**3. Gender diversity**

Nowadays, many firms try to nominate more women to their boards of directors in the pursuit of gender diversity, but there's more to the story, and investors should be

aware that although more women on boards signifies progress, it is also crucial to see more women in managerial roles.

Previous studies have shown that the presence of female director improves decision-making process, since it requires keeping multiple points of view and perspectives in mind, as well as assessing potential outcomes [18]. The diversity of the board can also enhance the board independence, consequently increased board diversity could lead to a better board monitoring function [19]. Furthermore, the recent finding suggests that firm with female directors could reduce male CEO overconfidence, especially in industries with high overconfidence prevalence [20].

Female directors tend to take into account the needs of a wide range of stakeholders [21]. This allows companies to attract a wider range of prospective customers and better penetrate various markets [22]. At the same time, female leaders are more likely to be participative, democratic, and communal in their leadership style, as well as more environmentally conscious. As a result, female directors are also often associated with improved corporate sustainability disclosure (CSD) [8] and CSR performance of companies (for e.g. see [6, 7]). Likewise, researchers found that greater gender diversity on a board of directors can lead to more transparent information disclosure [23], and higher reported earnings [24]. The presence of female director on board also gives a positive signal to stakeholders that the company cares about the societal diversity in their governance (for e.g. see [18, 25, 26]).

The literature also recognizes there are gender psychological differences in this professional setting. Female leaders are more likely to be risk-averse, have complicated moral reasoning abilities, empathy, compassion, kindness, and interpersonal sensitivity. Males are more ambitious, aggressive, autonomous, self-confident, adventurous, and competitive than females [27–29]. When it comes to leadership, female directors are also not the same as male leaders [2]. The presence of more female directors could stimulate more collaborative and participative communication among its members [4], which in turn promote participatory decision making [3].

The presence of women has an impact on financial performance as well. New ideas and views can evolve into new strategies, products, and services that increase the firm's revenue and profit. For all of these reasons, several studies demonstrated a positive effect of gender diversity on business financial success (for a metaanalysis, see [2]).

Adams and Ferreira [19], on the other hand, argue that this relationship occurs exclusively in organizations with inferior corporate governance (as proxied by stronger takeover defenses). Besides, there is also evidence of a non-linear relationship between the number of female directors and financial performance; the presence of one or two "token" women on a board is associated with poorer firm performance, whereas the presence of three or more women (reaching a critical mass) is associated with improved firm outcome (for e.g. see [7, 21, 30]).

On the other side, gender diverse boards may result in greater decision-making costs in boards, as well as an increase in the possibility of disputes and board functions [19]. The diverse boards could suffer more conflicts of interests and slower decision making. Furthermore, some researchers have suggested that diversity might have a detrimental impact if employees do not value/believe in their varied work groups [31].

Overall, there seems to be some evidence to indicate that the presence of female directors could enhance firm corporate governance and participatory decision making, which turn into favorable firm outcomes such as financial performance. This could also imply that, in order to boost economic development and growth, equal

participation of men and women in the labor force is supposed to ensure full utilization of available national resources. Nonetheless, in reality, males continue to dominate the majority of leadership positions across the world, and change is required.
