Top Management Team Composition and Financial Performance: Examining the Role of Gender Diversity

Abstract

Despite the growing research on the effect of top management team gender diversity on company\nfi nancial performance, the results remain inconclusive. The theoretical framework guiding this study\nincludes the upper echelons theory and critical mass theory. Under the upper echelons theory\nframework, the study investigates whether female participation in top management teams positively\ninfl uences company fi nancial performance. Based on critical mass theory, the study attempts to\ndetermine what percentage of women in a top management team constitutes a critical mass. Unlike\nmost previous studies, both theories are applied to only the context of 823 small- and mediumsized\nenterprises (SMEs) with a workforce between 50 to 250 employees in the manufacturing\nsector in the Czech Republic. The fi ndings indicate that the premises of the upper echelons theory\nare also applicable to SMEs. At the same time, the fi ndings show limited support for critical mass\ntheory. More specifi cally, this study does not support a linear relationship between the number of\nwomen in top management team and fi nancial performance and only partially supports a U-shaped\ncurvilinear relationship. The implications of the fi ndings and suggestions for future research are also\ndiscussed. In sum, this study brings new insight to the area of gender diversity in top management\nand advances the gender diversity literature’s understanding of the relationship between top\nmanagement team composition and company fi nancial performance. Moreover, the study provides\na better understanding of the key role of a critical mass in top management teams.