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This study explores relationships of women in management positions with firm financial performance. Utilizing the resource-based theory of competitive advantage, as well as stakeholder and diversity arguments, we hypothesize that firms employing greater percentages of women managers at the general management, top management, and board of director levels will experience relatively better financial performance. Examining data from the Wall Street Journal for 200 large firms, we find positive relationships between the firm's total percentage of women managers and ROS, ROA, ROI, and ROE. High percentages of women top managers and board members did not predict performance.
Modern business is clearly conducted in uncertain contexts. Today's firms are faced with ever increasing international competitive pressures, unstable capricious markets, new and complex technologies, and with dramatic changes in society in general. Paramount among these changing contexts is the change in the management composition of firms due to women assuming management positions. The American work force is one of the most ethnically and gender diverse in the world (Cox and Smoliński, 1994). For firms, this diversity affords new opportunities and challenges. According to Nichols (1993), in this decade, women managers will redefine managerial work and will provide firms with opportunities to capitalize on the challenging contexts they face. Zellner (1994) further notes that women are starting new businesses at a rate nearly twice that of men, and are "bringing to the table" skills such as team building and employee development that are very much in tune with today's competitive realities.
Our goal in this study is to provide conceptual arguments and empirically explore the firm-level relation· ships of women in management with financial performance outcomes. To this date, few studies have been directly concerned with firm-level financial performance issues. We will justify and build on the assumption that firms employing more women managers have probably done a better job of recruiting capable managers from the total available talent pool, and consequently will be in a better position to link with customers, employees, and other constituencies. Firms employing higher percentages of women are likely to perform better inasmuch as they are more progressive and more competitive because their management contingents more closely mirror the composition of existing markets.
EXPLANATORY FRAMEWORK
Rationale for these arguments is found in the...