The Role of Corporate Social Performance in Mediating the Relationship Between Top Management Team Gender Diversity and Market Performance

Abstract

This study explores how the number of females on top management teams, corporate social performance, and short-term firm performance are interrelated. In short, I hypothesized that corporate social performance (CSP) mediates the relationship between the percentage of females on a TMT and short term firm performance. Hypotheses were tested using a sample of publically traded firms listed on Standard & Poor's 1500 between 2000 and 2009, with data derived from Compustat, Execucomp, and the Kinder, Lyndenburg, and Domini (KLD) database. Results indicate that the potential negative effects of selecting women into TMTs can be attributed their tendency toward initiating corporate social performance initiatives and the initial costs associated with such efforts. As a result, the market penalizes these efforts in the short-term, as illustrated by the negative total influence on Tobin's Q. Despite its limitations, this study serves as a baseline for studying how firm performance, gender composition on TMTs, and CSP are interrelated. The presence of women leaders appears to detract from short-term performance because they are more likely than men to direct money toward initiatives associated with a company's long-term strategy-- often in the form of corporate social performance. In short, results imply that women run organizations differently than men, and this study contributes to understanding this difference.