Management Gender Diversity & Firm Performance: Evidence from Ethiopia

Abstract

Nowadays, the global interest and pressure to increase women's employment and presence in top management positions is posing tremendous theoretical and practical challenges to both academics and practitioners around the world. Drawing from the Upper Echelons Theory and the Critical Mass Theory, and using data from the financial sector in Ethiopia, we examined the effect of women's representation in top management teams and boards of directors on firm financial performance. Additionally, we investigated the effect of women's representation in the board of directors and workforce on women's representation in top management teams. Furthermore, we assessed the extent of women's representation in the workforce, top management teams, and boards of directors in the financial industry of Ethiopia. Our findings revealed a significant negative correlation between women's representation in top management and financial performance. Similarly, women's representation in the workforce was found to be negatively related to a firm's financial performance. We did not find a significant relationship between women's representation in the boardroom and the firm's financial performance. However, we did observe that women's representation in the boardroom had a positive influence on women's representation in the top management teams, and women's representation in the workforce was not related to women's representation in top management teams. Moreover, even though the financial sector employs a considerable number of women, a descriptive analysis showed that women have been underrepresented in the top management and board of directors in the financial sector, with only 1 out of 11 top management positions and 2 out of 9 board positions filled by women on average. We discuss the theoretical and practical implications of our findings.