Women directors and performance: evidence from Malaysia

• Published date: 18 November 2019
• Date: 18 November 2019
• DOI: https://doi.org/10.1108/EDI-02-2019-0084
• Pages: 841-856
• Author: Kwee Pheng Lim,Chun-Teck Lye,Yee Yen Yuen,Wendy Ming Yen Teoh
• Subject Matter: Hr & organizational behaviour,Employment law

Women directors and

performance: evidence

from Malaysia

Kwee Pheng Lim, Chun-Teck Lye, Yee Yen Yuen and

Wendy Ming Yen Teoh

Faculty of Business, Multimedia University, Malacca, Malaysia

Abstract

Purpose –The purpose of this paper is to examine the relationship between women on board and the

financial performance of Malaysian listed companies.

Design/methodology/approach –Panel generalised method of moments (GMM) analysis was used over

928 public-listed companies listed on the Malaysian Stock Exchange from 2010 to 2016. GMM overcomes the

problem of endogeneity and simultaneity bias. The dependent variable was firm performance, measured by

Tobin’sQ. The explanatory variable was gender diversity, proxied by the percentage of women on board, the

presence of women and gender heterogeneity indices, Blau and Shannon indices.

Findings –More gender diversification leads to declining firm performance possibly due to issues of

tokenism and gender stereotypes.

Research limitations/implications –Further studies should look into the impact of various types of

ownership structures on firm value and also by sectors.

Practical implications –As women represent half the population in Malaysia, more positive affirmative

policies must be introduced to enhance their contributions to society.

Social implications –As women progress in society, their contributions towards nation building will be

significant. Women not only play a nurturing role, but also can shape the destiny of a country.

Originality/value –Studies on the relationship between board gender diversity and financial performance have

been conducted in the context of a few developed economies. This study contributes to the literature by examining

such an issue in a developing economy that has a different environment from that of developed economies.

Keywords Corporate governance, Firm performance, Women on board

Paper type Research paper

1. Introduction

Gender diversity generates a lot of interest in recent years not only among the academia

community, but also the civil societies and governments around the world. Even though

women make up 39 per cent of the total labour force according to the International Labour

Organisation and World Bank database, they hold only 15 per cent of all board seats

globally in 2016. It further highlighted that over the last two decades, even though women

have significantly progress in their educational achievements, but this has not translated

into a comparable improvement in their position at work. A census conducted by the

Catalyst on the percentage of board seats held by women reveals an interesting story.

Countries in Northern Europe achieved better results as compared to Taiwan, South Korea

and Japan. This is because the government of Northern Europe are using quotas and targets

to drive up numbers on gender composition of the board believing that the presence of

women could bring significant positive contribution towards firm performance.

Over the last two decades, the world has witnessed many corporate scandals and

financial crises. A question was raised whether these failures will be minimised if the

board has some female members (Adams and Funk, 2007). It is believed that board

diversity contributes to good corporate governance (CG) practice as women directors are

more diligent monitors (Adams and Ferreira, 2009) as well as they help to improve the

quality of board decisions and enhance the legitimacy of the organisations (Low et al.,

2015; Hillman et al., 2007).

Equality, Diversity and Inclusion:

An International Journal

Vol. 38 No. 8, 2019

pp. 841-856

© Emerald PublishingLimited

2040-7149

DOI 10.1108/EDI-02-2019-0084

Received 21 February 2019

Revised 11 June 2019

Accepted 21 July 2019

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/2040-7149.htm

841

Women

directors and

performance

In recent years, many scholars have researched on the impact of women directors on firm

performance. But, the empirical evidences in the extant literature are inconclusive.

Furthermore, many of these studies are mainly conducted in developed economies such as

the USA (Adams and Ferreira, 2009; Krishnan and Park, 2005), Canada (Francoeur et al.,

2008), Spain (Campbell and Minguez-Vera, 2008), the Netherlands (Marinova et al., 2010) and

Denmark (Smith et al., 2006). There are not many such studies in developing economies.

Hence, this study contributes to the literature by examining the link between gender

diversity and firm value for a developing economy that is different economically and

culturally. In addition, a dynamic panel generalised method of moments regression analysis

shall be employed as it is more powerful and can eliminate biasness and inconsistency. The

results would be more generalisable as the study includes smaller firms unlike previous

studies and the data are over a longer span of seven years.

This study examines the impact of women directors on firm value of Malaysian listed

firms. Our empirical evidence reveals that the representation of women on board is

negatively related to financial performance, contrary to the findings in developed countries.

This study begins with a review of literature and hypothesis development, follows by a

description of the data and methodology, the empirical results and ends with the

concluding remarks.

2. Literature review and hypotheses development

2.1 Gender diversity in Malaysia

Malaysia, a predominantly Muslim country (61 per cent), has traditionally a low proportion

of women participation in the board, a situation which the Government has recently

addressed via CG reforms and legislative changes. They were aware of the obstacles that

women face in reaching certain key positions within the CG structure. In 2004, the

government has advocated a policy that at least 30 per cent of decision-making positions is

to be occupied by women in the public sector. As a result of this affirmative gender policy,

more than 32 per cent of women were employed in the premier grade civil posts, an increase

from 19 per cent in 2004 (Loh, 2011). However, the target of 30 per cent is not yet met in

2016 for the private sector which shows only 11.5 per cent achievement, see Figure 1. This

finding is unsurprising given the patriarchal nature of the society. But at the end of 2017, the

figure has increased to 19.2 per cent for the top 100 public-listed companies on Bursa

542

554

553

544

559

534

669

702

757

7,227

7,103

7,000

7,065

7,076

6,209

6,559

6,561

6,583

7.5

7.8

7.9

7.7

7.9

8.6

10.2

10.7

11.5

2008 2009 2010 2011 2012 2013 2014 2015 2016

WOB Total %

Source: Women, Family and Community Development Malaysia, 2016

Figure 1.

Percentage of women

on board

842

EDI

38,8