Older studies showed that companies with high numbers of female directors on the board perform substantially better on three metrics-return on equity, return on sales, and return on invested capital-than companies with very few or no female director. Though recently frank Dobbin and a group of researchers from Harvard have found something different. Stock prices were found to fall slightly when female directors were appointed into the board. It was not because the performance declined but rather it was because of investors’ bias, mostly non block holding institutional investors. And these tend to control half of the shares. In the absence of public scrutiny it has been found that fund managers tendency to associate men with leadership and success may cause them to disfavor companies that appoint women to boards most likely without realizing it. Research in the field of psychology has shown that people use stereotypes as cognitive shortcuts to make judgment about supposed differing abilities of men and women. Even though this is the case. It is believed that companies that successfully diversify boards with women are likely to see increased independence, innovation and good governance which ultimately leads to good performance. ( Harvard Business Review, July –August, 2010)Image may be NSFW.
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