Advertisement

Women on Corporate Boards and Financial Performance in Fast-Emerging Markets: Insights from Malaysia

  • Abdullah Al Mamun
  • Qaiser Rafique Yasser
  • Michael Seamer
  • Mariano L. M. Heyden
Chapter

Abstract

In this study, we focus on the relation between female representation on boards of directors and firm financial performance based on evidence from 100 publicly listed firms in Malaysia from 2010 to 2014. Our findings indicate that the presence of at least one female director on the board is positively associated with firm financial performance. However, we find no statistically significant link between having a higher proportion of female directors or the presence of a female CEO-chair on financial performance.

Key words

Female board participation Emerging economy firm boards Board diversity Corporate governance 

Notes

Acknowledgement

We would like to thank the guest editors and anonymous reviewers for their constructive comments and suggestions that helped shape this chapter. We would also like to acknowledge the Research Training Program (formerly known as International Post Graduate Research Scholarship) for their generously supporting Doctoral program of Abdullah Al Mamun during this project.

References

  1. Abdullah, S. N., Ku Ismail, K., & Nachum, L. (2015). Does having women on boards create value? The impact of societal perceptions and corporate governance in emerging markets. Strategic Management Journal, 38(3): 334–354.Google Scholar
  2. Adams, R. B., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of Financial Economics, 94(2): 291–309.CrossRefGoogle Scholar
  3. Afza, N. A. (2011). The effect of owner’s gender and age to firm performance: A review on Malaysian public listed family businesses. Journal of Global Business and Economics, 2(1): 104–116.Google Scholar
  4. Ahern, K. R., & Dittmar, A. K. (2012). The changing of the boards: The impact on firm valuation of mandated female board presentation. The Quarterly Journal of Economics, 127(1): 137–197.CrossRefGoogle Scholar
  5. Alowaihan, A. K. (2004). Gender and business performance of Kuwaiti small firms: A comparative approach. International Journal of Commerce and Management, 14(4): 69–82.CrossRefGoogle Scholar
  6. Becht, M., Bolton, P., & Röell, A. (2002). Corporate Governance and Control. ECGI—Finance Working Paper # 02, 2002. http://ssrn.com/abstract=343461.
  7. Bliss, R., & Potter, M. (2002). Mutual fund managers: Does gender matter? Journal of Business and Economic Studies, 8(1): 1–15.Google Scholar
  8. Bøhren, Ø., & Strøm, R. Ø. (2007). Aligned, informed and decisive: Characteristics of value-creating boards, Ljubljana Meetings Paper, 2007.Google Scholar
  9. Brammer, S., Millington, A., & Pavelin, S. (2007). Gender and ethnic diversity among UK corporate boards. Corporate Governance, 15(2): 393–403.CrossRefGoogle Scholar
  10. Broome, L. L., & Krawiec, K. D. (2008). Signalling through board diversity: Is anyone listening, University of Cincinnati Law Review, Twenty-First Annual Corporate Law Symposium.Google Scholar
  11. Butner, E. H., & Moore, D. P. (1997). Women’s organizational exodus to entrepreneurship: Self-reported motivations and correlates with success. Journal of Small Business Management, 35(1): 34–46.Google Scholar
  12. Carter, D., D’Souza, F. Simkins, B. J., & Simpson, W. (2010). The gender and ethnic diversity of US boards and board committees and firm financial performance. Corporate Governance: An International Review, 18: 396–414.CrossRefGoogle Scholar
  13. Carter, D., Simkins, B., & Simpson, W. (2003). Corporate governance, board diversity and firm value. The Financial Review, 38: 33–53.CrossRefGoogle Scholar
  14. Cox, T. (2001). Creating the multicultural organization: A strategy for capturing the power. San Francisco, CA: Jossey-Bass.Google Scholar
  15. Credit Suisse. (2012). Gender diversity and corporate performance. Retrieved from https://infocus.creditsuisse.com/data/_product_documents/_shop/360145/csri_gender_diversity_and_corporate_performance.pdf.
  16. Erhardt, N. L., Werbel, J. D., & Shrader, C. B. (2003). Board of director diversity and firm financial performance. Corporate Governance: An International Review, 11(2): 102–111.CrossRefGoogle Scholar
  17. Farrell, K. A., & Hersch, P. L. (2005). Additions to corporate boards: The effect of gender. Journal of Corporate Finance, 11: 85–106.CrossRefGoogle Scholar
  18. Fasci, M. A., & Valdez, J. (1998). A performance contrast of male and female owned small accounting practices. Journal of Small Business Management, 36(3): 1–7.Google Scholar
  19. Fischer, E. M., Reuber, A. R., & Dyke, L. S. (1993). A theoretical review and extension of research on sex, gender and entrepreneurship. Journal of Business Venturing, 8(3): 151–168.CrossRefGoogle Scholar
  20. Gregory-Smith, I., Main, B. M., & OíReilly, C. A. (2014). Appointments, pay and performance in UK boardrooms by gender. The Economic Journal, 124: F109-F128.CrossRefGoogle Scholar
  21. Grosvold, J., & Brammer, S. (2011). National institutional systems as antecedents of female board representation: An empirical study. Corporate Governance: An International Review, 19(2): 116–135.CrossRefGoogle Scholar
  22. Heidrick, & Struggles, I. (1986). The changing board. Chicago: Heidrick and Struggles Inc.Google Scholar
  23. Hermalin, B. E., & Weisbach, M. S. (2003). Boards of directors as an endogenously determined institution: A survey of the economic literature. Economic Policy Review, 9(1): 7–26.Google Scholar
  24. Herring, C. (2009). Does diversity pay? Race, gender and the business case for diversity. American Sociological Review, 74: 208–224.CrossRefGoogle Scholar
  25. Hillman, A., Canella, A. A., & Harris, I. C. (2002). Women and racial minorities in the boardroom: How do directors differ? Journal of Management, 28: 747–763.CrossRefGoogle Scholar
  26. Hillman, A. J. (2015). Board diversity: Beginning to Unpeel the Onion. Corporate Governance: An International Review, 23(2), 104–107.CrossRefGoogle Scholar
  27. Hillman, A. J., Shropshire, C., & Canella, A. A. (2007). Organizational predictors of women on corporate boards. Academy of Management Journal, 50(4): 941–952.CrossRefGoogle Scholar
  28. Huse, M., & Rindova, V. P. (2001). Stakeholders’ expectations of board roles: The case of subsidiary boards. Journal of Management and Governance, 5: 153–178.CrossRefGoogle Scholar
  29. Hutchinson, M., Mack, J., & Plastow, K. (2014). Who selects the ‘right’ directors? An examination of the association between board selection, gender diversity and outcomes. Accounting and Finance, doi:  10.1111/acfi.12082.Google Scholar
  30. Isidro, H., & Sobral, M. (2014). The effects of women on corporate boards on firm value, financial performance, ethical and social compliance. Journal of Business Ethics, 132(1), 1–19.CrossRefGoogle Scholar
  31. Joana, M., Janneke, P., & Chantal, R. (2010). Gender diversity and firm performance: Evidence from Dutch and Danish boardrooms. Tjalling C. Koopmans Research Institute, Discussion paper series no. 10-03.Google Scholar
  32. Laakso, E. (2010). Stock market participation and household characteristics in Europe. Master Thesis, Aalto University, School of Economics 2010. http://epub.lib.aalto.fi/en/ethesis/pdf/12385/hseethesis12385.pdf.
  33. Lindstädt, H., Wolff, M., & Fehre, K. (2011). Frauen in Führungspositionen: Auswirkungen auf den Unternehmenserfolg. Berlin: BundesministeriumfürFamilie, Senioren, Frauen und Jugend.Google Scholar
  34. Loscocco, K. A., Robinson, J., Hall, R. H., & Allen, J. K. (1991). Gender and small business success: An inquiry into women’s relative disadvantage. Social Forces, 70(1): 65–85.CrossRefGoogle Scholar
  35. Nielsen, S., & Huse, M. (2010). The contribution of women on boards of directors: Going beyond the surface. Corporate Governance: An International Review, 18(2): 136–148.CrossRefGoogle Scholar
  36. Page, S. (2007). The difference: How the power of diversity creates better groups, firms, schools and societies. Princeton, NJ: Princeton University Press.Google Scholar
  37. Prasso, S. (1996). Poll: Women in office, not offices. The Commercial Appeal, 7B.Google Scholar
  38. Robinson, G., & Dechant, K. (1997). Building a business case for diversity. Academy of Management Executive, 11: 21–30.Google Scholar
  39. Rose, C. (2007). Does female board representation influence firm performance? The Danish evidence. Corporate Governance: An International Review, 15: 404–413.CrossRefGoogle Scholar
  40. Ruigrok, W., Peck, S., Tacheva, S., Greve, P., & Hu, Y. (2006). The determinants and effects of board nomination committees. Journal of Management and Governance, 10: 119–148.CrossRefGoogle Scholar
  41. Schwartz-Ziv, M. (2015). Does the gender of directors matter? Journal of Financial and Quantitative Analysis, Forthcoming.Google Scholar
  42. Sen, S., & Bhattacharya, B. (2001). Does doing good always lead to doing better? Consumer reactions to corporate social responsibility. Journal of Marketing Research, 38: 225–243.CrossRefGoogle Scholar
  43. Shaw, E., Marlow, S., Lam, W., & Carter, S. (2009). Gender and entrepreneurial capital: Implications for firm performance. International Journal of Gender and Entrepreneurship, 1(1): 25–41.CrossRefGoogle Scholar
  44. Shin, P. S., & Gulati, M. (2011). Showcasing diversity. North Carolina Law Review, 89: 1017–1054.Google Scholar
  45. Singh, V., & Vinnicombe, S. (2004). Why so few women directors in top UK boardrooms? Evidence and theoretical explanations. Corporate Governance, 12(4): 479–489.CrossRefGoogle Scholar
  46. Smale, A., & Miller, C. C. (2015, March 6) Germany sets gender Quota in Boardrooms. The New York Times Retrieved from http://www.nytimes.com/2015/03/07/world/europe/germanlaw-requires-more-women-on-corporate-boards.html?_r=0.
  47. Smith, N., Valdemar, S., & Mette, V. (2006). Do women in top management affect firm performance? A panel study of 2,500 Danish firms. International Journal of Productivity and Performance Management, 55(7): 569–593.CrossRefGoogle Scholar
  48. Terjesen, S., Aguilera, R. V., & Lorenz, R. (2014). Legislating a woman’s seat on the board: Institutional factors driving gender quotas for boards of directors. Journal of Business Ethics, 1–19.Google Scholar
  49. Terjesen, S., Sealy, R., & Singh, V. (2009). Women directors on corporate boards: A review and research Agenda. Corporate Governance: An International Review, 17(3), 320–337.CrossRefGoogle Scholar
  50. Terjesen, S., & Singh, V. (2008). Female presence on corporate boards: A multi-country study of environmental context. Journal of Business Ethics, 83(1): 55–63.CrossRefGoogle Scholar
  51. Torchia, M., Calabrò A, & Huse, M. (2011). Women directors on corporate boards: From tokenism to critical mass. Journal of Business Ethics, 102(2):299–317.CrossRefGoogle Scholar
  52. Vance, S. C. (1983). Corporate leadership: Boards, directors, and strategy. New York: McGraw-Hill Book Co.Google Scholar
  53. Wei, X. (2007). Wage Compensation for job-related illness: Evidence from a matched employer and employee survey in the UK. Journal of Risk and Uncertainty, 34(1): 85–99.CrossRefGoogle Scholar
  54. Yasser, Q. R. (2012). Affects of female directors on firms performance in Pakistan. Modern Economy, 3: 817–825.CrossRefGoogle Scholar

Copyright information

© The Author(s) 2017

Authors and Affiliations

  • Abdullah Al Mamun
    • 1
  • Qaiser Rafique Yasser
    • 2
  • Michael Seamer
    • 1
  • Mariano L. M. Heyden
    • 3
  1. 1.The University of NewcastleCallaghanAustralia
  2. 2.Preston University(Islamabad Campus)Pakistan
  3. 3.Department of ManagementMonash Business School, Monash UniversityMelbourneAustralia

Personalised recommendations