Board Gender Diversity and Organizational Financial Performance: A Perspective from U.S. Hospitals

The purpose of this study is to: 1) examine the association between board gender diversity (BGD) and hospital financial performance and 2) determine whether that association is mediated by boards’ level of engagement in its monitoring and stakeholder management roles. The conceptual framework guiding this study was developed based on upper echelons, agency, and stakeholder theories. Results showed that BGD did not significantly affect hospital financial performance directly or indirectly through boards’ engagement in its monitoring and stakeholder management roles. However, BGD significantly affected boards’ engagement in a third role, performance evaluation, which measured boards’ use of precise and quantifiable metrics to perform its monitoring and stakeholder management roles. Having three or more female directors was associated with lower board performance evaluation, while having three or more directors from both genders was associated with higher board performance evaluation. Results also showed that board performance evaluation was positively related to operating margin. Furthermore, several board, hospital, and market characteristics significantly affected financial performance and boards’ engagement in its monitoring, stakeholder management, and performance evaluation roles. 

While the research hypotheses were not supported, the results are important for policymakers and managers as they shed light on the relationship between BGD, board monitoring, board stakeholder management, and financial performance using data from an underexplored industry (Erwin et al., 2018). Results imply that changes in BGD are unlikely to affect firm financial performance, but they may affect boards’ engagement in certain activities, which can in turn affect financial performance. Policymakers and managers may want to consider these results when making decisions that will affect BGD or board activities.