The reaction of Malaysian investors to the appointment of female directors : a case of top public listed companies in Malaysia

Abstract

The fifth goal under the Sustainable Development Goals (SDG) is to achieve gender equality, which includes an effort to ensure women’s effective participation and equal opportunities for leadership at all levels of decision-making. The present scenario in Malaysia's financial market however raises a question of whether predominant male investors are willing to break the ‘glass ceiling’ and accept the nomination of women into executive positions in public listed companies. This study examines the market reaction towards the appointment of female directors by utilizing event study analysis on the announcement effects of female directors' appointments. The study found evidence that investors react positively in the first 3 days after the announcement; thus, denying the scepticism of female directors. Also, the speed of price adjustment reestablished evidence of semi-strong form efficiency in the Malaysian stock market. Next, we apply the binomial logistic regression to predict the dichotomous relationship between the positive average abnormal return (AAR) with the specific factors in the announcement (the directorate, age, family relationship and industry), which helps to determine the criteria influencing the affirmative reaction of investors. The analysis found that age is the only significant factor that positively influences the investors’ reaction to generating positive abnormal returns. This study contributed to the current research on the market's reaction toward a female board of directors' appointment while indirectly providing general insights on the issue of gender equality in Malaysia. It also provides evidence of a semi-strong form market in Malaysia while acknowledging the significance of age as a decisive factor influencing the positive market reaction.