Creative Commons

This dissertation was written as part of the MSc in International Accounting, Auditing and Financial Management at the International Hellenic University. The observating role fullfiled by the board of directors is an essential corporate governance control mechanism, particularly in countries where external mechanisms are less well developed. The composition of the board based on gender can affect the quality of this observating role and thus the financial performance of the firm. This is part of the ‘‘business case’’ for female participation on boards, though arguments may also be framed in terms of ethical considerations. While the matter of board gender diversity has captured researchers’ attention in recent years, most empirical results are based on U.S. data. This article is trying to focus to an increasing number of non- U.S. studies by investigating the link between the gender diversity of the board and firm financial performance in UK, which is a country that historically has had minimal female participation in the workforce, but which has now introduced legislation to improve equality of opportunities. We investigate the topic using panel data analysis and find that gender diversity – as measured by the percentage of women on the board and according to two more indexes– has a positive effect on firm value and that the opposite causal relationship is not significant. Our study suggests that investors in UK do not penalize firms which increase their female board membership and that greater gender diversity can generate economic gains.