Women on board : the impact on financial performance of companies listed Bursa Malaysia

Abstract

In recent years, an increasing number of educated women has joined the workforce and held high administrative positions in the corporations they serve. The number of women on board of directors can influence a company performance, and this raises concerns about the optimal proportion of women directors a company should have and how it may impact the financial performance of the company. In 2011, the Malaysian Cabinet permitted a policy that by 2016, the board of directors of all listed companies in Malaysia should be composed of at least 30% women. Following the influence the policy could have, this research examines the relationship between the existence of women on boards and Malaysian listed companies’ performance. This is done by applying the theory of resource dependence. Therefore, this research proposes seven hypotheses related to women board participation. This study analyses the annual reports of the top 100 listed firms in Malaysia from 2016 to 2018 after the policy of gender diversification is implemented. This research also examines the qualifications of women directors, women directors on audit committees, women directors as CEOs or Chairman, their age and tenure on boards and women independent directors. All of these features are examined in relation to return on assets (ROA). Multiple regression analysis is utilised to evaluate the association between company performance (ROA) as a dependent variable and women on boards of directors and their characteristics as the independent variables. This study has found that there is a significant negative relationship between women on boards and firms’ financial performances. When examining women in audit committees, on the other hand, it was found that there is a significant positive relationship on firm performance. Furthermore, this study found that there is a significant positive relationship between women as CEOs or chairman and firm performance. In contrast, women directors with accounting and finance qualification, tenure, and independence were found to have positive but insignificant relationships with firm performance. The age of women on boards was found to have a negative but insignificant relationship with firm performance. This research contribute to the existing literature on women on boards from the perspective of a developing nation. The results could motivate listed firms in Malaysia to appoint more qualified women as members of the boards in order to not only adhere to the government policy but also gained benefits in term of company performance.