Impact of Managerial Gender Diversity on Firm Performance in Japanese Companies: Evidence from Tobin's Q Analysis

The gender gap is significantly greater in Japan than in any other advanced OECD countries. A country’s competitiveness depends on its human talent—the skills, education and productivity of its workforce. This research is unique because it presents empirical evidence testing whether increasing gender diversity is associated with improved firm performance for Japanese listed companies, which have different cultural backgrounds from Western companies, after controlling for size and firm age. A number of researchers have proposed various mechanisms that would imply a positive relationship between workforce diversity and firm performance. As Worthley et al. [1] point out, the growing importance of the Japanese female workforce under global competition requires a better understanding of gender-related issues in organizational management which is undergoing a transformation from their rooted traditional managerial habits, such as seniority-based promotion, lifetime employment, paternalism, or prioritizing corporate harmony, which favor men. We find statistically significant positive relationships between managerial gender diversity and one measure of firm performance, Tobin’s q, without a long time lag required for it to be realized. We find, similarly to Siegel and Kodama [2], that manufacturing firms benefit significantly and sensitively to a greater extent from increasing managerial gender diversity as compared to those in the service industries, and moreover the curvature of this relationship is significantly greater for manufacturers. Furthermore, firms that demand fewer hours of overtime from their employees also experience this performance boost with increases in management gender diversity, with the same concave shape, and the more OT is reduced the more pronounced the effect. Having established a committee for diversity promotion by 2006 did not show any impact on firm performance per se, even by 2012, but it did magnify the effect of gender diversity on Tobin’s q, providing support for Pless and Maak’s [3] conjecture that a culture of inclusiveness is required for the benefits accruing from gender diversity to truly be realized. Finally, it is concluded that gender diversity could revitalize Japanese firms by providing an immediately accessible but underutilized source of competitive advantage.