0156) (0.257) (0.257) (0.257) (0.257) (0.258) (0.257) (0.258)

Industry fixed effects YES YES YES YES YES YES YES YES

Year fixed effects YES YES YES YES YES YES YES YES

Country fixed effects YES YES YES YES YES YES YES YES

Observations 17,859 17,859 17,859 17,859 17,859 17,859 17,859 17,859

R-squared 0.013 0.157 0.157 0.157 0.167 0.167 0.167 0.167

Adjusted R2 -0.238 -0.079 -0.079 -0.079 -0.067 -0.067 -0.067 -0.067

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31

4.4 Results high and low percentage board gender diversity

From the main results, it becomes clear that only model (1) and model (7) have shown that the relationship between board gender diversity and firm performance is positive and significant. To test if the percentage of women in a board of directors would affect this relationship, two dummy variables are made to distinguish between firms with a high percentage of women in boards (BGD HI) and a low percentage of women (BGD LO). For the dummy variable, which indicates a high percentage of women, 1 indicates if the percentage of women on a board is higher than 20 percent and 0 otherwise. For the dummy variable, which indicates a low percentage of women, 1 indicates if the percentage of women on a board is below 11.11 percent and 0 otherwise. The numbers of 20 and 11.11 percent are chosen, because this is the 20 percent of women on board is the third quartile (p75) and 11.11 percent is the median (p50). Because of a negative skewness for board gender diversity, the first quartile (p25) for this variable is 0. For this reason, the median was a more logical choice.

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32 shown. This relation between this interaction variable and firm performance has not changed with a minimum of 20 percent of women on the board. This will mean that internationalization will not affect the relationship between BGD HI and firm performance for sure. In this case, hypothesis 3 should still be rejected.

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33 Table 6

The influence of a high percentage of board gender diversity (BGD HI) on firm performance.

The table presents OLS regressions of high board gender diversity on firm performance, control variables and the moderating effect of internationalization and risk-taking performance. The total sample consists of the unbalanced panel of 17,859 firm-year observations over 3,897 firms. The sample covers the period 2011-2017. Appendix A1. provides the definitions of all variables used in throughout this paper including their sources. Standard errors are clustered at the firm level. *,** and *** indicate significance at the 10%, 5% and 1% level, respectively. Regression models include industry-, year- and country fixed effects.

OLS regression

Dependent variable: Firm Performance – Tobin’s Q ratio

(1) (2) (3) (4) (5) (6) (7) (8) BGD HI 0.0494*** 0.0341** 0.0339** 0.0321** 0.0317* 0.0437*** 0.0389** (0.0160) (0.0149) (0.0149) (0.0148) (0.0165) (0.0154) (0.0167) Board size 0.0064** 0.0064* 0.0064* 0.0067** 0.0067** 0.0065** 0.0065** (0.0033) (0.0033) (0.0033) (0.0032) (0.0032) (0.0032) (0.0032) Firm size -0.2520*** -0.2520*** -0.2520*** -0.2610*** -0.2610*** -0.2620*** -0.2630*** (0.0160) (0.0160) (0.0160) (0.0161) (0.0161) (0.0161) (0.0161) Firm leverage -0.0011*** -0.0011*** -0.0011*** -0.0010*** -0.0010*** -0.0010*** -0.0010*** (0.0000) (0.0000) (0.0000) (0.0000) (0.0000) (0.0000) (0.0000)

Market to book value 0.0957*** 0.0941*** 0.0941*** 0.0925*** 0.0925*** 0.0923*** 0.0923***

(0.0023) (0.0023) (0.0023) (0.0023) (0.0023) (0.0023) (0.0023) Board independence 0.0000 -0.0001 -0.0001 -0.0001 -0.0001 -0.0001 -0.0001 (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) GDP Growth 0.0251*** 0.0245*** 0.0247*** 0.0229*** 0.0229*** 0.0229*** 0.0228*** (0.0042) (0.0043) (0.0043) (0.0042) (0.0042) (0.0042) (0.0042) Investor protection 0.0160** 0.0176** 0.0176** 0.0162** 0.0161** 0.0161** 0.0153** (0.0073) (0.0074) (0.0074) (0.0073) (0.0074) (0.0073) (0.0074) Internationalization -0.0003 -0.0003 -0.0003 -0.0003 -0.0004 (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) Risk-taking behavior -1.6920*** -1.6920*** -1.3660*** -1.3470*** (0.1420) (0.1420) (0.1840) (0.1860) BGD HI * Internationalization 0.0000 0.0000 (0.0000) (0.0000) BGD HI * Risk-taking behavior -0.0280*** -0.0298*** (0.0100) (0.0103) Constant 1.757*** 5.107*** 5.022*** 5.024*** 5.332*** 5.333*** 5.354*** 5.369*** (0.0116) (0.257) (0.259) (0.259) (0.259) (0.260) (0.259) (0.260)

Industry fixed effects YES YES YES YES YES YES YES YES

Year fixed effects YES YES YES YES YES YES YES YES

Country fixed effects YES YES YES YES YES YES YES YES

Observations 17,859 17,859 17,859 17,859 17,859 17,859 17,859 17,859

R-squared 0.014 0.157 0.154 0.154 0.162 0.162 0.163 0.163

Adjusted R2 -0.262 -0.079 -0.083 -0.083 -0.072 -0.072 -0.072 -0.072

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34 Table 7

The influence of a low percentage of board gender diversity (BGD LO) on firm performance.

The table presents OLS regressions of low board gender diversity on firm performance, control variables and the moderating effect of internationalization and risk-taking performance. The total sample consists of the unbalanced panel of 17,859 firm-year observations over 3,897 firms. The sample covers the period 2011-2017. Appendix A1. provides the definitions of all variables used in throughout this paper including their sources. Standard errors are clustered at the firm level. *,** and *** indicate significance at the 10%, 5% and 1% level, respectively. Regression models include industry-, year- and country fixed effects.

OLS regression

Dependent variable: Firm Performance – Tobin’s Q ratio

(1) (2) (3) (4) (5) (6) (7) (8) BGD LO 0.0139 0.0208 0.0209 0.0178 0.0298* 0.0098 0.0230 (0.0151) (0.0140) (0.0140) (0.0139) (0.0155) (0.0146) (0.0158) Board size 0.0064** 0.0064* 0.0064* 0.0067** 0.0067** 0.0065** 0.0065** (0.0033) (0.0033) (0.0033) (0.0032) (0.0032) (0.0032) (0.0032) Firm size -0.2520*** -0.2520*** -0.2520*** -0.2610*** -0.2610*** -0.2620*** -0.2630*** (0.0160) (0.0160) (0.0160) (0.0161) (0.0161) (0.0161) (0.0161) Firm leverage -0.0011*** -0.0011*** -0.0011*** -0.0010*** -0.0010*** -0.0010*** -0.0010*** (0.0000) (0.0000) (0.0000) (0.0000) (0.0000) (0.0000) (0.0000)

Market to book value 0.0957*** 0.0941*** 0.0941*** 0.0925*** 0.0925*** 0.0923*** 0.0923***

(0.0023) (0.0023) (0.0023) (0.0023) (0.0023) (0.0023) (0.0023) Board independence 0.0000 -0.0001 -0.0001 -0.0001 -0.0001 -0.0001 -0.0001 (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) GDP Growth 0.0251*** 0.0249*** 0.0250*** 0.0232*** 0.0230*** 0.0232*** 0.0229*** (0.0042) (0.0042) (0.0043) (0.0042) (0.0042) (0.0042) (0.0042) Investor protection 0.0160** 0.0187** 0.0188** 0.0173** 0.0151** 0.0175** 0.0147** (0.0073) (0.00736) (0.00736) (0.00732) (0.00743) (0.00732) (0.00743) Internationalization -0.0003 -0.0003 -0.0006 -0.0003 -0.0006 (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) Risk-taking behavior -1.6920*** -1.6920*** -1.4830*** -1.4240*** (0.1420) (0.1420) (0.1840) (0.1860) BGD LO * Internationalization 0.0000 0.0000 (0.0000) (0.0000) BGD LO * Risk-taking behavior -0.0182*** -0.0233*** (0.0102) (0.0104) Constant 1.753*** 5.107*** 4.992*** 4.995*** 5.305*** 5.331*** 5.323*** 5.362*** (0.0152) (0.257) (0.259) (0.259) (0.259) (0.260) (0.259) (0.260)

Industry fixed effects YES YES YES YES YES YES YES YES

Year fixed effects YES YES YES YES YES YES YES YES

Country fixed effects YES YES YES YES YES YES YES YES

Observations 17,859 17,859 17,859 17,859 17,859 17,859 17,859 17,859

R-squared 0.014 0.157 0.154 0.154 0.162 0.162 0.163 0.163

Adjusted R2 -0.026 -0.079 -0.083 -0.083 -0.072 -0.072 -0.072 -0.072

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35

4.5 Robustness analysis

As already is indicated in section three of this paper, return on assets (ROA) will be used instead of the Tobin’s Q ratio to analyze the robustness of the results. Both proxies are measurements for firm performance, whereby Tobin’s Q is focused on the growth performance and future earnings of the firm and the return on assets is focused on the financial performance of the firm (Montgomery and Wernerfelt, 1988). The ROA ratio can be calculated by the net income divided by the total assets. It will clarify the company what the earnings are which are obtained from investments. Robustness tests are done, based on the main regression models, presented in table 5.

Table 8 reports the results of this robustness check. As can be seen, the results are not entirely the same as presented in table 5. At first, it becomes immediately clear that the univariate regression in model (1) between board gender diversity and firm performance is no longer significant in comparison to the model with Tobin’s Q. In addition, this relation is also no longer a positive significant in model (7). Furthermore, it can be seen that the moderator of risk-taking behavior, which tests the effect on the main relationship is no longer negative significant. The moderating effect of internationalization on the relationship between board gender diversity and firm performance keeps the same for ROA as for Tobin’s Q proxy. Because the coefficients differ from those in table 5, it cannot be said that the analysis is robust when replacing the dependent variable.

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36 independent variable to analyze if the outcomes hold for this proxy (Coles, Daniel and Naveen, 2006). This measurement does focus on other parts of risk-taking behavior. The difference between σROA and R&D expenses is the fact that the results of σROA show the total risk behavior of a firm, and R&D expenses take only risk-taking behavior into account when firms have to make decisions about firm investments.

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37 Table 8

The influence of board gender diversity (BGD) on firm performance.

The table presents OLS regressions of board gender diversity on firm performance, control variables and the moderating effect of internationalization and risk-taking performance. In this table, the proxy for firm performance is a return on assets, instead of the Tobin’s Q ratio. The total sample consists of the unbalanced panel of 17,859 firm-year observations over 3,897 firms. The sample covers the period 2011-2017. Appendix A1. provides the definitions of all variables used in throughout this paper including their sources. Standard errors are clustered at the firm level. *,** and *** indicate significance at the 10%, 5% and 1% level, respectively. Regression models include industry-, year- and country fixed effects.

OLS regression

Dependent variable: Firm Performance – ROA

(1) (2) (3) (4) (5) (6) (7) (8) BGD 0.0000 -0.0001 -0.0001 -0.0001 0.0000 -0.0001 -0.0000 (0.0001) (0.0001) (0.0001) (0.0001) (0.0001) (0.0001) (0.0001) Board size -0.0006 -0.0005 -0.0005 -0.0004 -0.0004 -0.0004 -0.0004 (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) Firm size -0.0300*** -0.0299*** -0.0300*** -0.0360*** -0.0360*** -0.0359*** -0.0359*** (0.0021) (0.0021) (0.0021) (0.0020) (0.0020) (0.0020) (0.0020) Firm leverage 0.0000 0.0000 0.0000 0.0000*** 0.0000*** 0.0000*** 0.0000*** (0.0000) (0.0000) (0.0000) (0.0000) (0.0000) (0.0000) (0.0000)

Market to book value 0.0050*** 0.0050*** 0.0050*** 0.0044*** 0.0044*** 0.0044*** 0.0045***

(0.0003) (0.0003) (0.0003) (0.0003) (0.0003) (0.0003) (0.0003) Board independence -0.0000 -0.0000 -0.0000 -0.0000 -0.0000 -0.0000 -0.0000 (0.0001) (0.0001) (0.0001) (0.0001) (0.0001) (0.0001) (0.0001) GDP Growth 0.0023*** 0.0023*** 0.0023*** 0.0016*** 0.0016*** 0.0016*** 0.0016*** (0.0001) (0.0006) (0.0006) (0.0005) (0.0005) (0.0005) (0.0005) Investor protection 0.0022** 0.0023** 0.0022** 0.0017* 0.0018* 0.0017* 0.0018** (0.0010) (0.0010) (0.0010) (0.0009) (0.0009) (0.0009) (0.0009) Internationalization 0.0001 0.0000 0.0001 0.0000 0.0001 (0.000) (0.000) (0.000) (0.000) (0.000) Risk-taking behavior -0.6090*** -0.6090*** -0.6220*** -0.6220*** (0.0177) (0.0177) (0.0238) (0.0238) BGD X Internationalization -0.000 -0.000 (0.000) (0.000) BGD X Risk-taking behavior 0.0011 0.0011 (0.0014) (0.0014) Constant 0.137*** 0.558*** 0.558*** 0.557*** 0.673*** 0.670*** 0.672*** 0.669*** (0.00184) (0.0336) (0.0336) (0.0336) (0.0324) (0.0325) (0.0324) (0.0325)

Industry fixed effects YES YES YES YES YES YES YES YES

Year fixed effects YES YES YES YES YES YES YES YES

Country fixed effects YES YES YES YES YES YES YES YES

Observations 17,859 17,859 17,859 17,859 17,859 17,859 17,859 17,859

R-squared 0.031 0.074 0.074 0.074 0.147 0.147 0.147 0.147

Adjusted R2 -0.216 -0.186 -0.186 -0.186 -0.093 -0.093 -0.093 -0.093

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38 Table 9

The influence of board gender diversity (BGD) on firm performance.

The table presents OLS regressions of board gender diversity on firm performance, control variables and the moderating effect of internationalization and risk-taking performance. In this table, the proxy for risk-taking behavior is R&D expenses, instead of σROA. The total sample consists of the unbalanced panel of 17,859 firm-year observations over 3,897 firms. The sample covers the period 2011-2017. Appendix A1. provides the definitions of all variables used in throughout this paper including their sources. Standard errors are clustered at the firm level. *,** and *** indicate significance at the 10%, 5% and 1% level, respectively. Regression models include industry-, year- and country fixed effects.

OLS regression

Dependent variable: Firm Performance – Tobin’s Q ratio

(1) (2) (3) (4) (5) (6) (7) (8) BGD 0.0014* 0.0000 0.0000 -0.0000 -0.0004 0.0016** -0.0007 (0.0008) (0.0008) (0.0008) (0.0008) (0.0011) (0.0008) (0.0011) Board size 0.0064** 0.0064* 0.0064* 0.0067** 0.0067** 0.0065** 0.0065** (0.0033) (0.0033) (0.0033) (0.0032) (0.0032) (0.0032) (0.0032) Firm size -0.2520*** -0.2520*** -0.2520*** -0.2720*** -0.2730*** -0.2740*** -0.2740*** (0.0160) (0.0160) (0.0160) (0.0164) (0.0164) (0.0164) (0.0164) Firm leverage -0.0011*** -0.0011*** -0.0011*** -0.0010*** -0.0010*** -0.0010*** -0.0010*** (0.0000) (0.0000) (0.0000) (0.0001) (0.0001) (0.0001) (0.0001)

Market to book value 0.0957*** 0.0957*** 0.0957*** 0.0958*** 0.0958*** 0.0955*** 0.0954***

(0.0023) (0.0023) (0.0023) (0.0023) (0.0023) (0.0023) (0.0023) Board independence 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) GDP Growth 0.0251*** 0.0251*** 0.0251*** 0.0251*** 0.0251*** 0.0250*** 0.0250*** (0.0042) (0.0042) (0.0042) (0.0042) (0.0042) (0.0042) (0.0042) Investor protection 0.0160** 0.0160** 0.0160** 0.0175** 0.0171** 0.0172** 0.0171** (0.0073) (0.0073) (0.0073) (0.0073) (0.0074) (0.0073) (0.0074) Internationalization -0.0002 -0.0002 -0.0003 -0.0002 -0.0002 (0.0004) (0.0004) (0.0004) (0.0004) (0.0004) R&D Expenses -1.5020*** -1.5020*** -1.8310*** -1.8260*** (0.2620) (0.2620) (0.3110) (0.3120) BGD X Internationalization 0.0000 0.0000 (0.0000) (0.0000) BGD X R&D Expenses -0.0323** -0.0319* (0.0165) (0.0168) Constant 1.930*** 5.107*** 5.107*** 5.110*** 5.446*** 5.456*** 5.472*** 5.475*** (0.0156) (0.257) (0.257) (0.257) (0.264) (0.264) (0.264) (0.265)

Industry fixed effects YES YES YES YES YES YES YES YES

Year fixed effects YES YES YES YES YES YES YES YES

Country fixed effects YES YES YES YES YES YES YES YES

Observations 17,859 17,859 17,859 17,859 17,859 17,859 17,859 17,859

R-squared 0.013 0.157 0.157 0.157 0.159 0.159 0.159 0.159

Adjusted R2 -0.238 -0.079 -0.079 -0.079 -0.077 -0.077 -0.077 -0.077

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39

5. Conclusion

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40 Contrary to the expectation, there is found no positive significant evidence, whether internationalization is affecting the relationship between board gender diversity and firm performance. The result is not in line with the studies of Tallman & Li (1996) and Hitt et al. (1997), who have found some positive significant evidence for this relationship. Hypothesis 3 is rejected, which will mean that there is found no evidence whether the firm performance will increase when a gender diversified board will use internationalization as a business strategy. Finally, this paper has investigated if there is a significant difference between a high percentage of women on board and a low percentage of women. From this research, it can be concluded that there is indeed a difference between these two groups. The results show that board with at least 20 percent of women on the board, a high percentage, has a positive significant relationship with firm performance. In this case hypothesis 1a should be accepted and hypothesis 1b rejected. A low percentage of women on board, less than 11.11 percent, shows not a significant relationship at all with firm performance. It is hard to say if the board with a low percentage will affect firm performance. From this, it can be concluded that boards with at least 20 percent will affect firm performance positively. Furthermore, the results show that a board with a high percentage of women facing risk, this will negatively affect firm performance. However, there is found no evidence if internationalization will affect the relation between high board gender diversity and firm performance.

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41 affect the performance of the firm. Managers should take this into account in the composition of the board.

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42

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49

Appendix

A1

Definitions of variables.

This table describes all variables throughout this paper. For each variable, the table reports the definition and the data source. The data sources include the Thomas Reuters Datastream database and the database of the World Bank.

Variables Description Source

Firm performance Tobin’s Q ratio calculated by the market value of the

equity and the total book value of the total debts divided by the total book value of the assets

Thomas Reuters DataStream

ROA Return on assets. This ratio can be calculated by the

net income divided by the total assets

% Women (BGD) The number of women in the board relative to the total number of board members, expressed in percentages.

Thomas Reuters DataStream

BGD HI Dummy variable, which indicates a high percentage of women, 1 indicates if the percentage of women on a board is higher than 20 percent and 0 otherwise.

Thomas Reuters DataStream

BGD LO Dummy variable, which indicates a low percentage of women, 1 indicates if the percentage of women on a board is below 11.11 percent and 0 otherwise.

Thomas Reuters DataStream

Risk-taking behavior The standard deviation of return on assets of an overlapping period of three years. Calculate the deviation of profitability (EBITDA/Total assets) for a specific year.

Thomas Reuters DataStream

R&D Expenses Proxy, risk-taking behavior. Calculated as R&D divided by the total assets of the firm.

Thomas Reuters DataStream

Market to book value Calculated by the market value of equity divided by de book value of equity.

Thomas Reuters DataStream

Board size The total number of directors, control for group dynamics and performance.

Thomas Reuters DataStream

Firm size The logarithm of the total asset of a firm Thomas Reuters DataStream

Firm leverage The ratio of total debt to equity Thomas Reuters DataStream

Board independence Percentage of independent board members as reported by the company

Thomas Reuters DataStream

Internationalization The number of foreign sales relative to the total sales of a firm.

Thomas Reuters DataStream

Investor protection The extent to which investors are protected through disclosure of ownership and financial information at a scale from 1 to 10.

World Bank

GDP Growth The rate at which a nation's Gross Domestic Product (GDP) changes/grows from one year to another

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