Board Gender Diversity and Investment Efficiency: Evidence From UK Private Firms

Abstract

This paper examines the relationship between private firm investment efficiency and board gender diversity in the UK from 2006 to 2019. The findings indicate that board gender diversity has a positive impact on private firm investment efficiency, with the effect primarily driven by reductions in overinvestment rather than underinvestment. Contrary to the critical mass hypothesis, even the presence of a single woman director is associated with improved investment efficiency, and this positive effect becomes more pronounced as women's representation increases. Further analysis reveals that the effect of women directors is stronger in financially constrained firms and more pronounced in non-family firms. The findings support regulations to increase the representation of women directors in private firms.