Thesis 633557

Leading Through Crisis:
The Impact of Gender-Diverse Boards on Corporate

Financial Performance, Innovation, and CSR during
COVID-19 Pandemic
Radoslaw Lodziński
Study program: Master in Management

Student number: 633557
Date: June 15th, 2023
Supervisor: Dr. Guosong Xu

Co-reader: Dr. Vince Fabrizio
Executive Summary
Boards of directors are an essential element of corporate governance systems around the
world and their main function lies in monitoring the management and providing resources
to the firm to ensure its success. These aspects have a potential impact on firms’ financial
performance, innovation, and corporate social responsibility (CSR). Given the importance
of the board, many scholars have attempted to study the relationship between board gender
diversity and various aspects of firm performance, however, most of these studies have been
conducted during periods of relatively calm market conditions. The COVID-19 pandemic
in early 2020 caused serious disruptions in the global business landscape and is viewed as
one of the biggest crises of the century. This study utilizes these extraordinary conditions
and explores corporate governance practices in a period of crisis by focusing especially on
the impact of board gender diversity on firm financial performance, innovation, and CSR.
The research method used is based on the Difference-in-Differences regression methodology
and investigates data on the performance of listed firms in 31 European countries in the
period from 2017 to 2022. Firm performance is measured in various dimensions, using
Tobin’s Q and ROA for approximating financial performance, R&D expenditures and R&D
intensity for estimating innovation efforts, and ESG scores for CSR performance. Obtained
results indicate no significant relationship between board gender diversity and financial
performance during the crisis, which is not in line with expectations developed based on
the existing literature. Additionally, higher board gender diversity was found to translate
to lower innovation expenditures and ESG scores and a small, but statistically significant,
correlation between CSR engagement and financial performance was discovered. These
results imply that firms with gender-diverse directors may prioritize immediate survival
during a crisis, which can potentially affect innovation and CSR.
The copyright of the master thesis rests with the author. The author is responsible for its
contents. RSM is only responsible for the educational coaching and cannot be held liable
for the content.
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Contents
1 Introduction 3
2 Practical Relevance 5
3 Literature Review and Hypotheses 6

3.1 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Theoretical Frameworks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2.1 Agency Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2.2 Resource Dependence Theory . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Hypotheses Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3.1 Board Gender Diversity and Financial Performance . . . . . . . . . . 8
3.3.2 Board Gender Diversity and Innovation . . . . . . . . . . . . . . . . 10
3.3.3 Board Gender Diversity and CSR . . . . . . . . . . . . . . . . . . . . 12
3.3.4 CSR and Financial Performance . . . . . . . . . . . . . . . . . . . . 12
4 Data and Methodology 14

4.1 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Dependent Variables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2.1 Financial Performance . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2.2 Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2.3 CSR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.3 Independent Variables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3.1 Gender Diversity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3.2 Covid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Control Variables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.4.1 Financial Performance Controls . . . . . . . . . . . . . . . . . . . . . 17
4.4.2 Innovation Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.4.3 CSR Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.4.4 Country Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.5 Fixed Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.6 Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5 Results 20
5.1 Data Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.2 Impact of Board Gender Diversity on Financial Performance . . . . . . . . 22
5.3 Impact of Board Gender Diversity on Innovation . . . . . . . . . . . . . . . 25
5.4 Impact of Board Gender Diversity on CSR . . . . . . . . . . . . . . . . . . . 27
5.5 Impact of CSR on Financial Performance . . . . . . . . . . . . . . . . . . . 28
6 Discussion 31
6.1 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.2 Managerial Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.3 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Appendix 35
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1 Introduction
The COVID-19 pandemic brought the world to an unexpected standstill in early 2020,
causing severe disruptions in the global business landscape. The fact that it was so
unexpected and abrupt posed considerable challenges for firms worldwide in areas such as
agile strategy and swift innovation. The unprecedented conditions created space for
researchers to investigate the performance of boards with varying gender diversity in such
challenging conditions. Currently, research on board gender diversity is focused on
examining it in the undisturbed times and found proof for its positive impact on financial
performance, innovation, and corporate social responsibility (CSR) initiatives (Carter
et al., 2003; J. Chen et al., 2018; Bear et al., 2010). However, investigating the
relationship between board gender diversity and firm performance during a crisis is still an
underresearched area.
Even though an increasing amount of people worldwide recognize the importance of
gender diversity in the workplace and leadership, women are still largely underrepresented
on corporate boards in many countries. According to a report by Deloitte in 2022
(Deloitte, 2022), only 9 countries around the world had an average proportion of female
directors above 30%, which highlights the severity of the problem. The 30% threshold is
mentioned by scholars as a point at which female directors can have a real impact on the
board’s dynamics (Joecks et al., 2013). Therefore, if this research manages to prove that
board gender diversity indeed improves firm performance, it could cause investors to push
for more gender-diverse boards, which in turn would minimize the need to introduce
mandatory board gender quotas worldwide. The reason why reducing the number of
quota introductions might be valuable is the fact that they have been proven to, on
average, diminish value (Smith, 2018; von Meyerinck et al., 2022). Apart from
investigating the impact of board gender diversity on firm performance, this study is
aimed at identifying the underlying mechanisms through which it could do so.
Identification of these channels, whether it be, increased innovation or robust CSR
initiatives, can clarify precisely how gender diversity influences financial outcomes.
Therefore, studying the channels through which gender diversity can improve financial
performance is crucial to understand all forces at play and to provide insights that can be
used when formulating policies and strategies related to board composition.
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What makes this research unique is that it goes beyond the simple investigation of the
relationship between board gender diversity and firm performance and introduces a unique
setting in the form of the pandemic. This additional element will allow for performance
comparison between boards with varying levels of board gender diversity in times of crisis.
If a positive relationship between the proportion of female directors and performance is
discovered, this may prompt companies to rethink their board composition to include
more gender diversity in their structure, which will lead to a more inclusive corporate
environment in the long term. The COVID pandemic in this setting acts as an exogenous
shock, which creates a special research setting that disrupts normal business operations.
The relationship between gender diversity and firm performance is endogenous, which
means that board gender diversity can be influenced by unobserved factors that also affect
financial performance. This creates a significant challenge for research in this area as
heterogeneous boards may differ systematically from homogeneous ones in areas like
industry norms, initial financial health, or progressive leadership. An exogenous shock in
the form of COVID-19 seems to provide a solution as it impacts all companies, regardless
of their board structure or other aspects. Thus, if there is a difference in how businesses
with mixed-gender boards perform during the pandemic compared to those without, there
is more chance that the difference can be attributed to the gender diversity on the board.
Therefore, this study examines the following research question:
What is the impact of board gender diversity on corporate financial
performance, innovation, and CSR during the COVID-19 pandemic, and what
are the underlying mechanisms that influence financial performance?
To properly identify the difference in performance between the pandemic and pre-pandemic
period this research utilizes the Difference-in-Differences regression methodology that allows
for comparing treated and control groups between these periods. The following sections of
this thesis will present the practical relevance of this study, a review of the existing literature
on the topic, research design and methods, as well as results and discussion.
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2 Practical Relevance
This study provides several practical implications, that can improve managers’ decisions
during crises like the COVID-19 pandemic. First, it is found that board gender diversity has
no significant impact on corporate financial performance during a crisis. This implies that
increasing the proportion of female directors during a crisis has neither positive nor negative
financial results. Further, CSR is found to be an underlying mechanism that increases
financial performance during a crisis. This discovery is particularly important as it proves
that even during difficult times, investing in CSR activities can result in financial benefits.
Moreover, this study finds a negative impact between board gender diversity and both
innovation and CSR during the COVID-19 pandemic. In terms of practical implications, it
means that in times of crisis, managers in firms led by gender-diverse boards should make
sure that cutting back on R&D investments and CSR initiatives will not lead to a point
where it negatively impacts their business. Moreover, the emphasis should be put on CSR
incentives as they have been found to increase financial performance during a crisis.
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3 Literature Review and Hypotheses
3.1 Board of Directors
A board of directors’ main functions are monitoring the management, providing resources
to the firm, and ensuring that management acts in the best interest of the firm’s owners
(Pfeffer, 2019) and is therefore crucial to achieving success. Members of the board have an
important role in the corporate governance of a firm, as they monitor and verify
management’s decisions, determine their compensation, solve potential conflicts of interest
and have an impact on the strategic direction of a firm (Kula, 2005). All of these
functions are in the best interest of shareholders and are supposed to ensure a return on
their investment (Porta et al., 1997).
3.2 Theoretical Frameworks
As mentioned before, two main important functions of the board are resource provision and
management supervision. There are two main theoretical perspectives that explain how a
board achieves these objectives. Agency Theory argues that the degree to which the board
monitors the management depends on their incentives and Resource Dependency Theory
states that resource provision comes from the board’s own capital (Hillman and Dalziel,
2003).
3.2.1 Agency Theory
Agency theory is mainly focused on the relationship between the principals, which are the
owners of a firm (shareholders) and agents (managers) that act on their behalf and run
the company. The main issue in this type of relationship, according to the Agency Theory,
is ensuring an alignment between principals’ and agents’ objectives and minimizing any
opportunistic behaviour of the agents. As owners, principals, have an objective of
maximizing their own wealth which is translated to maximizing the firm value, therefore it
is crucial to ensure that management has the same objective in mind. In the context of
board diversity, Agency Theory hints at how more diversity can translate to better
financial performance, by saying that gender diversity has the potential to improve
management monitoring, minimize agency costs and increase board independence.
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Campbell and Mı́nguez-Vera (2008) report that gender-diverse boards are better at
monitoring managers and are more proactive in making decisions, which leads to lower
agency costs and better financial performance. Adams and Ferreira (2009) reached similar
conclusions as they showed female directors have the potential to minimize agency costs.
Additionally, Carter et al. (2003) proved a significant negative relationship between the
agency costs in a firm and the percentage of women on the board. In their discussion,
they proposed that women are more likely to bring up issues overlooked by their male
colleagues, which leads to better monitoring and increased board independence. Hillman
et al. (2000) in their study discovered that diverse boards contribute to a firm’s financial
performance by being better at monitoring the management and ensuring the objectives’
alignment between agents and principals. Similarly, Jurkus et al. (2011) argues that more
female directors positively contribute to lower agency costs. Another benefit of diversity is
that various cultural backgrounds imply different perspectives that directors voice which
may increase the board’s independence. This is attributed to the fact that due to their
differing perspective, diverse board members are more inclined to question the status quo
than directors with more conventional, homogenous backgrounds (Carter et al., 2003).
3.2.2 Resource Dependence Theory
Resource Dependency Theory (RDT) first introduced by Pfeffer and Salancik (1978)
states that companies depend on their environment in obtaining resources critical to
ensuring they can compete effectively in the market. Therefore, RDT suggests that the
main function of the board is ensuring access to these critical resources.
Pfeffer and Salancik (2003) identified four main channels through which the board
contributes to the success of a firm: (a) its advisory function; (b) providing external
information; (c) providing priority access to resources; and (d) improving the company’s
legitimacy. Consistent with this perspective, Gales and Kesner (1994) state that more
gender-diverse boards are better at providing resources to the firm, as suggested by the
RDT framework because they bring in different viewpoints to board discussions, as well as
more connections due to their varying backgrounds. Adding to that, Hillman et al. (2000)
argue that gender-diverse boards have a bigger range of viewpoints and experiences that
can translate into improved decision-making and thus better financial performance. Board
diversity, therefore, helps a company to navigate a complex operating environment
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because it provides insights into different markets and stakeholder expectations, which can
positively impact a firm’s financial performance.
Additionally, increased female participation in the boards can also impact certain social
factors. Reguera-Alvarado et al. (2017) state that female directors can aid in attracting
top talent and in having a wider network of financial and human capital resources, as well
as in attracting better strategic alliances. Brammer et al. (2009) argues that board gender
diversity makes firm appeal more progressive and inclusive which positively impacts their
credibility in the eyes of stakeholders. This is especially important as a company’s
long-term financial success depends on many stakeholder-related factors such as employee
satisfaction and consequently higher retention, higher consumer loyalty, and less
governmental scrutiny.
3.3 Hypotheses Development
3.3.1 Board Gender Diversity and Financial Performance
The effect of board diversity on firm performance is a subject of ongoing debate. Part of
the research body finds the relationship to be positive. Carter et al. (2003) show that
including female directors on a board creates an environment with a broader range of
market-specific expertise. This in turn helps the board to understand the needs of a
greater variety of customers (Erhard et al., 2003). In addition, Hewlett et al. (2013)
discovered that increasing the number of leaders with various points of view can boost the
creation of new and original ideas. Carter et al. (2010) further supports this argument by
positing that female directors add more knowledge and skills to the board. Moreover
having female directors on the board not only improves a company’s performance but also
encourages women in lower positions to pursue high-level positions within the
organisation, resulting in higher productivity and, ultimately, better firm performance
(Dezsö and Ross, 2012). However, it is worth pointing out that some studies find that the
relationship between board-gender diversity and financial performance becomes highly
significant only once there are three or more women on the board (Liu et al., 2014;
Brahma et al., 2021).
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The debate on the effects of board diversity on firm performance takes an even more
compelling turn in the context of crisis situations. The COVID-19 pandemic severely
disrupted global economies, bringing out the need for effective corporate governance
(Goodell, 2020). During times of crisis, investors pay extra attention to corporate
governance issues, as they might be potentially harmed by managers who misuse company
resources for personal gains. Gender-diverse boards seem to offer a solution to this
problem, as they have been found to enhance corporate governance, especially during
crisis settings (Gul et al., 2011). Adding to that argument, Adams and Ferreira (2009)
find that gender-diverse boards increase board meeting attendance and participation in
monitoring committees which further enhances corporate governance.
According to Khatib and Nour (2021), the COVID-19 pandemic affected a number of
business factors, including firm performance and governance. Moreover, they discovered
that although the relationship between board gender diversity and financial performance
was negative before the pandemic, it became positive after the pandemic began. In
addition, during the crisis, more diverse boards were found to have a positive impact on
both ROA and ROE. Further, Akhtar et al. (2022) found that during the peak of the
market’s negative sentiment caused by the COVID-19 pandemic, companies with
gender-diverse boards experienced higher abnormal returns. The relationship was
influenced by the presence of women on both the executive and monitoring boards. These
findings might lead to a conclusion that when a crisis comes, investors look more
favourably at firms with a larger representation of female directors, possibly viewing these
companies as more resilient and capable to deal with the incoming storm. In addition,
Byrne and Worthy (2015) find that women directors are on average better at integrating
multiple perspectives and sources of information before making a decision. Furthermore,
gender diversity has been found to create a unique setting that fosters the development of
original solutions (Terjesen et al., 2009; Dı́az-Garcı́a et al., 2014). Finally, according to
(Sun et al., 2015), boards with a higher representation of women are more likely to engage
in challenging and counter-cyclical investments, which can benefit firm performance,
especially in crisis times.
Despite some evidence suggesting that increased diversity can have a positive impact on
firm performance, other studies indicate the opposite. To be specific, Adams and Ferreira
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(2009) find that although gender diversity increases a firm’s board meeting participation,
the impact on its financial performance is negative. Additionally, according to Earley and
Mosakowski (2000), diversity can lead to more different opinions, which if not handled
correctly can be the cause of conflicts and communication issues. Garcı́a-Meca et al.
(2015) confirms this by discovering that gender-diverse boards can indeed suffer from
lower decision-making efficiency and more conflicts. On the other hand, some studies, like
the one by Ciavarella (2017), found no significant impact of board gender diversity on
corporate financial performance. Nevertheless, considering all these arguments, it can be
hypothesized that:
H1: During COVID-19 pandemic, companies with higher gender diversity on boards have
significantly better financial performance.
3.3.2 Board Gender Diversity and Innovation
The ability to innovate and develop novel ideas has emerged as a crucial strategy for
corporations to stay ahead of the curve in the fast-paced, globally competitive business
environment (Hitt et al., 1997). Several studies argue for a positive link between a board’s
gender diversity and its firm’s innovation capabilities (Galia et al., 2015; J. Chen et al.,
2018). According to Miller and Triana (2009) and Ruiz-Jiménez and Fuentes-Fuentes
(2016), gender-diverse boards translate to a more diverse pool of viewpoints, skills, and
talents which in turn enhances innovation. Moreover, a homogeneous board can
accidentally create a conformity environment which promotes compliance and biased
opinions, consequently slowing down innovation (Cyert, March, et al., 1963). On the other
hand, the research shows the potential heterogeneous boards have in terms of innovation.
According to G. Chen et al. (2005), this potential results primarily from cognitive
differences within these groups, which encourages more creative outcomes than in
homogeneous groups.
Furthermore, diversity plays a role that goes beyond simply enhancing the perspectives
and skills of the board. It often serves as the ignition for revolutionary ideas, sparked by
heightened group creativity (Page, 2008). Additionally, Nijstad et al. (2014) emphasize
that making strategic decisions regarding innovation requires the ability to handle
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conflicting information and opposing ideas. Therefore, diversity is essential for a firm’s
innovation as it increases different points of view and encourages creative thinking.
Moreover, according to Griffin et al. (2021), gender-diverse boards tend to have a
long-term perspective. This could result in increased innovation as the innovating
activities require substantial investments that might not create immediate returns.
While numerous studies have emphasized a strong positive link between a company’s
innovation and its financial performance, including the work by Teece et al. (1997), this
study does not specifically test this relationship. In today’s dynamic business landscape,
the ability to swiftly adapt to shifting market dynamics is essential for a company’s
survival. Innovation plays a vital role in enabling organizations to navigate this market,
driving their expansion and growth. Furthermore, innovation gives businesses a
competitive advantage by offering solutions to various business hurdles (Artz et al., 2010).
Thus, innovation plays a dual-purpose role. It not only facilitates growth but also serves
as a crucial instrument for resolving problems and overcoming obstacles in the fiercely
competitive business environment. Although a connection between innovation and
financial performance is widely acknowledged, it is important to consider that the impact
of innovation may require a period of a few years to fully materialize in financial
performance indicators. This is due to the period of time required for new ideas to be
developed, put into practice, and then finally accepted by the market. The COVID-19
pandemic only lasted for a few years, so the variables in this study have only a one-year
lag. This restriction makes it difficult to fully understand how innovation affects financial
performance over the long term. Consequently, this research does not aim to directly test
the relationship between innovation and financial performance, even though the
importance of innovation is recognized.
To sum up, various literature supports the assumption that gender diversity in boards
enhances a firm’s innovation. This relation can be achieved through having a large range
of viewpoints and enhancing employees’ creativity. Given these arguments, it can be
hypothesized that:
significantly better innovation.
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3.3.3 Board Gender Diversity and CSR
The composition of a company’s board, especially the presence of women, can greatly
impact how much focus a company places on corporate social responsibility (Zhang et al.,
2013). Although both genders can display a full range of traits, women are on average
more nurturing, empathetic and exhibit a stronger commitment to the well-being of
society (Rao and Tilt, 2016). This tendency can lead to an increased involvement in CSR
activities. Additionally, as shown by Jurkus et al. (2011), businesses with a higher ratio of
female directors take more charitable actions and engage in more environmental
commitments. This implies that board gender diversity can contribute to and strengthen
a company’s CSR initiatives. Moreover, a diverse board of directors encourages thorough
discussions that allow for the emergence of a wider range of viewpoints and solutions (Rao
and Tilt, 2015). This in turn leads to an improvement in the quality of decisions made,
including those related to CSR, as it facilitates a fusion of various backgrounds,
experiences and skills (Bear et al., 2010). Furthermore, Guping et al. (2020) found that
female directors tend to significantly strengthen internal dynamics in the company due to
their understanding of underrepresented groups and commitment to diversity principles.
This manifests for example through improving working relationships with employees,
which leads to increased job satisfaction.
In conclusion, a company’s CSR initiatives can be significantly improved by increasing
gender diversity on the board of directors. In addition, female directors, who tend to have
nurturing and empathetic qualities, put more emphasis on CSR initiatives. Given these
arguments, it can be hypothesized that:
significantly better CSR.
3.3.4 CSR and Financial Performance
Companies can have a big impact on the societies they operate in and with such power
comes great responsibility. These responsibilities go beyond the responsibilities the firms
have to their owners, that is increasing the company’s value. Corporate social
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responsibility is a way to describe the obligations corporations have with respect to their
various stakeholders. However, part of the existing literature suggests that these two
aspects don’t have to be mutually exclusive by showing that active involvement in CSR
activities can lead to better financial results.
H. Chen and Wang (2011) shows that a company’s public image and reputation can be
increased by being involved in CSR activities. This in turn can lead to better financial
results since modern customers pay much more attention to the social, ethical and
environmental impacts of businesses, thus making it one of the decisive factors before
purchasing a product or a service (Gauthier, 2005). By demonstrating active contribution
to society or the environment companies can create strong and long-term relationships
with many important stakeholders. Strong relationships with stakeholders can increase
trust and loyalty of the customers which can be particularly important during a crisis.
Beurden and Gössling (2008) also emphasizes how active participation in CSR initiatives
enables more effective stakeholder relationship management, which has been shown to
improve the performance of the company (Orlitzky et al., 2003). Finally, Sial et al. (2018)
find that CSR incentives can enhance employee satisfaction and loyalty, as employees see
that their employer makes a positive contribution to society. This in turn decreases
turnover and increases innovation.
In conclusion, a well-implemented CSR strategy that affects stakeholder relations,
reputation management, and employee satisfaction can be a powerful tool for enhancing a
company’s financial performance. Given these arguments, it can be hypothesized that:
H4: During COVID-19 pandemic, companies with higher CSR on boards have significantly
better financial performance.
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4 Data and Methodology
4.1 Data
The research data was gathered from multiple sources, all accessible via the Erasmus Data
Service Centre or through a web search. Compustat provides financial data of the
companies, whereas information on board members was fetched from BoardEx. Moreover,
ESG scores were downloaded from the Refinitiv Eikon database. Moreover,
country-specific data was obtained from Our World in Data website. Another
country-specific measure, masculinity indices, were collected from Hofstede Insights. After
merging the data, only the companies that fully covered the whole period from 2017 to
2022 were retained. This led to the data sample that consists of 1478 publicly listed
companies from 31 European countries, which translates to 8868 observational data
points. The 31 European countries include Austria, Belgium, Croatia, Cyprus, Czech
Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland,
Ireland, Italy, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway,
Poland, Portugal, Romania, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, and
the United Kingdom. Finally, the director variables were lagged by 1 year to account for
the potential discrepancy between the directors’ decisions and their observable effects on
the company.
4.2 Dependent Variables
4.2.1 Financial Performance
Financial performance in this study is measured using Tobin’s Q and ROA. Tobin’s Q is a
measure of the market’s expectations of future earnings of the company, thereby it can be
used as an indicator of a company’s financial performance (Montgomery and Wernerfelt,
1988; Demsetz and Villalonga, 2001). Tobin’s Q is calculated as a proportion of a company’s
market value to the cost of replacing its assets. Tobin’s Q value is greater than 1 if the
company’s market value exceeds the cost of replacing its assets. This could indicate that
the company has a competitive advantage or promising growth prospects that are reflected
in the market value but not in replacing costs of its assets. On the other hand, if Tobin’s Q
value is below 1, it can suggest that the company has limited growth potential or uses its
assets inefficiently. Since it has been shown that a simple Tobin’s Q is strongly correlated
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with more complex proxies of Tobin’s Q, a simple Tobin’s Q is used in this paper (O’Connell
and Cramer, 2010; Najid and Rahman, 2011; Valenti et al., 2011). Therefore, Tobin’s Q
is calculated as the ratio of the market capitalization plus total debt divided by the total
assets of the company. Moreover, return on assets (ROA), will be used as a second financial
performance indicator. In contrast to Tobin’s Q, ROA is an accounting-based performance
measure, which means that it looks at past performance rather than future expectations.
ROA is calculated by dividing the net income by the average total assets (O’Connell and
Cramer, 2010; Khatab et al., 2011; Najid and Rahman, 2011).
4.2.2 Innovation
Innovation in this study will be quantified using the metric of research and development
expenses (R&D) and R&D intensity (Miller and Triana, 2009; J. Chen et al., 2018).
Numerous studies have demonstrated the validity of both R&D expenditures and R&D
intensity as a reliable proxies for corporate innovation (Hitt et al., 1997; Hoskisson et al.,
2002; O’Brien, 2003; Olson et al., 2006). R&D intensity is defined as the ratio of a firm’s
R&D expenditures to its sales. In case R&D values were missing, they were assigned a
value of zero, which prevents results from being skewed by excluding companies with low
R&D expenditures (O’Brien, 2003; Miller and Triana, 2009). Because of the big range of
the data, in order to ensure its comparability, the logarithm of both values (R&D
expenses and R&D intensity) were used (Aghion et al., 2013; J. Chen et al., 2018).
4.2.3 CSR
This study employed the ESG scores as a proxy for a firm’s corporate social responsibility
(CSR). ESG stands for environmental, social and governance and its use as a measurement
of CSR has been supported and confirmed by numerous studies (Dorfleitner et al., 2020;
Kuo et al., 2021). According to Cini and Ricci (2018), ESG scores are the best available
metric for evaluating a company’s CSR activities. The ESG scores are based on the
information disclosed directly by the company. This study employs two scores from the
Refinitiv Eikon database: ESG score and ESG combined score as CSR proxies. The ESG
score is a combination of ten principal themes, including emissions, environmental
innovation, resource use, community, human rights and product responsibility (Rajesh and
Rajendran, 2020). ESG combined score additionally incorporates ESG-related
controversies and negative events that have drawn media attention, offering a more
15
comprehensive view (Dorfleitner et al., 2020). Scores on this scale range from 1 to 100.
4.3 Independent Variables
4.3.1 Gender Diversity
Gender Diversity Index (GDI), a continuous variable with a range from 0 (denoting
complete lack of gender diversity) to 1 (indicating complete gender diversity), will be the
main metric used (Equation 1). The choice to use the GDI was made with the intention of
measuring overall gender diversity rather than just concentrating on the representation of
women on boards. In most cases men constitute the majority of the board, thus increasing
the number of women on these boards would only bring the ratio closer to gender balance.
However, it is important to take into account the situations in which women hold the
majority of board positions.

#Men − #Women
GDI = 1 − (1)
#Men + #Women
Moreover, two additional measures are used for robustness checks. A continuous variable
represents the percentage of women on the board of directors and a binary variable that
takes the value of 1 if there is at least one female director on the board and 0 otherwise
(Adams and Ferreira, 2009). By integrating three different metrics of board gender diversity,
this study provides a comprehensive and robust analysis.
4.3.2 Covid
The variable Covid is set to have a value of 0 for the period prior to the COVID-19 pandemic,
and a value of 1 for the period during the pandemic. The starting point of the pandemic
is set for the beginning of 2020, although the World Health Organization announced the
coronavirus epidemic as a global pandemic on March 11, 2020 (Cucinotta and Vanelli,
2020). This change was made due to the fact that financial data collected for this research
is reported annually.
16
4.4 Control Variables
4.4.1 Financial Performance Controls
When analysing financial performance, the model accounts for several control variables
that were often used in the literature. Board size is included as it could have an impact
on decision-making dynamics. Firm size, calculated using the logarithm of total assets
is also included as it can the influence business’s market position (Carter et al., 2010).
Additionally, the model controls for the percentage of independent directors and leverage,
defined as the ratio of total debt to total assets (Lawrence and Raithatha, 2023).
4.4.2 Innovation Controls
The model with innovation as the dependent variable incorporates control variables such
as board size and board independence (Galia et al., 2015). These variables can influence
strategic decision-making and the promotion of innovation in the company. Leverage and
firm size are also included as they help to control a firm’s financial status and thus its ability
to invest in long-term, innovative projects (O’Brien, 2003).
4.4.3 CSR Controls
When looking at how board gender diversity affects CSR, the model accounts for the size
of the firm and its leverage ratio (Naeem et al., 2022). These variables can influence the
financial capability of the firm to engage in CSR initiatives. The model also controls for the
board’s independence and size (Giannarakis, 2014; Hosain, 2020; Khan et al., 2013; Jahid
et al., 2020).
4.4.4 Country Controls
Country-specific controls like masculinity, the number of COVID-19 cases, and the
stringency index are incorporated into the model to guarantee a thorough cross-country
analysis. It’s important to control for these variables as they provide insights into the
unique national and cultural contexts in which businesses operate. The masculinity score
reflects a country’s cultural attitude toward values that are on average more associated
with men, such as achievement, assertiveness, and material success. These different values
may potentially influence the dynamics within the board. When it comes to covid control
variables, the number of COVID-19 cases per million citizens and the strictness of the
17
regulations imposed by the government in response to the pandemic are used. The
number of infected people could directly translate to the workforce availability and morale
of the nation which might affect how the companies operate. Strictness of regulations
could also disturb the company’s operations as most companies had to develop and adjust
to the remote work infrastructure but it could also push companies towards more
innovative solutions, thus it is an important factor to account for.
4.5 Fixed Effects
Firm and country fixed effects serve as important mechanisms to capture distinctive
attributes and dynamics that influence firm performance. These fixed effects capture the
unique characteristics of each firm and country they operate in. Firm fixed effects account
for the unobservable aspects that remain constant within each individual firm, such as
business models or the company’s culture. On the other hand, country fixed effects
account for the characteristics that are constant across individual countries, such as
economic health or legal systems.
4.6 Models
This study uses Difference-in-Differences (DiD) regression to establish a connection
between gender diversity on boards and firm performance, innovation and CSR during
COVID-19 pandemic.
Model 1
P erf ormancei,t = β0 + β1 BGDi,t + β2 Covidi,t + β3 BGDi,t × Covidi,t
+ β4 BoardSizei,t + β5 BoardIndependencei,t + β6 F irmSizei,t
+ β7 Leveragei,t + β8 M asculinity i + β9 StringencyIndexi,t
+ β10 CovidCasesi,t + β11 F irmF E + β12 CountryF E + εi,t
18
Model 2
Innovationi,t = β0 + β1 BGDi,t + β2 Covidi,t + β3 BGDi,t × Covidi,t
Model 3
CSRi,t = β0 + β1 BGDi,t + β2 Covidi,t + β3 BGDi,t × Covidi,t
Model 4
P erf ormancei,t = β0 + β1 CSRi,t + β2 Covidi,t + β3 CSRi,t × Covidi,t
Performance stands for corporate financial performance, Innovation represents firm
innovation, CSR stands for corporate social responsibility, BGD represents the board
gender diversity, Covid is a dummy variable representing whether the data point is from
before or during the COVID-19 pandemic. BoardSize refers to the size of the board,
BoardIndependence refers to the degree of independence of the board, FirmSize is a firm
size, measured by the firm’s total assets, and Leverage stands for firm leverage.
Masculinity is a masculinity index. Additionally, CovidCases represents the number of
COVID-19 cases per million citizens, StringencyIndex measures the strictness of
regulations imposed by the government. FirmFE and CountryFE are fixed effects that
control for unobserved, time-invariant firm-specific and country-specific factors. Finally, ε
is the error term, i refers to the company, and t denotes the year.
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5 Results
5.1 Data Overview
Table 1: Summary Statistics Before 2020
Obs Mean SD Min Median Max

Tobin Q 4,434 1.387 0.633 0.247 1.181 4.878
ROA 4,434 0.030 0.097 -2.997 0.033 2.441
RD 4,434 1.403 2.160 0 0 10.797
R D Intensity 4,434 0.029 0.194 0 0 6.880
ESG 2,252 58.614 19.681 1.760 61.385 94.950
ESG Combined 2,252 55.739 18.584 1.760 56.835 94.100
BGD GDI 4,434 0.463 0.297 0 0.500 1
BGD Percent 4,434 0.237 0.158 0 0.250 1
BGD Dummy 4,434 0.834 0.372 0 1 1
Board Size 4,434 10.401 5.413 2 9 46
Board Independence 4,434 0.798 0.183 0 0.824 1
Leverage 4,434 0.264 0.162 0.000 0.250 0.966
Firm Size 4,434 7.777 2.398 1.395 7.640 16.817
Covid Cases 4,434 0 0 0 0 0
Stringency Index 4,434 0 0 0 0 0
Masculinity 4,026 45.942 23.400 5 43 88
Table 2: Summary Statistics After 2020
Obs Mean SD Min Median Max

Tobin Q 4,434 1.365 0.676 0.237 1.141 4.872
ROA 4,434 0.023 0.080 -1.430 0.027 0.721
RD 4,434 1.461 2.209 0 0 11.227
R D Intensity 4,434 0.029 0.170 0 0 5.576
ESG 2,618 59.789 19.932 3.270 62.410 95.960
ESG Combined 2,577 56.901 18.465 3.270 58.480 95.750
BGD GDI 4,434 0.551 0.292 0 0.600 1
BGD Percent 4,434 0.286 0.162 0 0.300 1
BGD Dummy 4,434 0.887 0.317 0 1 1
Board Size 4,434 10.682 5.331 2 10 37
Board Independence 4,434 0.808 0.179 0 0.833 1
Leverage 4,434 0.285 0.168 0.000 0.272 0.964
Firm Size 4,434 7.974 2.404 1.597 7.835 17.306
Covid Cases 4,434 11.653 1.133 8.784 11.800 13.465
Stringency Index 4,434 42.073 25.609 5.560 43.510 84.260
Masculinity 4,026 45.942 23.400 5 43 88
Table 1 and Table 2 above show the summary statistics of the data before and after 2020
respectively. When comparing the two tables it can be noticed that Tobin’s Q suffered
a minor decrease on average after 2020. This may suggest that the pandemic made the
companies less valuable in the eyes of investors. Apart from that, the average ROA also fell
20
after 2020. This might be also due to the pandemic which made the companies less efficient
in the use of assets in generating profits. Furthermore, data suggests that expenditures
in R&D increased. However, R&D intensity after 2020 showed a decrease showed by the
lower average and a significantly reduced maximum value. Moreover, data revealed that
ESG Combined scores and the average ESG after 2020 increased, implying that firms on
average enhanced their efforts in terms of social interactions, environmental responsibility
and governance. In addition, data revealed a trend in firms working on their transparency
and corporate responsibility since a bigger number of firms provided ESG information.
Regarding metrics for board gender diversity data implies that there was an increase in
female board members as well as the ratio of boards featuring at least one woman. It can
be interpreted that after 2020 there was a trend towards greater gender balance. However,
by comparing it to the six-year timeline of the development of board gender diversity in
Figure 1, it becomes clear that this increase is constant and not influenced by the beginning
of the COVID-19 pandemic.
Figure 1: Change in female participation on boards over the years
When it comes to control variables, the average board size increased slightly after 2020.
The average board independence score also increased, indicating a higher degree of board
independence after 2020. The average leverage ratio rose, suggesting the during pandemic
companies were taking on more debt. The financial strain on businesses might have
increased as a result of the pandemic, which has resulted in increased borrowing to
maintain business operations. The average firm size also increased after 2020, suggesting
21
growth in company size. This could result from mergers, acquisitions, or organic growth
during this period. In the period before the COVID-19 pandemic, the variables ’Covid
Cases’ and ’Stringency Index’ were naturally absent, as they measure aspects related to
the pandemic. Finally, the masculinity score did not change over time as it is constant
over the years.
Table 3: Summaxry Statistics by Industry
Number of R&D ESG BGD BGD BGD

Industry Tobin’s Q ROA R&D ESG
Companies Intensity Combined GDI Percent Dummy
Agriculture 60 1.225 0.021 1.247 0.033 54.805 54.817 0.592 0.3 0.8
Construction 360 1.212 0.018 0.546 0.003 60.963 59.288 0.508 0.256 0.906
Finance 1800 1.049 0.026 0.006 0 57.122 53.73 0.508 0.262 0.856
Manufacturing 3660 1.504 0.03 2.675 0.06 60.75 57.655 0.49 0.25 0.858
Mining 168 1.106 0.012 1.14 0.004 62.907 56.401 0.469 0.248 0.78
Retail Trade 330 1.392 0.024 0.551 0.002 64.801 62.552 0.61 0.322 0.952
Services 1218 1.597 0.023 0.967 0.024 54.704 53.845 0.491 0.262 0.811
Transportation 1014 1.327 0.023 0.969 0.003 60.747 57.008 0.553 0.288 0.919
Wholesale Trade 258 1.411 0.044 0.369 0.001 51.097 50.118 0.498 0.25 0.818
Table 3 presents a descriptive analysis of different industry sectors. Industries varied
considerably in the given metrics. Looking at the board gender diversity (BGD) measures,
the Retail Trade sector showed the highest scores on all three BGD metrics. Conversely,
the Mining sector displayed the lowest scores on all three BGD metrics. The
manufacturing sector had the highest number of companies (3,660). The services sector
had the highest Tobin’s Q (1.597), suggesting a relatively high firm valuation in this
industry. Wholesale Trade had the highest ROA (0.044). R&D expenditures (2.675) and
R&D intensity (0.6) were highest in the Manufacturing sector, implying a strong focus on
research and development. The ESG scores were highest in the Retail Trade sector,
suggesting a strong emphasis on sustainable and socially responsible practices in this
sector.
5.2 Impact of Board Gender Diversity on Financial Performance
The main aim of this research was to establish whether firms with higher board gender
diversity showed superior financial performance during the COVID-19 pandemic. To
examine this, a Difference-in-Differences (DiD) regression method was conducted on a
sample consisting of 8,052 observations. Financial performance was approximated using
Tobin’s Q, a performance and value measure, and ROA that focuses primarily on
profitability. Additionally, firm and country fixed effects were included and standard
errors were clustered by company.
22
Table 4: Regression Results - Board Gender Diversity on Financial Performance
Dependent variable:
Tobin Q ROA
(1) (2) (3) (4) (5) (6)
BGD GDI:Covid 0.036 -0.004
(0.025) (0.005)
BGD Percent:Covid 0.071 -0.007
(0.047) (0.010)
BGD Dummy:Covid 0.003 -0.005
(0.022) (0.005)
BGD GDI -0.092∗∗∗ -0.016∗∗
(0.034) (0.007)
BGD Percent -0.170∗∗∗ -0.038∗∗∗
(0.065) (0.013)
BGD Dummy 0.024 -0.008
(0.025) (0.005)
Covid 0.068 0.068 0.095 -0.062∗∗ -0.062∗∗ -0.058∗∗
(0.132) (0.132) (0.133) (0.027) (0.027) (0.028)
Board Size -0.003 -0.003 -0.003∗ -0.0001 -0.0001 -0.00002
(0.002) (0.002) (0.002) (0.0004) (0.0004) (0.0004)
Board Independence -0.175∗∗∗ -0.177∗∗∗ -0.203∗∗∗ -0.028∗∗ -0.026∗∗ -0.032∗∗
(0.064) (0.064) (0.063) (0.013) (0.013) (0.013)
Firm Size -0.137∗∗∗ -0.137∗∗∗ -0.142∗∗∗ 0.030∗∗∗ 0.031∗∗∗ 0.030∗∗∗
(0.017) (0.017) (0.017) (0.004) (0.004) (0.004)
Leverage -0.321∗∗∗ -0.320∗∗∗ -0.321∗∗∗ -0.227∗∗∗ -0.226∗∗∗ -0.227∗∗∗
(0.053) (0.053) (0.053) (0.011) (0.011) (0.011)
Covid Cases -0.012 -0.012 -0.013 0.005∗∗ 0.005∗∗ 0.005∗∗
(0.010) (0.010) (0.010) (0.002) (0.002) (0.002)
Stringency Index 0.002∗∗∗ 0.002∗∗∗ 0.002∗∗∗ 0.00005 0.00005 0.00005
(0.0004) (0.0004) (0.0004) (0.0001) (0.0001) (0.0001)
Firm Fixed Effects Yes Yes Yes Yes Yes Yes
Country Fixed Effects Yes Yes Yes Yes Yes Yes
Observations 8,052 8,052 8,052 8,052 8,052 8,052

R2 0.051 0.051 0.050 0.076 0.076 0.076
Adjusted R2 -0.143 -0.144 -0.145 -0.113 -0.113 -0.114
F Statistic (df = 27; 6683) 13.263∗∗∗ 13.245∗∗∗ 13.002∗∗∗ 20.355∗∗∗ 20.492∗∗∗ 20.222∗∗∗
Note: ∗ p<0.1; ∗∗ p<0.05; ∗∗∗ p<0.01
23
Table 4 presents the main variables of interest - the interaction terms between the three
measures of board gender diversity (’BDG GDI’, ’BGD Percent’, and ’BGD Dummy’) and
a dummy variable - ’Covid’. The regression models included these terms to capture the
impact of board gender diversity on firm performance during the pandemic period.
However, when inspecting the coefficient of these interaction terms neither Tobin’s Q nor
ROA showed any statistically significant relationship with any of them. This means that
the board’s gender diversity does not have a significant impact on firm performance
during the COVID-19 pandemic.
When looking at the gender diversity metrics ’BDG GDI’ and ’BGD Percent’, a negative
and statistically significant relationship (at 1% level) is observed with both Tobin’s Q and
ROA, which means that board gender diversity significantly impacts the firm’s
market-based performance. Similarly, when looking at ROA, ’BDG GDI’ remained
significantly negatively correlated at the 1% level, whereas ’BGD Percent’ showed a
marginally lower significance level, at 5%. This suggests that firms with higher board
gender diversity tended to have lower financial performance, regardless of the period.
In addition, across all models, a consistent negative relationship was found between the
’Covid’ variable and ROA. At a 5% confidence level, this relationship was statistically
significant. The results indicate that the pandemic generally had a negative impact on
firm profitability, and this negative impact happened regardless of the levels of board
gender diversity. On the other hand, the relation between ’Covid’ dummy and Tobin’s Q
was positive but insignificant.
Furthermore, ’Covid Cases’ shows a negative, but not statistically significant relationship
with Tobin’s Q. This suggests that an increase in Covid cases did not affect a firm’s
valuation. However, a contrasting positive and statistically significant relationship was
found between Covid Cases and ROA, implying that firms might have exhibited better
profitability despite an increase in Covid cases.
Lastly, ’Stringency Index’ was found to have a small but positive correlation with Tobin’s
Q and ROA, however with all coefficients being statistically significant only for Tobin’s Q
24
at 1%. This suggests that businesses tended to perform better in areas with stricter
responses to the pandemic, possibly as a result of more successful pandemic management.
In essence, the study found no empirical support for the claim that businesses with more
gender diversity on their boards performed significantly better financially during the
COVID-19 pandemic.
5.3 Impact of Board Gender Diversity on Innovation
Table 5: Regression Results - Board Gender Diversity on Innovation
Dependent variable:
RD R D Intensity
(1) (2) (3) (4) (5) (6)
BGD GDI:Covid -0.125∗∗∗ -0.009
(0.038) (0.009)
BGD Percent:Covid -0.214∗∗∗ -0.016
(0.071) (0.017)
BGD Dummy:Covid 0.007 -0.003
(0.034) (0.008)
BGD GDI 0.150∗∗∗ 0.005
(0.051) (0.012)
BGD Percent 0.264∗∗∗ 0.009
(0.099) (0.023)
BGD Dummy 0.005 0.021∗∗
(0.038) (0.009)
Covid 0.439∗∗ 0.428∗∗ 0.343∗ 0.056 0.055 0.053
(0.201) (0.201) (0.203) (0.047) (0.047) (0.047)
Board Size 0.007∗∗∗ 0.007∗∗∗ 0.007∗∗∗ 0.001∗ 0.001∗ 0.001
(0.003) (0.003) (0.003) (0.001) (0.001) (0.001)
Board Independence -0.220∗∗ -0.217∗∗ -0.203∗∗ -0.055∗∗ -0.055∗∗ -0.060∗∗∗
(0.097) (0.097) (0.096) (0.023) (0.023) (0.022)
Firm Size 0.181∗∗∗ 0.181∗∗∗ 0.187∗∗∗ -0.006 -0.006 -0.007
(0.026) (0.026) (0.026) (0.006) (0.006) (0.006)
Leverage 0.038 0.037 0.034 0.072∗∗∗ 0.072∗∗∗ 0.072∗∗∗
(0.081) (0.081) (0.081) (0.019) (0.019) (0.019)
Covid Cases -0.027∗ -0.027∗ -0.025∗ -0.004 -0.004 -0.004
(0.015) (0.015) (0.015) (0.003) (0.003) (0.003)
Stringency Index -0.001 -0.001 -0.001 -0.0001 -0.0001 -0.0001
(0.001) (0.001) (0.001) (0.0002) (0.0002) (0.0002)
Observations 8,052 8,052 8,052 8,052 8,052 8,052

R2 0.021 0.021 0.019 0.006 0.006 0.007
Adjusted R2 -0.179 -0.180 -0.182 -0.197 -0.197 -0.196
F Statistic (df = 27; 6683) 5.314∗∗∗ 5.214∗∗∗ 4.761∗∗∗ 1.577∗∗ 1.571∗∗ 1.746∗∗∗
Note: ∗ p<0.1; ∗∗ p<0.05; ∗∗∗ p<0.01
25
This section is aimed at testing the second hypothesis, namely that during the COVID-19
pandemic, organizations with more gender-diverse boards would achieve higher levels of
innovation. For the purpose of this study, innovation was estimated using two different
metrics: the company’s R&D expenditures and R&D intensity (annual R&D spending
divided by annual total sales). Both company and country fixed effects were incorporated
in the analysis and standard errors were clustered at the company level.
Table 5 provides an overview of the results of the regression where R&D is taken as the
dependent variable. Looking at the coefficient of the interaction term between the board
gender diversity (BGD) variables and the occurrence of COVID-19, a significant negative
relationship is visible. The coefficients for ’BGD GDI’:’Covid’ and ’BGD Percent’:’Covid’
are -0.125 and -0.214 respectively, and are both significant at the 1% level. What this
means is that during the pandemic board gender diversity negatively impacts the firm’s
R&D. On the other hand, the interaction terms for the other R&D level measure, R&D
Intensity, are not statistically significant.
Then looking at the ’BGD GDI’ and ’BGD Percent’ coefficients (0.150 and 0.264), it is
clear that there is a positive impact on the R&D, which is significant at the 1% confidence
level. This implies that despite the pandemic, higher levels of board gender diversity
translate to bigger R&D efforts. Additionally, when examining the R&D Intensity, the
dummy representing the presence of at least one woman on the board (BGD Dummy)
leads to a higher innovation intensity, as it has a positive coefficient (0.021) significant at a
5% level.
Additionally, variable ’Covid’ shows a significant positive relationship with R&D in all
three models, which implies that irrespective of the level of board gender diversity, the
pandemic led to more R&D activities. This is not surprising as these activities can reflect
firms adapting to the rapidly changing economic and social environment. However, for
R&D Intensity, the ’Covid’ coefficient is positive but not significant which indicates that
even though R&D expenditures increased, its intensity did not get significantly impacted.
In conclusion, while the interaction terms suggest that board gender diversity weakens the
impact on innovation during the pandemic, it also shows a positive relation outside of the
26
crisis.
5.4 Impact of Board Gender Diversity on CSR
Table 6: Regression Results - Board Gender Diversity on CSR
Dependent variable:
ESG ESG Combined
(1) (2) (3) (4) (5) (6)
BGD GDI:Covid -5.975∗∗ -5.513∗∗∗
(2.340) (1.491)
BGD Percent:Covid -12.746∗∗∗ -10.356∗∗∗
(4.288) (2.736)
BGD Dummy:Covid -7.001∗ -4.533∗
(4.017) (2.570)
BGD GDI 6.136∗∗ 6.716∗∗∗
(2.620) (1.670)
BGD Percent 8.608∗ 11.470∗∗∗
(5.073) (3.237)
BGD Dummy 2.461 4.940∗∗
(3.132) (2.004)
Covid 0.685 0.526 2.496 4.779 4.295 4.416
(9.235) (9.207) (10.029) (5.884) (5.874) (6.417)
Board Size 0.307∗∗ 0.304∗∗ 0.315∗∗ 0.171∗∗ 0.171∗∗ 0.161∗∗
(0.125) (0.125) (0.126) (0.080) (0.080) (0.081)
Board Independence 0.909 1.937 1.332 1.100 1.476 1.149
(5.657) (5.649) (5.621) (3.604) (3.604) (3.597)
Firm Size 2.851∗ 2.973∗ 2.856∗ 3.404∗∗∗ 3.472∗∗∗ 3.404∗∗∗
(1.544) (1.542) (1.546) (0.984) (0.984) (0.989)
Leverage -3.950 -3.846 -4.605 -1.812 -1.725 -2.034
(4.967) (4.962) (4.999) (3.165) (3.166) (3.199)
Covid Cases 0.785 0.833 0.913 0.447 0.475 0.582
(0.681) (0.681) (0.680) (0.434) (0.434) (0.435)
Stringency Index -0.030 -0.029 -0.024 -0.021 -0.020 -0.016
(0.031) (0.031) (0.031) (0.019) (0.019) (0.020)
Observations 1,296 1,296 1,296 1,296 1,296 1,296

R2 0.149 0.149 0.144 0.340 0.338 0.330
Adjusted R2 -0.042 -0.042 -0.048 0.192 0.190 0.180
F Statistic (df = 22; 1058) 8.403∗∗∗ 8.419∗∗∗ 8.093∗∗∗ 24.746∗∗∗ 24.572∗∗∗ 23.724∗∗∗
Note: ∗ p<0.1; ∗∗ p<0.05; ∗∗∗ p<0.01
This section tests the third hypothesis of the study, which posits that during the
COVID-19 pandemic, companies with higher board gender diversity would exhibit
superior CSR performance, measured through ESG scores. The analysis incorporates both
company and country fixed effects and standard errors are clustered at the company level.
When examining both ESG scores as the dependent variables, the interaction terms
27
between the board gender diversity variables and the Covid-19 pandemic period display
negative and significant findings. Specifically, the coefficients are significant across all
models, with ’BGD GDI’:’Covid’ and ’BGD Percent’:’Covid’ significant at 1% level and
’BGD Dummy’:’Covid’ at 10% (Table 6). This indicates that during the COVID-19
pandemic, companies with higher gender diversity on their boards experienced a lower
CSR performance, compared to homogeneous boards. However, in a broader context,
’BGD GDI’, ’BGD Percent’, and ’BGD Dummy’ all show significant positive associations
with ESG and ESG Combined scores. This indicates that, regardless of the pandemic,
higher levels of board gender diversity are generally associated with better CSR
performance.
Moreover, ’Covid’ variable shows a positive but non-significant association with both ESG
and ESG Combined scores across all models. This suggests that the pandemic had a
minor effect on CSR performance, regardless of board gender diversity. Similarly,
increases in ’Covid Cases’ show a positive but non-significant relationship with ESG
scores, indicating that the severity of the pandemic didn’t significantly influence CSR
performance. Lastly, increases in the ’Stringency Index’, show a non-significant negative
correlation with ESG scores. This implies that the intensity of lockdown measures didn’t
significantly influence a company’s CSR performance.
The findings show that although higher board gender diversity is generally linked positively
to better CSR performance, during the pandemic this relation is negative.
5.5 Impact of CSR on Financial Performance
Table 7 presents the results of regression models, which aim to explore the impact of ESG
scores on companies’ financial performance during the COVID-19 pandemic. The financial
performance measures used are Tobin’s Q and ROA.
Looking at Tobin’s Q as the dependent variable, the interaction term between ESG score
and the COVID-19 pandemic (’ESG’:’Covid’) shows a positive effect (0.002) that is
statistically significant at the 10% level. This implies that higher ESG scores during the
pandemic were associated with a higher Tobin’s Q. However, the effect size is relatively
small. However, ’ESG Combined’:’Covid’ shows no significant effects on Tobin’s Q. When
28
Table 7: Regression Results - CSR on Financial Performance
Dependent variable:
Tobin Q ROA
(1) (2) (3) (4)
ESG:Covid 0.002∗ 0.0002
(0.001) (0.0002)
ESG Combined:Covid 0.001 0.0003∗
(0.001) (0.0002)
ESG -0.001 0.00001
(0.001) (0.0002)
ESG Combined -0.002 0.0003
(0.001) (0.0002)
Covid 0.192 0.239 -0.044 -0.050
(0.276) (0.277) (0.044) (0.044)
Board Size -0.004 -0.004 -0.0005 -0.001
(0.004) (0.004) (0.001) (0.001)
Board Independence -0.290∗ -0.307∗ -0.003 -0.005
(0.166) (0.165) (0.026) (0.026)
Firm Size -0.263∗∗∗ -0.260∗∗∗ 0.022∗∗∗ 0.021∗∗∗
(0.046) (0.046) (0.007) (0.007)
Leverage -0.559∗∗∗ -0.552∗∗∗ -0.301∗∗∗ -0.301∗∗∗
(0.148) (0.148) (0.024) (0.023)
Covid Cases -0.032 -0.031 0.002 0.002
(0.020) (0.020) (0.003) (0.003)
Stringency Index 0.002∗∗ 0.002∗∗ -0.0001 -0.0001
(0.001) (0.001) (0.0001) (0.0001)
Firm Fixed Effects Yes Yes Yes Yes
Country Fixed Effects Yes Yes Yes Yes
Observations 1,296 1,296 1,296 1,296

R2 0.143 0.142 0.178 0.180
Adjusted R2 -0.048 -0.050 -0.006 -0.003
F Statistic (df = 22; 1058) 8.050∗∗∗ 7.976∗∗∗ 10.422∗∗∗ 10.569∗∗∗
Note: ∗ p<0.1; ∗∗ p<0.05; ∗∗∗ p<0.01
29
ROA is used as the dependent variable, ’ESG’:’Covid’ exhibits an insignificant effect. On
the other hand, ’ESG Combined’:’Covid’ exhibits a marginally positive effect on ROA at
the 10% level (0.0003), indicating that combined ESG scores during the pandemic have a
marginal but positive impact on ROA.
The analysis of COVID-related variables (Covid, Covid Cases, Stringency Index) suggests
a generally insignificant impact on the companies’ financial performance. The only
significant finding is a slight positive association between the strictness of regulations
(’Stringency Index’) and Tobin’s Q.
In conclusion, the results suggest that CSR performance can have a positive impact on
financial performance during the COVID-19 pandemic. However, the effect size is relatively
small and significant at a level of 10%.
30
6 Discussion
6.1 Conclusions
As boards across the world are still underrepresented, and increasing gender diversity has
recently become a popular topic in corporate governance, it’s interesting to see how
gender-diverse boards behave in non-standard conditions. The global crisis caused by the
unexpected COVID-19 pandemic immensely disturbed the operations and business models
of companies worldwide. Therefore this event created an interesting research setting to
understand how gender-diverse boards impact financial performance, innovation and CSR.
On top of that, this research aims to reveal the underlying mechanisms that stand behind
the relationship between board-gender diversity and financial performance, in order to
understand not only why, but also exactly how females on boards impact firm
performance. One of these suspected channels is CSR. Therefore this study aimed to
answer the following research question: What is the impact of board gender diversity on
corporate financial performance, innovation, and CSR during the COVID-19 pandemic,
and what are the underlying mechanisms that influence financial performance?
The first hypothesis states that during COVID-19 pandemic, companies with higher
gender diversity on boards have significantly better financial performance. According to
the literature, there are many advantages associated with gender-diverse boards that
enhance a firm’s governance and provide new resources to the company (Carter et al.,
2003; Campbell and Mı́nguez-Vera, 2008; Adams and Ferreira, 2009). However, the results
do not support this hypothesis, as they show that during the crisis the relationship
between board gender diversity and financial performance was not statistically significant.
However, the results are still worth examining. An interesting difference is shown between
Tobin’s Q and ROA, which were used as financial performance indicators. Tobin’s Q,
which is a metric used to describe the market’s expectations about the future performance
of the company, is shown to have a slight positive impact on firm performance in all
models. However, ROA which is an accounting measure, shows an even smaller but
negative influence on firm performance. Positive Tobin’s Q suggests that investors believe
that gender-diverse boards might perform better during the crisis, and this belief is
reflected in their investment decisions. On the other hand, negative ROA might be
31
explained by gender-diverse boards focusing on the strategies that need to be implemented
fast and do not bring immediate profits but are crucial for the company’s performance
during a global pandemic, such as remote work infrastructure and digital transformation.
In the short term, expenditures result in lower assets, thus they decrease the ROA.
However, it’s worth pointing out that these results are not significant thus they can’t be
used to support the first hypothesis.
The second hypothesis posits that during COVID-19 pandemic, companies with higher
gender diversity on boards have significantly better innovation. Current research points to
concluding that, heterogeneous boards enhance firms’ innovation by incorporating
multiple viewpoints into their decisions and boosting employees’ creativity. However, the
results indicate the complete opposite, meaning that during the pandemic, gender-diverse
boards had significantly lower R&D expenditures and R&D intensity, with only R&D
spending being statistically significant. This is quite surprising, considering that before
the pandemic, gender-diverse boards demonstrate a significant positive influence on
innovation. The potential explanation for this baffling result could be that gender-diverse
boards might prioritize allocating resources to more short-term survival, thus investing
less money in long-term innovation. This explanation is supported by Loukil and Yousfi
(2016), who find that gender-diverse boards are more prudent when it comes to
risk-taking and resource allocation. Thus, during COVID-19 pandemic, riskier
investments such as R&D spending, that do not bring immediate results, could
temporarily decline (S. Chen et al., 2016). It’s also worth pointing out that reduced R&D
expenditures don’t necessarily mean that general innovation has decreased. Innovating
activities needed for rapid adjustment to the pandemic such as digitization or remote work
solutions, might not be included in the R&D measures. Nevertheless, these results do not
offer sufficient support for the second hypothesis.
The third hypothesis states that during COVID-19 pandemic, companies with higher
gender diversity on boards have significantly better CSR. However, again, the results are
very surprising. They suggest that during the crisis, gender-diverse boards had
significantly worse CSR performance which was measured by ESG scores. This contradicts
a big part of the literature, which posits that women on average are more committed to
the well-being of society, undertake more charitable initiatives, and have better relations
32
with employees (Rao and Tilt, 2016; Jizi, 2017; Guping et al., 2020). And indeed, the data
points to the conclusion that in normal times these gender-diverse boards have higher
ESG scores. However, during the pandemic, we can observe a 180-degree shift. A possible
explanation for this phenomenon could be that companies with gender-diverse boards
experienced unique challenges that made them transfer a significant amount of CSR
budget to deal with these issues. Following the finding that mixed-gender boards often
exhibit remarkable risk management capabilities (S. Chen et al., 2016), they could be
more hesitant to spend funds on activities that do not seem to result in immediate
financial gains. Consequently, these findings do not provide sufficient support to uphold
the third hypothesis.
The fourth hypothesis posits that during COVID-19 pandemic, companies with higher
CSR have significantly better financial performance. According to previous research,
involvement in CSR activities can increase the financial performance of a company. By
creating long-lasting relationships with a diverse range of stakeholders, firms can improve
their reputation and brand image (H. Chen and Wang, 2011; Orlitzky et al., 2003). This
in turn can translate to enhanced financial performance. The results of this study confirm
and add to previous findings. CSR, measured by ESG scores, shows a small but positive
and significant correlation with financial performance, during COVID-19 pandemic.
Therefore, the fourth hypothesis is sufficiently supported by these findings, meaning that
during the crisis, committing to CSR is a channel through which companies can enhance
their financial performance.
6.2 Managerial Implications
This study makes several discoveries that provide insights which can help managers make
better decisions during times of crisis. The main finding suggests that increased board
gender diversity does not lead to better financial performance nor it results in worse one. The
relationship is simply insignificant, meaning that adding more females to the board during
a crisis does not affect financial performance. Moreover, the research successfully identifies
CSR as a channel through which companies can increase their financial performance. This
shows, that even during the pandemic, spending money on societal and environmental
endeavours is not only a matter of ethics but also a way to improve a firm’s financial results.
33
In addition, this research finds surprising results indicating that during the crisis, both R&D
investments and ESG scores see a significant drop in firms led by gender-diverse boards.
This means that during a crisis, managers in companies with gender-diverse boards should
make sure that they do not harm their firms long-term by not investing in innovation but
also short term, as it was shown that CSR initiatives can positively impact firm performance.
6.3 Limitations
Despite the valuable insights provided by this study, it is important to be aware of its
limitations. The scope of this study is limited to 31 European countries, thus the findings
may not apply to companies outside of Europe, because of different cultures or other
hidden factors. Moreover, the one-year lag of director variables might not be enough to
fully capture the effects of board decisions on financial performance, innovation and CSR.
Another limitation of this study is that it does not distinguish between one and two-tier
boards due to data unavailability. Additionally, the regression models did not account for
the role of government financial support during the pandemic, which might have affected
where companies allocate their resources. Finally, this research focused only on publicly
listed firms, which might make the results not applicable to smaller, private firms. Future
research should aim to address these limitations to provide a more complete picture of
how board gender diversity impacts corporate financial performance, innovation and CSR
during a crisis.
34
RD ESG BGD BGD BGD Board Board Firm Covid Stringency
Tobin Q ROA RD ESG Covid Leverage Masculinity
Intensity Combined GDI Percent Dummy Size Independence Size Cases Index
Appendix
Tobin Q 1 0.397 0.195 0.258 0.153 0.104 -0.069 -0.046 -0.077 -0.028 -0.110 0.052 0.041 -0.198 -0.040 0.031 -0.032
Correlation matrix
ROA 0.397 1 0.122 0.031 0.087 0.034 -0.028 -0.028 -0.019 -0.088 -0.021 -0.040 -0.155 -0.052 -0.074 -0.142 -0.063
RD 0.195 0.122 1 0.675 0.252 0.386 0.050 0.040 0.080 0.028 0.079 0.119 -0.161 0.113 0.027 0.014 -0.066
R D Intensity 0.258 0.031 0.675 1 0.128 0.214 -0.035 -0.047 0.051 0.021 0.013 0.064 -0.147 -0.027 0.020 0.016 0.044
ESG 0.153 0.087 0.252 0.128 1 0.792 0.245 0.242 0.108 0.184 0.070 0.144 -0.069 0.055 0.192 0.095 -0.141
ESG Combined 0.104 0.034 0.386 0.214 0.792 1 0.241 0.244 0.144 0.211 0.218 0.127 -0.090 0.292 0.216 0.134 -0.109
BGD GDI -0.069 -0.028 0.050 -0.035 0.245 0.241 1 0.967 0.390 0.179 0.015 0.318 0.0003 0.111 0.183 0.098 -0.250
35
BGD Percent -0.046 -0.028 0.040 -0.047 0.242 0.244 0.967 1 0.367 0.180 0.0002 0.313 0.009 0.112 0.184 0.101 -0.249
BGD Dummy -0.077 -0.019 0.080 0.051 0.108 0.144 0.390 0.367 1 0.047 0.107 0.189 -0.060 0.125 0.046 0.031 -0.138
Covid -0.028 -0.088 0.028 0.021 0.184 0.211 0.179 0.180 0.047 1 0.020 0.029 0.081 0.052 0.991 0.761 -0
Board Size -0.110 -0.021 0.079 0.013 0.070 0.218 0.015 0.0002 0.107 0.020 1 -0.267 -0.071 0.249 0.022 0.037 0.327
Board Independence 0.052 -0.040 0.119 0.064 0.144 0.127 0.318 0.313 0.189 0.029 -0.267 1 -0.018 0.039 0.028 -0.062 -0.227
Leverage 0.041 -0.155 -0.161 -0.147 -0.069 -0.090 0.0003 0.009 -0.060 0.081 -0.071 -0.018 1 0.006 0.076 0.096 -0.007
Firm Size -0.198 -0.052 0.113 -0.027 0.055 0.292 0.111 0.112 0.125 0.052 0.249 0.039 0.006 1 0.056 0.019 -0.290
Covid Cases -0.040 -0.074 0.027 0.020 0.192 0.216 0.183 0.184 0.046 0.991 0.022 0.028 0.076 0.056 1 0.681 0.006
Stringency Index 0.031 -0.142 0.014 0.016 0.095 0.134 0.098 0.101 0.031 0.761 0.037 -0.062 0.096 0.019 0.681 1 0.026
Masculinity -0.032 -0.063 -0.066 0.044 -0.141 -0.109 -0.250 -0.249 -0.138 -0 0.327 -0.227 -0.007 -0.290 0.006 0.026 1
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Leading Through Crisis:

The Impact of Gender-Diverse Boards on Corporate

Study program: Master in Management

Supervisor: Dr. Guosong Xu

and explores corporate governance practices in a period of crisis by focusing especially on

The research method used is based on the Difference-in-Differences regression methodology

during a crisis, which can potentially affect innovation and CSR.

for the content.

3 Literature Review and Hypotheses 6

4 Data and Methodology 14

challenging conditions. Currently, research on board gender diversity is focused on

performance, innovation, and corporate social responsibility (CSR) initiatives (Carter

Even though an increasing amount of people worldwide recognize the importance of

on corporate boards in many countries. According to a report by Deloitte in 2022

aimed at identifying the underlying mechanisms through which it could do so.

Identification of these channels, whether it be, increased innovation or robust CSR

used when formulating policies and strategies related to board composition.

If a positive relationship between the proportion of female directors and performance is

industry norms, initial financial health, or progressive leadership. An exogenous shock in

Therefore, this study examines the following research question:

What is the impact of board gender diversity on corporate financial

are the underlying mechanisms that influence financial performance?

financial results. Further, CSR is found to be an underlying mechanism that increases

financial performance during a crisis. This discovery is particularly important as it proves

3.1 Board of Directors

management’s decisions, determine their compensation, solve potential conflicts of interest

their investment (Porta et al., 1997).

3.2 Theoretical Frameworks

3.2.1 Agency Theory

opportunistic behaviour of the agents. As owners, principals, have an objective of

management monitoring, minimize agency costs and increase board independence.

3.2.2 Resource Dependence Theory

states that companies depend on their environment in obtaining resources critical to

main function of the board is ensuring access to these critical resources.

diversity, therefore, helps a company to navigate a complex operating environment

positively impact a firm’s financial performance.

credibility in the eyes of stakeholders. This is especially important as a company’s

long-term financial success depends on many stakeholder-related factors such as employee

3.3 Hypotheses Development

3.3.1 Board Gender Diversity and Financial Performance

including female directors on a board creates an environment with a broader range of

encourages women in lower positions to pursue high-level positions within the

organisation, resulting in higher productivity and, ultimately, better firm performance

relationship between board-gender diversity and financial performance becomes highly

Brahma et al., 2021).

monitoring committees which further enhances corporate governance.

market’s negative sentiment caused by the COVID-19 pandemic, companies with

gender-diverse boards experienced higher abnormal returns. The relationship was

multiple perspectives and sources of information before making a decision. Furthermore,

in challenging and counter-cyclical investments, which can benefit firm performance,

especially in crisis times.

corporate financial performance. Nevertheless, considering all these arguments, it can be

significantly better financial performance.

3.3.2 Board Gender Diversity and Innovation

talents which in turn enhances innovation. Moreover, a homogeneous board can

accidentally create a conformity environment which promotes compliance and biased

innovation as it increases different points of view and encourages creative thinking.

Moreover, according to Griffin et al. (2021), gender-diverse boards tend to have a

long-term perspective. This could result in increased innovation as the innovating

driving their expansion and growth. Furthermore, innovation gives businesses a

competitive business environment. Although a connection between innovation and

financial performance is widely acknowledged, it is important to consider that the impact

of innovation may require a period of a few years to fully materialize in financial