How institutions moderate the effect of gender diversity on firm performance

Research investigating the relationship between firm performance and gender diversity has so far reported conflicting evidence: Some studies find firm performance to benefit from gender diversity, others find negative results or no effect at all. Taking this inconclusive evidence as a sign for moderators influencing the effect of gender diversity on firm performance, we investigate the moderating influence of institutions on this relationship. Using data on 7,661 firms in 71 countries, we employ a multilevel linear regression with fixed effects to examine the moderating effect of formal as well as informal institutional characteristics. We find that institutions indeed moderate the relationship between gender diversity and firm performance. In particular, informal institutions seem to moderate the effect of diversity on market valuation (Tobin's Q), while formal institutions moderate the effect of gender diversity on firm financial performance (ROA). These results have important theoretical implications for the academic debate on gender diversity and firm performance as well as practical implications for both businesses and lawmakers.