However, these studies investigate the risk attitudes of women in the general population. In their sample of economics, finance and business students, Deaves, L¨ uders, and Luo (2009) do not find women to be less overconfident than men. They postulate that women who are attracted to ‘male’ disciplines may be different from those in the general population. In the context of our study, it is plausible that female directors possess characteristics that have helped them to climb the corporate ladder and become directors. Adams and Funk (2012), for instance, hypothesize that the degree of risk aversion in women may vanish once they have broken through the glass ceiling and have adapted to a male-dominated culture. In a Swedish sample, they find that female directors are more risk-seeking than their male counterparts. Nonetheless, if one accepts that there are general differences in risk attitude between the genders, it is possible that the gender composition of the board may explain variation in corporate risk-taking behavior.
The argument of this paper draws parallels with those of feminist scholars of the welfare state who argue that increasing women’s political participation and power is a prerequisite for ensuring social policymaking truly reflects women’s interests and concerns (e.g. Orloff, 1993). An analogy can also be drawn with the role of employee representatives on corporate boards in advocating for workers’ rights: studies have shown that codetermination is associated with improved employee outcomes, such as in terms of greater job security (Kim et al., 2018) and reduced pay ratios (e.g. Vitols, 2010), thereby helping to ‘decommodify’ workers by mitigating against the risks associated with dependence on the market. Likewise, this paper argues that increasing women’s presence among board and executive positions, in which workplace decision-making and power are concentrated, can bring women’s issues onto companies’ agendas and lead to the adoption of female-friendly practices, policies and cultures at the firm- level. These practices, policies, and cultures can in turn help to reduce the incidence of gendered social risks (employment/care conflicts, economic dependence on a partner) and sexual harassment among women at all levels of the organisational hierarchy. For these reasons, I argue that considerations of gender within comparative welfare state research should be broadened to include women’s share of board and executive roles in the workplace and the policies that support this.
The board of directors is the corporate body that creates long-term business strategies by defining not only the objectives but also the choice of operating entities. The board appoints and dismisses managers, oversees their performance, establishes remuneration and makes strategic choices and decisions that cannot be delegated. Another finding concerns the relationship between EBITDA and women on the board combined with the female presence in top management. In this case, we have an operating result connecting with operating figures. Top management turns the policies formulated by the board into objectives, strategies and projects through a shared vision of the future. The characteristics of female managers emerge as winning factors that produce better results. In this study, we sought to demonstrate that the representation of both sexes is not a gender issue, but rather a matter of business in every respect. Law 120/2011 pushed Italian companies to introduce this new resource into their businesses.
As previously noted, the ASX’s stated motivation for implementing change to the corporate governance principles explicitly quotes enhanced company performance. This claim by the ASX is puzzling because a positive association between genderdiversity and performance has not been convincingly established in the available academic literature. The alternative explanations are that firms will appoint women directors for other reasons – for example, the firm is already performing well and there is external pressure for diverse boards (Farrell and Hersch, 2005); or that “women may be being preferentially placed in leadership roles that are associated with an increased risk of negative consequence” (Ryan and Haslam, 2005, 83). Commentary from other disciplines argues a strong case for moral or social legitimacy – firms choose gender diverse boards for a variety of reasons and the “business case” is not solely an economic imperative (Carter et al., 2010; Fairfax, 2011), but offers a signal of the firm’s commitment to its reputation and image to all stakeholders (consumers, employees, etc.), not just investors (Burke, 1997; Broome and Krawiec, 2008). Below, we summarise the academic literature on the impact of genderdiversity on firm performance and similar types of constructs.
Except for model 5 (ROE), our results show that almost all of the coefficients of genderdiversity (Female) are not significant in our models. These results are in line with those of Terjesen and Singh (2008) and Rose (2007) who find that women have little impact when sitting on the board in contradiction with the findings of Erhardt et al. (2003). Despite the argument that a gender-diverse board is a tougher monitor, the net effect of gender heterogeneity (i.e. Female) is likely to disappear supporting the findings of Adams and Ferreira (2009) and Carter et al. (2010). This suggests that in the perspective of the contingency theory, such additional monitoring might be counterproductive. Also, there is a possibility that banks appoint female directors only to follow the trend of inclusion of women and ethnic minorities on the board. Our sample allows us to examine diversity based on ethnicity and nationality of the board members (Ethnog diversity). Table 4 reports negative coefficients of Ethnog diversity in all the models (ROA, ROE, adjusted ROA, and adjusted ROE). This is surprising because the board could presumably get more benefits from this diversity. This effect is economically significant. For instance, an increase of one standard deviation in this diversity measure is associated with decreases in ROA by1.11 11 , ROE by -0.52, adjusted ROA by -0.39, and adjusted ROE by -1.51. In other words, Ethnog diversity is not only related to lower performance, but also simultaneously to higher risk with a greater increase in risk, leading to lower risk-adjusted returns 12 . Our results are somewhat different from those of Carter et al. (2010) who finds no significant link between U.S. S&P 500 firms’ performance and the presence of ethnic minority directors and foreign directors. Furthermore, despite the fact that there are hundreds of types of ethnicities in Indonesia, bank boards are commonly dominated by persons belonging to a limited number of ethnic groups. Theoretically, ethnic heterogeneity on the board would allow them to better understand their customers and hence deliver better services. In practice, ethnicity diversity, if not well managed, may become a burden for board members because they often bring different values and norms that might be difficult to coordinate. Ethnic diversity might indicate diversity in other terms such as language, custom, behavior or even the specific perspective of certain ethnic 11 To obtain this value, we calculate: ∆ROA = [one standard deviation of Ethnog diversity (Table 1) * the
Ahern and Dittmar’s (2012) study focus on Norwegian firms during the period from 2001 to 2009. In 2003, the Norwegian government legislated the new law which required that 40% of directors of Norwegian firms have to be women. Before gender quota law, only 9% of directors were women. Ahern and Dittmar investigate all public limited Norwegian firms that are traded on the Oslo Stock Exchange (OSE) anytime between 2001 and 2009. The primary goal of their study is to investigate the impact on the firm valuation of mandated female board representation. They also measure the firm value with the Tobin’s Q because of the accounting change during the transition period of the quota. They find that the stock prices dropped significantly at the announcement of the law caused by the constraint imposed by the quota. Furthermore, they recognize a large decline in Tobin’s Q during the following years. According to their study, the quota led the less experienced board as well as the younger board members, higher leverage and acquisitions, and the decline of operating performance. On the contrary to the other studies, the results of this study indicated the negative relationship between boardgenderdiversity and firm financial performance.
D. A. Carter et al./The Financial Review 38 (2003) 33–53 35 corporations, e.g., Bank of America, Sara Lee Corporation, Motorola, Inc., PepsiCo, Inc., TIAA-CREF, the Society for Human Resource Management, the Hispanic As- sociation on Corporate Responsibility, the Children’s Defense Fund, the National Council of Negro Women, Fannie Mae, the Securities and Exchange Commission, and a variety of consulting groups. Referring to internal control mechanisms, Jensen (1993) argues that “suggestions to model the board process after a democratic po- litical model in which various constituencies are represented are likely to make the process even weaker.” The policy statement by TIAA-CREF also specifically recom- mends against constituency directors, stating that “Each director should represent all shareholders: therefore, TIAA-CREF opposes the nomination of specific represen- tational directors and the practice of cumulative voting in the election of directors” (TIAA-CREF, 1997).
tives undertake more acquisitions and issue debt more often than female executives” and that female executives give earnings guidance with wider ranges); Mara Faccio et al., CEO Gender, Corporate Risk-Taking, and the Efficiency of Capital Allocation, 39 J. C ORP . F IN . (June 15, 2015), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2021136 [https://perma .cc/34Y5-8B4M] (“We document that firms run by female CEOs tend to make financing and investment choices that are less risky than those of otherwise similar firms run by male CEOs.”). There are fewer articles, however, expressly examining women leaders’ impact on risk oversight at financial institutions. See Laura St. Claire, et al., Braving the Financial Crisis: An Empirical Analysis of the Effect of Female Board Directors on Bank Holding Company Performance 1 (Office of the Comptroller of the Currency, Working Paper No. 2016-1, 2016), https://www.occ.gov/publications/publications-by-type/occ-working-papers/ 2016-2013/working-paper-2016-1.html [https://perma.cc/X8H4-MK76]; see also Ajay Palvia et al., Are Female CEOs and Chairwomen More Conservative and Risk Averse? Evidence from the Banking Industry During the Financial Crisis, 131 J. B US . E THICS 577, 592 (2015)
Gender diverse board create better understanding to improve the quality of board discussion and decision making process (Gul et al., 2011). Female directors appear to be tougher monitors and are likely to join the monitoring committee. Female directors also have better attendance at the board meetings than male directors (Adams & Ferreira, 2009). In other words, women tend to take their role more seriously while in the boardrooms, thus leading to better corporate governance (Singh & Vinnicombe, 2004). Though having women in the boardrooms contributes to a better monitoring, corporate decision making process would take longer time (Berger, Kick, & Schaeck, 2014) as women tend to be more cautious in their decision-making process. Hence, the presence of women in the boardrooms may lead to over monitoring for firms that already have strong corporate governance. However, Khaw et al. (2016) show that over monitoring is not an issue in a weak investor protection environment, like China. Instead, the presence of female directors is significant in alleviating excessive risk taking that may be harmful to firms, specifically in an emerging market environment. For these reasons, we hypothesise that:
effects on the management, boardroom and the whole organization. However, for some firms it may be problematic to increase genderdiversity and the pressure towards it may only lead to a situation where current female directors hold more directorships. Forcing firms to increase diversity may lead to appointments of unexperienced directors, which probably will not increase firms’ corporate sustainability performance nor financial performance. On the other hand, it is difficult to gain experience of the directorship if nobody ever gives the chance to gain that experience. (Adams & Kirchmaier 2015: 2–3.) Interestingly, Adams & Kirchmaier (2015) find that the female labor force participation is linked positively and significantly to director participation. A one standard deviation increase in full-time economic participation increases non-executive director participation by 2.6 percent. Moreover, a one standard deviation change in full-time employment increases executive participation by 0.7 percent, which is relatively large compared to its mean, 4 percent. It is notable that the findings are relevant only for full- time participation; part-time and unemployed female workers do not bring positive and statistically significant benefits into director participation. The study suggests that encouraging women to work full-time may be important for generating possibilities for women to climb up to the top corporate positions. Full-time employment is related to better skills and experience, ultimately leading to greater firm performance. In this case, the differences in cultures around the world affect female representation in the boardrooms. If the culture does not support women working full-time, it is difficult to gain experience and give evidence to management and board of female talent.
intensity of CSR disclosure (Dienes & Velte, 2016). The absence of a relationship between genderdiversity and CSR disclosure is due to the number of women on the board's ranks in basic and chemical manufacturing companies still being a minority. This is indicated by the average value of genderdiversity in 2014 to 2016 of 11.32 percent. The value of 11.32 percent was obtained through the calculation of the number of female councils in the positions of the board of directors, the board of commissioners, the audit committee, and compared to the total overall board of companies averaged for 52 basic and chemical manufacturing companies. Harjoto et al. (2015) stated that women's board representative is more focused on social issues in the community so that it will support more social activities of the community and demand more information relating to the disclosure of CSR in making investment decisions (Hoang et al., 2018; Katmon et al., 2019). Therefore, the presence of fewer women in board positions can lead to lower CSR disclosures.
In today’s business entities, employees and top management teams become increasingly diverse in terms of age, ethnicity, and gender, in addition to their diversity in terms of tenure, experience, educational background, and socioeconomic status (Jackson and Alvarez, 1992; Sessa and Jackson, 1995). It appears to be a common phenomenon that minority or “lower- status” groups, such as women and minority ethnic groups, are likely to be marginalized in diverse groups (Ibarra, 1993), and therefore there are increasingly attempts to promote equal opportunity among different groups in the workplace. For example, such developed countries as the United States and Australia have established equal-opportunity commissions. Proposals on governance reform also increasingly state the importance of genderdiversity on the board of directors (Adams and Ferreira, 2009). Furthermore, the governments of Norway and Sweden have imposed gender quota on the boards of directors (Medland, 2004; Randøy et al., 2005).
The purpose of this study was to find out whether women on the board are positive related to firm performance among S&P 100 and FTSE 100 companies. This seems to be a current and modern topic due to the increasing awareness of corporate governance practices in the last decades. The current literature concerning studies in European countries is very thin. However after following the hypothesis that women on the board create value and increase the performance of a company, no statistically significance was found in either sample. But the result does not mean that women are bad for firm performance either. While finding the same results in both samples, this study confirms that female directors do not have a direct relation to firm performance regardless of their geographical location. The difference of the board structure in both countries has been taking into account through testing for joint endogeneity. Throughout the data collection some limitations were notable. Even though the amount of female directors increased, the amount of female directors on the board is still relatively low. The number of female directors increased from 1.4 (10.9%) female directors in 1996 to 2.4 (19.9%) in 2002. This is an increase of 10%. However this means just on average one more female director on the board. As stated by Konrad et al (2008) there needs to be at least 3 female directors on the board to make an impact on the decision making. As the number of female directors is still low, it is said that female directors stay powerless and lack an influence on the decision making and corporate performance (Nielsen and Huse 2010). Furthermore according to Rose (2007) women adopt the behavior and norms of men. Women have the desire to fit into the men- dominated boardroom and suppress their own features. Rose (2007) calls this a process of socialization. That means that there is supposed to be no impact of women on the board since they try to act and think like men do. Also the representation of women on the corporate board shouldn’t be the only measure to analyse the impact of women on corporate performance. Women in higher positions, such as management position, is similarly important. Despite the lack of women in top positions, Dezső and Ross (2012) found a positive relationship between women on the board and firm performance.
Boarddiversity or the co-existence of men and women of different nationalities, races, religions and ages on the board of directors is a much talked-about topic in today’s corporate world. Genderdiversity in the boardroom refers to the presence of women on the board of directors and is an important aspect of boarddiversity. Corporate boardrooms are not yet much diverse as far as gender is concerned because presence of women on boards of directors is limited worldwide. In Canada, for example, from 2001 to 2003, 51.4 percent companies had no women directors (Catalyst, 2003) and in Britain, in 2004, 31 percent of the FTSE 100 had no women directors (Catalyst, 2005). In addition, according to data from the Ethical Investment Research Service (2004), womenboard directors were less than 10 percent of the total number of directors of companies headquartered in Australia, the United Kingdom, Germany, France, Singapore, Hong Kong, Spain, Italy, and Japan. Only Norway (greater than 25 percent), where federal legislation requires all boards to have at least two women by 2006 and to have 40 percent women by 2008, and Sweden (almost 20 percent) had percentages of women directors greater than those in the United States (Catalyst, 2005). When women are lagging far behind their male counterparts in the rat race of board directorship in developed countries, their situation in a developing country like Bangladesh beggars description.
Another limitation of this thesis is that it didn’t consider the unique characteristics of individual female board members. Female directors all bring their own characteristics to a boardroom, like experience, education, culture and personality, making their influence highly complex (Torchia et al., 2011). Johnson et al. (2013) see a problem in using archival databases in getting an understanding of the impact of board composition on firm outcomes. When aggregating data on board level the differential effects of individuals or subgroups within the boards are overlooked or confounded. In addition, an important aspect is the level of power that women have on influencing corporate decisions in a firm (Triana et al., 2014). Often female directors that are added to a board get less powerful positions and the possibilities in changing board decisions will be limited (Miller & del Carmen Triana, 2009). The role of board processes is another topic mostly overlooked by genderdiversity studies (S. Nielsen & Huse, 2010). For example, boardroom behaviour, frequency of meetings, the attendance of board meetings, the different board tasks and the level of monitoring can all influence the way different corporate decisions are made (Adams & Ferreira, 2009; S. Nielsen & Huse, 2010; Schwartz-Ziv, 2017; Terjesen et al., 2009). Alternative approaches to investigate genderdiversity are therefore proposed, like case studies, lab studies, simulations or focusing on single industries (Johnson et al., 2013). An example of a case study is following an individual firm over multiple years, to control for the numerous firm and financial characteristics that influence a firm’s decision- making process. An example of focusing on a single industry is investigating manufacturing and trade firms, as previously mentioned, this thesis found an effect in this industry. These are all alternative approaches to find effects in a more controlled environment, but then generalizability will remain a difficulty.
The existing literature is mainly focused on the market and accounting performance as mentioned earlier. This is why this paper will contribute to the existing literature by adding a risk factor which will measure the riskiness and volatility of the company. Jizi and Nehme (2010) argued that companies which have more women on their board would be less risky and volatile. According to the theoretical schools of thoughts companies which have more diverse boards should have more knowledge of the industry, relationship with the industry and customers (Reguera-Alvardo, Fuentes & Laffarga 2017: 339). Because of these factors the company should understand its environment and manage the challenges better, and the risk might also be smaller or more stable compared to less diverse companies. The risk and volatility will be measured by the standard deviation of the yearly stock return.
This study examines the relationship between boardgenderdiversity and corporate risk taking among Malaysian companies. Pooled Ordinary Least Square (OLS) regression and Panel Data regression are used in this study to examine the relationship between these variables. The selected samples include of Malaysian listed companies in the main board Bursa Malaysia. Final sample consists of 634 non-financial companies with 6,816 firm- year observations for a sample period of 15 years that is from the year 2000 until 2014. Results indicate that the presence of women directors can mitigate corporate risk taking while; male-only board leads to higher level of firmrisk taking. These results are consistently significant when different measures are used to proxy for risk taking. Consistently, both pooled OLS and panel data regressions confirm the findings. In addition, fixed effects panel data regression is found to better explained the hypothesised relationship than random effects. This study concludes that boardgenderdiversity can be used as a monitoring agent to mitigate corporate risk taking, supporting the regulator’s initiative to promote genderdiversity in the corporate boardrooms.
The relationship between women’s presence and firm performance however, vary according to the academic qualification held by the women directors . Women directors with a university degree will give significant positive effect to firm performance compared to women directors without a university degree, who will have a smaller or insignificant effect on firm performance . Furthermore, the association of genderdiversity with firm performance can give positive effect when the representation of women directors reaches certain threshold. One study suggests that positive performance can only be realized when women representative contributes 30% of the board of directors , but will negatively affecting firms’ performance when the women representation is less than the threshold. Other study, that was conducted in a transitional economy,
Ongore, K’Obonyo, Ogutu and Bosire (2015) established that genderdiversity has a positive effect on firm performance. They also point out that number of female directors observed in their study was significantly lower than male directors. Considering board composition in the Kenyan context, the study shows that gender disparity can affectfirm performance. Although it is easy to observe the increase in number of women directors, assessment of the influence and involvement of women directors is more difficult due to the inaccessibility of the boardroom processes. Moreover, researchers have mainly been interested in the bottom-line effects of women directors rather than on their role. Whereas some have found a positive association among genderdiversity and firm performance (Letting, Aosa & Machuki, 2012; Carter et al., 2003; and Erhardt, Werbel, Shrader, 2003), some have concluded that the relationship is negligible (Dale-Olsen, Schone, & Verner, 2010), and some have even concluded that the overall relationship is negative (Adams & Ferreira, 2009). Letting, Aosa and Machuki (2012), provide evidence that scholars have focused on the influence of the board members’ gender and educational qualification on firm performance. Common attributes of board members are age, level of education, gender, and experience. Therefore, from these attributes, Boarddiversity can directly or indirectly impact firm performance. The board is responsible for policy development and strategic direction making, thus it is an important part of corporate governance mechanism.
Rose (2007) pointed out that in Denmark, it is especially common that new board members are recruited within a small business circle, closely connected to each other. Such recruitment mechanism is an impediment to improve boarddiversity as director candidates with better expertise could be eliminated. In addition to the number of female directors, Rose (2007) included variables considering educational background, payment information and ownership for each board member in the empirical analysis. Several other corporate governance control variables are included in the study. The study consisted of a panel data set of Danish publicly listed companies between years 1998– 2001. The results of the regression analysis show that the coefficients between the number of women and Tobin’s Q as well as the dummy variable for the representation of women in the boardroom and Tobin’s Q are both close to or equal to zero. Thus, according to the findings of Rose (2007) gender has no impact on performance. In addition, educational background of the board members has no statistically significant impact on firm performance.