Impact of women on corporate boards of directors on product quality

Korenkiewicz, Dorota; Maennig, Wolfgang Article — Published Version Impact of women on corporate boards of directors on product quality Journal of Management and Governance Provided in Cooperation with: Springer Nature Suggested Citation: Korenkiewicz, Dorota; Maennig, Wolfgang (2023) : Impact of women on corporate boards of directors on product quality, Journal of Management and Governance, ISSN 1572-963X, Springer US, New York, NY, Vol. 28, Iss. 3, pp. 841-874, https://doi.org/10.1007/s10997-023-09677-6 This Version is available at: https://hdl.handle.net/10419/312841 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Vol.:(0123456789) Journal of Management and Governance (2024) 28:841–874 https://doi.org/10.1007/s10997-023-09677-6 1 3 Impact ofwomen oncorporate boards ofdirectors onproduct quality DorotaKorenkiewicz1· WolfgangMaennig2 Accepted: 21 March 2023 / Published online: 12 May 2023 © The Author(s) 2023 Abstract We analyze the impact of women on corporate boards of directors on product quality. We innovate firstly by integrating the broad but fragmented research on the topic, offering a first simultaneously testing of a larger set of variables identified to be significant in earlier studies. Second, we add alternative indicators of female representation in board of directors as a potential determinant of product quality. Third, we use evaluation scores of goods by the nonprofit foundation “Stiftung Warentest” as a quality indicator, thus adding to a regionally diversified evidence. We find a significant positive effect of female board directors on product quality. Keywords Gender equality· Women ratio· Women on boards of directors· Product quality· Product reliability· Consumer reports JEL Classification C30· L21· L25· C13· J16 1 Introduction Around the world, policymakers, legislators, large institutional investors, and certain stock exchanges have called to diversify boards of directors to increase board independence. Having women on boards sends a positive signal to both internal and external constituents, regarding whether man and women in a firm have similar educational backgrounds and the overall labor market in a particular economy is balanced (Dunn, 2012; Terjesen etal., 2016). * Wolfgang Maennig w[email protected] Dorota Korenkiewicz korenkiewicz.dorot[email protected] 1 The Boston Consulting Group GmbH, Ballindamm 17, 20095Hamburg, Germany 2 Department ofEconomics, University ofHamburg, Von-Melle-Park 5, 20146Hamburg, Germany 842 D.Korenkiewicz, W.Maennig 1 3 On average, women constituted 30% of corporate boards of directors in Europe’s largest publicly listed companies in 2020 (Gender Statistics Database, 2021), with the highest representation in France (45.1%), Iceland (44.4%), and Norway (40.4%), but other European countries lagged in this regard (e.g., Estonia, 8.8%). Although the female share of boards within European companies has almost tripled since 2010, it remains distant from the European Commission’s recommendation of 40% (Jourova, 2016). The global picture is similar, with females holding only 26.2% of corporate directorships among the Morgan Stanley Capital International World Index companies in 2020, and a declining growth rate in female board positions (Emelianova, 2020). Rohner and Dougan (2012) report that more than 15% of publicly listed companies in the US and Europe still did not have even one female board member appointed, with the gender gap particularly visible in IT, industrial goods, materials, and telecom sectors. The authors find an underrepresentation of women in consumer-related sectors in the European markets and for large-cap stocks. Adams and Kirchmaier (2016) confirm that women are underrepresented in science and engineering professions as well as all academic levels in academia. According to Hillman etal. (2007), only large firms are more inclined to employ a more gender-balanced directors’ cadre to strive for more legitimacy in the corporate hierarchy, as structural barriers still exist for female board candidates, and the actual circumstances are determined by individual firm and industry specific characteristics (Brieger etal., 2019). Young female human capital has overtaken young men in many countries in enrollment and exam passes at schools and universities, but women do not appear to succeed in corporate governance for complex reasons (Walby, 2011). Higher academic achievements are often required for female nominees to be considered for a board nomination. Women also feel that they are more frequently discouraged from aspiring to high-profile positions due to modest selfimage, discriminating stereotypes, or lack of networking opportunities among the higher echelons of corporate power. Furthermore, firm size and masculine corporate culture may impede women’s election to governance bodies. In contrast, opportunities for female directors are higher in public and nonprofit enterprises. Greater economic and political empowerment accompanied by countries’ shared cultural values, beliefs, and attitudes has successively helped women overcome the “glass ceiling” of corporate elites (Lewellyn & Muller-Kahle, 2020). However, corporate boardrooms’ gender democratization proceeds slowly, with the first wave of feminization based on political background, the second facilitated by female board candidates’ academic achievements, and the third attributed to exceptional and company-grown female talent (Heemskerk & Fennema, 2014). Sabatier (2015) confirms that existing quotas have prompted French companies to engage more female directors, which positively impacted companies’ performance, while Comi etal. (2020) elicit mixed results, finding positive effects only on firm labor productivity in Italy, negative effects in France, and an insignificant impact on the profitability of Spanish companies. The Norwegian board of directors’ quota reform of 2003 only applied to publicly listed companies in Norway, which to a larger extent accumulated capital that was financed by debt or a combination of debt and existing capital. The short-run impact of the reform on company performance measured by a return on assets was negligible (Dale-Olsen etal., 2013). Yang etal. 843 1 3 Impact ofwomen oncorporate boards ofdirectors onproduct… (2019a, b) determine that the Norwegian quota adversely affects treated firms’ performance and reduces risk. Researchers continue to investigate the business case for a higher proportion of female directors on boards, predominantly focusing on financial (e.g., firms’ profitability, market returns, stock prices, liquidity, enterprise value, profits dividends, and risk) or organizational effects (e.g., corporate innovativeness, entrepreneurship, relationships with stakeholders, organizational and team performance, or interdepartmental dynamics and transparency). The scientific evidence for these associations is mixed, as board diversity can become “a double-edged sword,” including a “value-in-diversity” proposition and counterarguments; for instance, regarding social categorization processes that lead to in-group favoritism and out-group discrimination and subsequent team fragmentation and negative behavioral dynamics or group outcomes (Kaczmarek & Nyuur, 2021). Numerous scholars have provided empirical evidence that differences in boards or firms with enhanced female participation may lead to differences in key company figures. Companies with more diversified boards may achieve increased patent activities (Griffin etal., 2021), improved stock liquidity (Ammad & Searat, 2017), better accounting performance (Dang & Nguyen, 2016; Lückerath-Rovers, 2013; Post & Byron, 2015), higher market valuation (Ntim, 2015), larger returns (Duppati etal., 2020; Johnstone-Louis, 2017; Kang etal., 2010), higher share price and earnings per share (van Dunk etal., 2005), a larger price/book value, and a larger average growth (Rohner & Dougan, 2012), particularly firms with a higher market value, as expressed by superior Tobin’s Q performance (Conyon & He, 2017). Rossi etal. (2018) determine that more women on boards of directors increase companies’ indebtedness level, but invested capital is used more efficiently. However, the positive impact of female directors could also depend on external circumstances. Dezsö and Ross (2012) suggest that women in executive management improve company performance only if female representation is moderated by high innovation intensity, measured as the ratio of research and development (R&D) expenses to assets from the prior year. Sarhan etal. (2019) determine that the positive impact of diversity on firms’ financial performance is stronger in companies that are better governed and can enhance the pay-for-performance sensitivity. Hsu etal. (2019) used a composite diversity index, including board members’ gender, age, tenure, and professional background, demonstrating that boardroom diversity positively affects operating performance, however firms with larger strategic change tend to present a negative correlation between boardroom diversity and operating performance. The probability of women on a board increases with firm performance, defined as return on assets and family ownership, but diminishes with corporate ownership and firm risk (Martin-Ugedo & Minguez-Vera, 2014). Farrell and Hersch (2005) find that the likelihood of electing a woman to a corporate board negatively depends on the number of females appointed in the past, suggesting that firms may add female directors only as a defensive reaction to outside pressure and scarce female top performers could proactively prefer stronger and better-positioned companies. Turban etal. (2019) rule out this reverse causality, confirming the positive effect of gender diversity (measured using Blau’s index) on firms’ market valuation (e.g., Tobin’s Q or turnover ratio), but only in national contexts where gender 844 D.Korenkiewicz, W.Maennig 1 3 diversity is normatively accepted and not in economies where it is regulated (e.g., Western Europe vs. Japan). Positive evaluations of the greater participation of women on business performance are not without opposition. Other scholars do not find significant effects; for example, on returns (Francoeur etal., 2008; Ramadhania etal., 2021), Tobin’s Q (Rose, 2007), IPO pricing (Mohan & Chen, 2004), or dividend payouts (Arora, 2021; Pucheta-Martinez & Bel-Oms, 2016). Some even reveal negative effects of female directors; for example, on companies’ share price (Ryan & Haslan, 2005), profitability (Shrader, 1997), or firm performance (Dang & Nguyen, 2016; Triana et al., 2013). Ferreira (2015) criticizes research that seeks to prove the positive effects of female directors on firms’ profitability, encouraging focus on female directors’ potential benefits to society. Since no consensus has emerged regarding the favorable effect of females on boards of directors, this study seeks to make four primary contributions to this controversial topic. First, our study complements the existing spectrum of academic research demonstrating the positive effects of boardroom diversity. We analyze the effect of increased female representation on boards of directors on product quality (PQ),1 which we consider to be a socially responsible measure of corporate success and an aspect of sustainable economic development, which is contemporarily deserving of more attention. We examine whether companies with a higher proportion of female directors produce higher quality goods than competitors that are governed by fewer women in boardrooms. Second, we review the relevant literature and methodologies applied to examine the effects of increased female participation in corporate governance. Third, we systematically extend the literature on Product Quality (PQ) in the light of our research. Our study enhances the partially fragmented research on the determinants of PQ (as described in the next section) by conducting the first simultaneous test of a larger set of variables identified to be significant in earlier studies. Finally, we add to research in the economics and management literature regarding the potential effects of gender diversity in leading positions in business enterprises. 2 Background High PQ is an instrumental component of sustainable corporate policies, as increased quality standards indicate corporations’ high social responsibility, which is a crucial management strategy (Kytle & Ruggie, 2005). Moreover, contemporary firms are expected to manage non-economic business results and fulfill social and ecological responsibilities to stakeholders and clients. Effective corporate social responsibility (CSR) is a tool for successful firm and product differentiation, since internal and external CSR can enhance products’ quality (Calveras & Ganuza, 2016). Social role theory considers women to be more moral, diligent, compassionate, inclusive, and 1 For summaries of the evolution of the definition of PQ, see (Reeves & Bednar, 1994) & Golder, Mitra, & Moorman (2012). 845 1 3 Impact ofwomen oncorporate boards ofdirectors onproduct… stakeholder oriented. The proportion of females on boards of directors is positively proportional to their influence on CSR decisions (Elstad & Ladegard, 2012). The more highly educated a female senior manager, the more sensitive she is in terms of the quality and commitment of the environment, and the more attention she pays to the community (Yang etal., 2019a, b). A larger proportion of women and female labor representatives at the board level are positively related to CSR and environmental performance (Lopatta etal., 2020), which may subsequently favorably affect PQ. PQ is also a key consumer decision criterion and has long been a “strategic weapon” in management practice (Garvin, 2001) that can impact several company performance indicators, such as outgoing defect rates and on-time delivery rates (Nagar & Rajan, 2001). Phillips etal. (1983) demonstrate that PQ also has a significant positive influence on return on investment (ROI), particularly for enterprises operating consumer goods non-durables, capital goods, and components businesses. Jacobson & Aacker (1987) observe a highly significant association between quality and product price (for four of six defined business segments), suggesting that buyers are inclined to reward premium goods with higher prices in these markets. Lakhal & Pasin (2008) summarize the literature finding a positive impact of PQ on financial performance, although they do not find a direct significant association linking PQ and financials for a sample of 133 Tunisian companies. Nevertheless, they detect a favorable correlation between PQ and customer satisfaction and internal processes. Table1 presents the major determinants of PQ studied empirically. For a summary on the evolution of the definition of PQ, see Reeves and Bednar (1994), Golder etal. (2012), and Suchanek etal. (2014). 3 Theoretical framework Despite substantial empirical literature devoted to the matter, the impact of boardroom diversity on firm performance is not a unanimously held business case. Note that diverging empirical results find their counterparts in diverging theoretical considerations. Three key theories support the positive aspects of greater gender meritocracy on corporate boards, including agency, resource dependence, and stakeholder theories (Ntim, 2015), whereas social identity theory emphasizes a more critical approach (Luis-Carnicer etal., 2008). Agency theory implies that female directors can more effectively resolve agency problems between shareholders and company managers. Female directors are particularly valued for ex-ante (visionary) strategic company control related to longterm strategy and monitoring of the environment (e.g., benchmarking qualitative indices). They may apply a higher sensitivity to internal compliance policies or acts of discrimination and are considered as more independent board members. The resource-based perspective argues that firms can develop a competitive advantage by employing a complementary pool of female talent, skills, capabilities, and networks. Corporate boards maintain essential links between companies and their environment. A firm’s effective linkage to its ecosystem, provides an organization with useful information, maintains a channel for communication purposes, is 846 D.Korenkiewicz, W.Maennig 1 3 Table 1 Literature review of the determinants of product quality Independent variables tested No Authors (Year) Research period Research method Industry sample Dependent variable Advertising spend Sales, General and Admin (SG&A) % of sales of new products Return on Investment Relative price Relative quality (t-1) Cost of Goods Sold (COGS) Market share Company brand Coman- agement Firm size Downsizing Capital expendictures Unions Market size Fixed cost industry 1 Phillips etal. (1983) 1974– 1975; 1980– 1981 OLS Consumer durables Relative product quality (t) (+)** (+)** (+)** Consumer non-dura- bles (−) (−) (−) 2 Jacobson & Acker (1987) 1970– 1983 Vector autoregression models Consumer durables Relative product quality (t) (+) (+) (+)** (+) (−) Consumer non-dura- bles (−)** (+) (+)** (−) (−) 3 Erden & Swait (1998) Pre 1998 Generalized Least Squares Consumer non-dura- bles Perceived quality (+)** 4 Cooke, W.N (2010) 1981– 1987 Ordered probit estimates Industrial goods Perceived extent of change in product quality (+)** (−)** (−)** (+) (+) 5 Berry & Waldfogel (2010) 2009 OLS, Tobits Newspapers restaurants Product quality (+)** (+)** ***p < 0.01; **p < 0.05; *p < 0.1 847 1 3 Impact ofwomen oncorporate boards ofdirectors onproduct… an important step in obtaining commitments of support from important elements of the environment, and helps legitimize organizations (Lückerath-Rovers, 2013). The increased presence of high-profile women in corporate governance could enhance the level of quality assurance, as they may be more responsive to sustainable market trends and technologies. Female leaders can passionately contribute cutting-edge managerial, engineering, and product development skills. They may also be more motivated and determined than their male counterparts to organize and manage publicly transparent internal sustainability and quality reporting, and more proactively network across and beyond corporate hierarchies to anticipate, detect, and navigate quality issues within organization (e.g., product recalls, warranty policy, and customer service). Stakeholder theory indicates that heterogeneous boards may be more creative, although it may take longer to negotiate and achieve consensus. By recruiting female directors, firms can benefit from links with stakeholders, particularly when determining business purpose and customer orientation, which can become major aspects of the superior PQ of delivered goods. Adams and Ferreira (2004, p. 14) suggest that gender diversity on boards may also have a political dimension, as “companies may care more about diversity when they are concerned about their public image.” In contrast, Luis-Carnicer etal. (2008, p. 588) examine social identity theory in context, revealing “demographic dissimilarity and these outcomes may vary among negative, neutral and even positive, depending on the extent to which employees’ social identities are built among their demographic characteristics” (Chattopadhyay etal., 2004). Tsui etal. (1992) demonstrate that greater cohesion in homogenous groups results from easier communication and low relational conflict, while higher gender diversity leads to more absences and less organizational commitment for men and more organizational commitment for women (with no effect on absences). These considerations imply that the impact of female directors may depend on the settings and general conditions in the relevant societies and firms. Board gender diversity may primarily affect firm performance positively in countries with high national governance quality (Nguyen etal., 2021), in national contexts where gender diversity is normatively accepted (Turban etal., 2019), and in firms with a high rate of innovation (Dezsö & Ross, 2012). According to social identity theory, male and female management styles differ as well. Women and men in the same organizational roles may behave somewhat differently (Eagly & Johanessen-Schmidt, 2001) and women may be more effective in performing certain tasks over others (Eagly etal., 1995). Although social scientists and organizational scholars argue that gender differences in managerial positions are minimal, they can become impactful when applied in a long-term repetitive mode (Martel etal., 1996). These arguments suggest that gender differences in approach and management of PQ on a strategic company level may result in different PQ outcomes over time. While diversity fosters change and evolution, the aggregate results of contemporary research in this topic remain inconclusive regarding whether it hinders or improves organizational performance. Fulton (2021) asserts that while social bridging theories argue in favor of diverse organizations, social bonding theories argue against it. The author’s study specifies these concepts as two distinct mechanisms, indicating that both can positively impact organizations, but their respective benefits 848 D.Korenkiewicz, W.Maennig 1 3 depend on the task being performed. The study demonstrates that social diversity facilitates performance related to accessing external resources and social interaction facilitates performance related to internal coordination. 4 Literature review andhypothesis development Koutoupis etal. (2022) systematically scrutinize 140 board diversity studies published from 2015 to 2021, determining that this topic has primarily been empirically investigated in developed countries. The research analyzed predominantly concentrates on the effect of board diversity on firms’ (financial and sustainability) performance; however, no conclusive results have emerged regarding the extent to which diversity facilitates firms’ operations. Nguyen etal. (2020) conducted a comprehensive systematic literature review of the existing research on women on corporate boards and financial and non-financial performance, reviewing 634 mixed, qualitative, quantitative, and theoretical studies conducted in over 100 countries from more than 10 disciplines (e.g., accounting, finance, economics, and governance) from 1981 to 2019 and published in 270 top-ranked journals. The authors find that many existing studies are descriptive and/or draw on single rather than multi-theoretical perspectives and focus on firm-level rather than country-level effects. The observable methodological limitations include a dearth of qualitative, mixed-methods, and cross-cultural/country studies. The study concludes by outlining opportunities for future research regarding women on boards of directors. The upper echelons theory stipulates that senior management’s quality and traits are reflected in organizations and systematically cascade down the hierarchical ladder to achieve strategic importance (Finkelstein etal., 2008; Hambrick & Mason, 1984; Pfeffer, 1983). The ratio of female directors represents a certain tendency of team (board) composition; hence, gender diversity can be a predictor of board level processes and effectiveness. Amin etal. (2021) indicate that female board presence significantly reduces agency costs (defined as the sum of monitoring expenditures by the principal, bonding expenditures by the agent, and residual losses), hence reduces the principal–agent conflict, particularly when a critical mass of women is achieved. Demographically balanced boards may tend to pursue long-term policies focused on high quality assurance, as female directors holding monitoring roles can mitigate managerial opportunism focused on earnings (Saona etal., 2019). Gyapong etal. (2019) reveal that gender mixed boards may alleviate principal–agent conflicts around the dividend payout in hard times for a company (e.g., during an economic crisis), although they generally favorably affect dividend payouts, particularly when female directors have a critical mass; however, when ownership concentration is high, board gender diversity reduces dividend payments. Corporate funds not spent on dividends could be theoretically invested in advancing a sustainable product portfolio of superior quality. Female directors with financial backgrounds improve earning’s quality more than their female counterparts without relevant financial expertise (Zalata etal., 2021). We assume that female directors are more effective as PQ agents for companies, staying more vigilant to customer feedback and corporate risks. Oliver (1996) 855 1 3 Impact ofwomen oncorporate boards ofdirectors onproduct… variables described above and the term WBOARD represents the variables related to gender. For robustness testing, we analyze the same data pool using a robust LS regression function by applying the M-, S-, and MM-estimation methods to mitigate the impact of outliers. We also run stepwise regressions; being aware of the criticisms of the last method (Whittingham etal., 2006, p. 1), we use a “hands-off” approach to test our data selection. 6 Empirical findings Table5 presents the re-estimation results of the effects of variables on PQ as individually considered by various studies. We first re-estimate the model of Phillips etal. (1983) in column (1). For consumer durables, we confirm a positive impact of sales force expenditure and company innovative power on PQ. In contrast, we do not find a positive relationship between advertising spending and PQ when using the variable specifications of Phillips etal. (1983). Column (2) confirms the findings of Jacobson and Aaker (1987), indicating a significant impact of higher relative product prices. Although Jacobson and Aaker (1987) find a significant negative impact of ROI on PQ within nondurable businesses, they generally doubt any larger association between these two parameters. Our results do not find a significant relationship between ROI and PQ. Jacobson and Table 4 Sample composition of the dependent variable and median/average quality scores Source: Authors’ calculations based on the data from annual reports and product quality evaluations in Stiftung Warentest’s consumer reports (2009 & 2010) Company sample No. of companies No. of product quality tests 2010 Median product quality score 2010 Average product quality score 2010 Total (consumer durables and nondurables) 71 555 2.5 2.7 Consumer durables 53 461 2.6 2.8 Automotive 8 19 2.7 3.2 Consumer electronics 41 425 2.5 2.7 Consumer goods 4 17 2.3 2.6 Non-Durables 18 94 2.3 2.5 Cosmetics & Chemicals 9 64 2.1 2.3 Food & Beverage 2 13 2.0 2.4 Retail 4 10 3.3 3.3 Telecommunication 3 7 2.5 2.3 By headquarter region Europe 31 189 2.5 2.8 Asia 24 268 2.8 2.7 US 16 98 2.4 2.6 856 D.Korenkiewicz, W.Maennig 1 3 Table 5 Determinants of product quality (OLS): quasi-replication of earlier studies Columns 1 2 3 4 5 6 Model Phillips etal. (1983) Jacobson and Acker (1987) Erdem and Swait (1998) Cooke (1992) Berry and Waldvogel (2010) Integrative approach Constant 0.836*** 1.039*** 1.009*** 1.356*** 1.354*** 1.173*** 0.067 0.072 0.020 0.159 0.324 0.373 Advertising expenses 0.330 0.689** 0.277 0.306 SG&A** −0.112 −0.081** 0.035 0.037 Innovative company* −0.082* 0.021 0.046 0.054 R&D −0.630 0.144 0.547 0.564 Return on investment 0.001 −0.001 0.002 0.002 Relative product price** −0.141** −0.096* 0.056 0.056 COGS** 0.110 0.086 Best brand* −0.110** −0.073 0.042 0.052 Firm size** −0.039*** −0.028** 0.011 0.013 Best company* −0.044 0.034 0.046 0.049 857 1 3 Impact ofwomen oncorporate boards ofdirectors onproduct… Table 5 (continued) Columns 1 2 3 4 5 6 Model Phillips etal. (1983) Jacobson and Acker (1987) Erdem and Swait (1998) Cooke (1992) Berry and Waldvogel (2010) Integrative approach Downsizing 0.083 0.065 0.072 0.072 CAPEX** −0,010 0.010 0.021 0.023 Market size** −0.009 0.005 0.014 0.017 Fixed cost industry*(c) −0.163** −0.183* 0.078 0.098 Industry fixed effects Yes Yes Yes Time fixed effects Yes Adj. R20.069 0.045 0.039 0.112 0.022 0.170 AIC −0.272 −0.253 −0.268 −0.326 −0.244 −0.328 Standard deviation values in italics FE Fixed Effects, N = 142 (c) Control variable * Dummy variable. **Logarithm ***p < 0.01; **p < 0.05; *p < 0.1 858 D.Korenkiewicz, W.Maennig 1 3 Aaker (1987) find no significant effect of COGS on PQ, which is confirmed in our replication. As the COGS variable is multilinear with industry dummy variables, we only test for COGS. Column (3) confirms the results of Erdem and Swait (1998) of a positive impact of brand names on the quality of goods, indicating that membership in the global group of “best brand” can favorably impact attested PQ. Cooke (1992) finds that firms’ size negatively, but marginally, impacts quality, while unionized and nonunionized companies, if empowered with an employee participation program, can improve product reliability. Model (4) shows a significant positive relationship between firm size and PQ but does not reveal any significant positive effects from an employee friendly human resource policy or effective employee participation. In addition, the results do not indicate any significantly negative effect of downsizing measures or capital expenditures on PQ. The author also finds a positive impact of capital investments on PQ, whereas the impacts of these variables are not significantly different from zero in our estimations. Model (5) quasi-replicates the finding of Berry and Waldfogel (2010) that fixed costs industries may have a significantly positive PQ advantage, but in contrast, we do not find a significant association between market size and PQ. Finally, Model (6) in Table5 presents the results of our estimation model including all previously used exogenous determinants. Note that the goodness of fit of our integrated approach is comparatively better. We find that sales, general and administrative expenses, relative product price, firm size, being part of a fixed cost industry, and advertising expenditures significantly impact PQ. In Table6, column (1) we simultaneously test all variables significantly associated with PQ in estimation (6) of Table5. Note that adjusted R2 increases. Variables such as advertising expenses, sales, general and administrative expenditures, product price, firm size, and fixed cost industry remain significant, while company innovativeness and best brand status lose significance. The coefficients of relative price and fixed cost industry increase in value, while other significant factors decrease. In column (2) we add our focus variables featuring the number and the proportion of females on boards of directors and the control parameter of board size. While we find an insignificant impact of board size on PQ, the absolute number of women directors significantly positively affects PQ. Increasing the female director count by one woman (ca. 10%) improves the average PQ score by 2.5%. Accordingly, in column (5) we find a significant positive association of the proportion of females on boards of directors on PQ. Columns (4) and (7) test the quadratic polynomial values of gender-specific variables and remain insignificant. We also confirm that PQ is positively impacted by sales, general and administrative expenses, the relative product price, best brand status, and by being in a fixed cost industry. Conversely, there is an inverse relationship between higher advertising expenses and goods’ quality. The models in Table7 adopt the idea of a nonlinear relationship between female participation and PQ due to minimum critical mass (Kanter, 1993; Rosener, 1995; Konrad etal., 2008; Torchia etal., 2011; Elstad & Ladegard, 2012; Joecks etal., 2013; Schwartz-Ziv, 2017; Amorelli & Garcia-Sanchez, 2019; Gyapong et al. 2019, Saggese et al., 2020; Nguyen etal., 2021; Amin et al., 2021). Column (1) of Table7 indicates that a complete lack of females on a board of directors does 859 1 3 Impact ofwomen oncorporate boards ofdirectors onproduct… Table 6 Effects of women on boards of directors on product quality (OLS) Columns 1 2 3 4 5 6 7 Model All significantFE Number of female directorsFE Number of female directorsFE Number of female directors^2FE Female board share [in %]FE Female board share [in %]FE Female board share^2 [in %]FE Constant 1.218*** 1.214*** 1.210*** 1.213*** 1.211*** 1.209*** 1.207*** 0.143 0.142 0.143 0.144 0.141 0.142 0.143 Advertising expenses 0.693** 0.781*** 0.830*** 0.821*** 0.799*** 0.828*** 0.830*** 0.283 0.253 0.290 0.294 0.248 0.287 0.289 SG&A** −0.076** −0.083*** −0.079** −0.080** −0.084*** −0.082** −0.081** 0.033 0.030 0.033 0.033 0.030 0.033 0.033 Innovative company* 0.021 0.008 0.013 0.013 0.009 0.012 0.012 0.051 0.050 0.052 0.052 0.050 0.052 0.052 Relative product price** −0.107** −0.130** −0.130** −0.129** −0.128** −0.128** −0.128** 0.047 0.054 0.054 0.055 0.053 0.054 0.054 Best brand* −0.078 −0.080* −0.081* −0.079* −0.072 −0.073 −0.073 0.047 0.047 0.047 0.048 0.047 0.047 0.047 Firm size** −0.025** −0.017 −0.017 −0.017 −0.015 −0.015 −0.015 0.011 0.014 0.014 0.014 0.014 0.014 0.014 Fixed cost industry*(c) −0.190** −0.183** −0.197** −0.196** −0.181** −0.190** −0.189** 0.086 0.077 0.087 0.088 0.076 0.087 0.088 Board size (c) −0.001 −0.001 −0.001 −0.003 −0.003 −0.003 0.005 0.005 0.005 0.005 0.005 0.005 Female directors count −0.025* −0.024* −0.031 0.013 0.014 0.030 Female directors count^2 0.001 0.005 860 D.Korenkiewicz, W.Maennig 1 3 Table 6 (continued) Columns 1 2 3 4 5 6 7 Model All significantFE Number of female directorsFE Number of female directorsFE Number of female directors^2FE Female board share [in %]FE Female board share [in %]FE Female board share^2 [in %]FE Women on board share −0.383** −0.373** −0.343 0.167 0.175 0.390 Women on board share^2 -0.084 0.992 Industry fixed effects Yes No Yes Yes No Yes Yes Time fixed effects Yes Yes Yes Yes Yes Yes Yes Adj. R20.209 0.224 0.219 0.214 0.233 0.227 0.221 AIC −0.409 −0.422 −0.409 −0.395 −0.433 −0.419 −0.405 Standard deviation values in italics FE Fixed Effects. N = 142 (c) Control variable * Dummy variable. **Logarithm ***p < 0.01; **p < 0.05; *p < 0.1 861 1 3 Impact ofwomen oncorporate boards ofdirectors onproduct… Table 7 Effects of female directors on product quality: non-linear effects Columns 1 2 3 4 5 6 Model Zero womenFE Female board intervals [in %]FE Female board intervals [in %]FE_M-estimation Female board intervals [in %]_M-esti- mation Female board intervals [in %]_S-esti- mation Female board intervals [in %]_MM-estimation Constant 1.169*** 1.187*** 0.960*** 0.972*** 1.082*** 1.084*** 0.146 0.143 0.124 0.124 0.070 0.101 Advertising expenses 0.708** 0.945*** 1.056*** 1.011*** −0.985*** 0.300 0.285 0.292 0.254 0.225 0.142 0.203 SG&A** −0.085** −0.083** −0.072** −0.084*** 0.054*** 0.022 0.033 0.033 0.029 0.026 0.017 0.024 Innovative company* 0.018 −0.006 −0.037 −0.046 0.053 0.053 0.046 0.045 Relative product price** −0.112** −0.123** −0.163*** −0.164*** −0.220*** −0.265*** 0.054 0.054 0.047 0.047 0.029 0.042 Best brand* −0.078 −0.067 −0.065 −0.060 0.047 0.047 0.045 0.041 Firm size** −0.018 −0.012 0.015 0.013 0.001 −0.006 0.014 0.014 0.012 0.012 0.007 0.010 Fixed cost industry*(c) −0.198** −0.182** −0.235*** −0.216*** 0.088 0.088 0.076 0.070 Board size (c) −0.002 −0.004 −0.006 −0.006 −0.002 −0.003 0.005 0.005 0.004 0.004 0.002 0.004 Zero women on board* 0.053 0.040 Women share on board_1-10 PC* −0.029 −0.012 −0.017 0.051 0.044 0.044 862 D.Korenkiewicz, W.Maennig 1 3 Table 7 (continued) Columns 1 2 3 4 5 6 Model Zero womenFE Female board intervals [in %]FE Female board intervals [in %]FE_M-estimation Female board intervals [in %]_M-esti- mation Female board intervals [in %]_S-esti- mation Female board intervals [in %]_MM-estimation Women share on board_11-20 PC* −0.021 −0.008 −0.017 −0.025 0.026 0.046 0.040 0.038 0.021 0.031 Women share on board_21-30 PC* −0.179*** −0.199*** −0.210*** −0.068** −0.105** 0.061 0.053 0.050 0.030 0.043 Women share on board_31-50 PC* −0.132 −0.150** −0.157** 0.087 0.075 0.075 Industry fixed effects Yes Yes Yes No No No Time fixed effects Yes Yes No No No No Adj. R20.211 0.243 0.125 0.131 0.190 0.088 AIC −0.399 −0.421 180 176 NA 217 Standard deviation values in italics FE Fixed Effects. N = 142 (c) Control variable* Dummy variable. **Logarithm ***p < 0.01; **p < 0.05; *p < 0.1 863 1 3 Impact ofwomen oncorporate boards ofdirectors onproduct… not significantly affect the PQ status quo. Column (2) shows that a positive ratio of women directors of 21–30% results in a 3.6% improvement on the PQ score in our log-lev model, also when controlling for time fixed effects. In columns (3–6), we control our model for variable outliers, obtaining similar positive results. The strongest M-estimation model is obtained excluding industry effects. These outcomes suggest that a minimum one-fifth female directors’ ratio generates effective action on PQ. 7 Conclusion We analyze the determinants of PQ, beginning by a quasi-replication of earlier quantitative studies, simultaneously testing all variables identified to be significant in the past and then adding gender-specific variables. As robustness tests, we leverage M-, S-, and MM- robust LS functions (to control for outliers’ impact) and stepwise regression algorithms. Our study confirms that optimizing certain determinants of organizational performance is relevant to increasing PQ benchmarks and that gender diversity in corporate governance could be an additional lever for improving the quality of offered goods. Our results also imply that stakeholders should discourage “tokenism” in appointing boards of directors. We confirm the finding of Phillips etal. (1983) that general sales and administrative expenses have a significant and positive effect on PQ. Our results mainly indicate a negative relationship of advertising expenses on PQ, showing a positive association only in one LS robustness test regression (S-Model). This relationship also remains unsettled in the literature. We confirm a positive association between relative product price and product reliability as demonstrated by Jacobson and Aaker’s (1987) research. We also identify an insignificant impact of costs of goods sold and ROI on PQ. Like Erdem and Swait (1998), we find company brand to be a significant determinant of quality performance. Our results suggest that an employee friendly workforce policy and higher capital investments could positively affect PQ, while downsizing measures may decrease it. We find a positive and significant correlation between firm size and PQ. Our models also confirm that being part of a fixed cost industry significantly favors PQ (Berry & Waldfogel, 2010). Finally, and as a central finding, using different multiple model variants and robustness specifications, we present evidence confirming that female directors can favorably affect PQ. Testing in more detail for further nonlinearities, we find that a critical mass of female board members—beyond a one-fifth proportion—is needed to positively influence PQ scores. Modern and high quality products demand a considerable degree of sustainability (monitoring and governance) and a respective communication style and policy, regarding which female board members appear to have an effective role as PQ agents. Advanced goods tend to already consume less energy and produce less waste and pollution in manufacturing processes. During the product life cycle, such companies usually operate with energy savvy mechanisms, assess low warranty costs, seldom experience product recalls, and maintain a low carbon footprint. Notably, business ethics and sustainability are among the top 864 D.Korenkiewicz, W.Maennig 1 3 issues considered by contemporary investors and an overall board gender diversity promotes the implementation of high ethical codes (Koutoupis etal., 2022), which presumably also includes related PQ and sustainability guidance. Ambitious governance best practices and strict monitoring procedures in corporations are company prerequisites for producing reliable and environmentally friendly goods. Diverse boards with more female directors may eventually better facilitate quality friendly policies and business ecosystems. Gender-balanced corporate governance bodies are more likely to implement quality assurance services (Liao etal., 2018). If more companies are motivated through appropriate regulations or research findings such as those found in this study to raise the number of female board appointments, a positive effect to PQ and the sustainability of national economic output could be achieved in the long run. Nongovernmental organizations could have a unique role in favorably affecting the current regulatory status quo of gender participation in corporate governance (Lindberg etal., 2014) and advance board sensitivity to the business implications of high quality goods. We acknowledge the limitations of our analysis, being aware that researchers’ intervention does not eliminate selection bias (Massaro etal., 2016). As with any empirical study, our results are based on a particular data sample that is specific to the period chosen, geography, and data availability. The regression analysis primarily used in such studies has limitations in assessing the circumstantial aspects of corporate governance. More qualitative and non-parametric analyses or survey approaches could provide adjacent observations in our context. In addition, measuring the proportion of female board members cannot fully capture the deeper traits of female directors’ behavior and management attributes; hence, it only allows for binary modeling of board diversity (Koutoupis etal., 2022). Some authors argue that the proportion of women on the board is not an appropriate measure of diversity, as boards with a large female presence will exhibit a high degree of homogeneity in terms of the gender category (Campbell & Minguez-Vera, 2008). Alternatively, rather than this measure (the proportion of females on boards of directors), the Blau or Shannon index could be used to measure gender diversity, since they are more sensitive to smaller values and may be more appropriate to capture critical mass effects (Humbert & Gunther 2017). We analyze effects of critical mass in Table7 by setting precise female share intervals. Furthermore, improved access to proprietary and consistently measured of firm characteristics and personnel-related data (e.g., board members’ biographical details, female directors’ experience, or granular key performance indicators on manufacturing shop floors), which are often protected by privacy policies, could presumably uncover further insights into the relationship between board member gender and PQ or other firm performance indicators. Broader data sets from other jurisdictions could consider even more factors, and conducting a similar study for a sample of companies from emerging countries could reveal further results. Notably, with broader resource inequality data that include diverse data on demographic, leadership, and formal personnel and organizational factors, an analysis of gender causality could become overly complex (Cruz-Castro & Sanz-Menendez, 2019; Mazur & Spierings, 2016). Rossignoli etal. 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She earned a master’s degree in International Management at the Poznan University ofEconomics and Business. She studied as an exchange student at the RWTH Aachen. Her professional career isfocused on market analytics and management consulting, with a special focus on the Transportation and Logisticsindustry. Wolfgang Maennig is professor at the Department of Economics of Hamburg University. He wasa visiting scholar at the UC Berkeley, at MIT, at the American University in Dubai, and at University of Stellenbosch(South Africa), among others. Wolfgang Maennig was Olympic Champion (rowing, eight with coxswain) at the Olympics 1988 in Seoul.