Gender Diversity in Top Management and Firm Performance: An Analysis with the IAB-Establishment Panel

In recent years the political and empirical debate about female participation in top management has intensified. The questions as to how women contribute to a company’s success and whether employing women in top management positions pays off on the bottom line remain to be conclusively answered, as the existing empirical evidence is ambiguous. Therefore, I propose a framework to help clarify the potential mediating and moderating effects of gender diversity and firm performance. Thus far, few papers have analyzed the gender diversity-performance relationship for Germany. This study therefore aims to explore the effects of gender diversity in top management on firm performance in Germany using unique data from the Institute for Employment Research’s Establishment Panel Survey. Various production functions reveal a slight, yet significant negative relationship between the proportion of women in top management positions in 2008 and establishment performance. An instrument variable approach is estimated to account for endogeneity, providing evidence for the robustness of the negative link. Further estimations highlight the importance of the moderating influences of the characteristics of the establishment, the industry and the environment, which shape the relationship between the share of women in top management positions and establishment performance. JEL Classification: J16, L25