Literature Review Women on boards and in TMTS and firm performance 21 by enhanced empathy towards others and the abi lity to consider multiple views both often ascribed to women fostering oversight of firm strategy Ni elsen Huse 2010 In fact business teams with an equal gender mix perform better than male dominated teams On average sales and profits are higher for groups with a proper balance of women and men Hoo gendorn Oosterbeek van Praag 2013 Teams perform also worse when they are dominated by women The relation between sales and share of women is inverse U shaped For a share of women below 50 percent sales and profits do rise along with an increase in the share of women For higher shares of women above 50 percent sales tend to decrease and the relation between profits and the share of women is flat 2 2 3 The effects of female representation on corporate boards Various theories can be used for examining the composition of corporate boards in particular the role of women on corporate boards and its impact on firm performance agency theory stakeholder theory and resource dependence theory Agency theory Fama Jensen 1983 Jensen Meckling 1976 is most often used for this purpose Agency theory views corporate boards as representatives of shareholders principal s interests The corpo rate board monitors and controls management s agent s actions Independence of supervising board members from executive directors is crucial for its functioning If diversity is understood as one manifestation of independence as individuals with diverse gender respectively age nationality add new possibly critical perspectives a diverse board could be more effective in monitoring Although this approach sounds convincing at first glance Carter Simkins and Simpson 2003 point out that agency theory simply does not provide a clear cut prediction concerning the link between board di versity and firm value p 37 Stakeholder theory Freeman 1984 says that it is not only the interest of shareholders that counts but the interests of all internal and external stake holders of a firm The board is a linkage instrument between the firm and its environment Ideally in creased equality of representation on corporate boards corresponds to demographic characteristics among key stakeholders such as customers sup pliers or potential and current employees Bram mer et al 2007 Appointing women to the board can thus provide legitimacy to the firm Lücke rath Rovers 2013 Resource dependency theory Pfeffer Salancik 1978 is a third line of research that is used to investigate the composition of corporate boards Similarly to stakeholder theory corporate boards are seen as an essential link between the com pany and its external resources on which the firm depends this link is the basis for good perform ance Lückerath Rovers 2013 There are at least four categories of benefits provided to companies through corporate boards in their linkage func tion These are information advice legitimacy access to resources or communication channels and obtaining commitment of support from the environment Hillman et al 2007 Lückerath Ro vers 2013 Hence composition of the board does have an impact Hillman et al 2007 apply the se categories with regard to gender diversity on corporate boards Legitimacy may accrue from ap pointing women to the board second companies that depend on the resource female employees can realize benefits by building bonds with cur rent and potential female employees Hillman et al 2007 Third advice and scope and content of information may be improved by adding female Women on boards and in TMTs and firm performance

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