Women directors and cost efficiency

In an era where gender norms vary widely and quite frequently hint to gender inequality in the labor market,
previous studies have shown that higher gender diversity is associated with better economic outcomes. Using
a novel dataset that provides granular data at the firm level, we test this hypothesis in the context of gold
mining companies. We concentrate on a relatively overlooked aspect, namely cost efficiency, and study whether
a larger number of women directors is associated with more efficient use of a company’s resources. We use
a stochastic frontier methodology to estimate the cost-efficiency of gold mines for a representative sample of
global mining companies. Using fixed-effects and instrumental-variable regressions, we find that an increase in
female representation on the parent company’s board translates into significant efficiency gains for the mining
operations controlled by the parent company. Specifically, a one standard-deviation increase in the share of
female directors increases cost-efficiency by 12 percent of a standard deviation of our main efficiency index.
This finding is robust to using alternative instruments for female representation, alternative stochastic-frontier
methodologies, and different specifications of the main estimating equation. Interestingly, the efficiency gains
induced by female directors do not necessarily improve the overall performance of the company as measured
by accounting profitability. Yet, cost efficiency is associated with higher cost-sustainability and long-term
viability of a firm, thereby rendering it more resilient. This hints that the underlying mechanism is consistent
with evidence that suggests that women directors exert a higher monitoring and audit effort than their male
counterparts. Our results provide additional evidence of a distinctly female style in corporate leadership and
shed light to different aspects of a firm’s productivity. Understanding differences in styles of leadership, allows
policy makers to implement more inclusive policies in the labor market and firms to endorse diversity in
leadership. This ultimately can lead to more inclusive norms in the labor market.