Does the Gender of Directors Matter?

How does gender-balance affect the working of boards of directors? I examine boards that have been required for two decades to be relatively gender-balanced: boards of business companies in which the Israeli government holds a substantial equity interest. I construct a novel database based on the detailed minutes of 402 board- and board-committee meetings of eleven such companies. I find that boards that had critical masses of at least three directors of each gender in attendance, and particularly of three women, were approximately twice as likely both to request further information and to take an initiative, compared to boards that did not have such critical masses. Consistent with these findings, the ROE and net profit margin of these type of companies is significantly larger in companies that have at least three women directors. Taken together, the study demonstrates that gender-balanced boards are more active, and that firms with gender-balanced boards exhibit better financial performance.