The impact of women on board on firms` performance in Malaysian public listed companies

Abstract

Over the years, the number of educated women who join the workforce and hold top executive positions in the organisations they serve has increased rapidly. The representation of women on boards affects the firm’s performance, thereby drawing attention to the proportion of women directors seated on the board and how they might influence the firm’s performance. In 2011, the Malaysian cabinet approved the policy that all board of directors of companies listed in Malaysia should consist of 30 per cent women members by 2016. This study therefore examines the association between the presence of women on the board and firms’ performance following the introduction of the diversity policy and the moderating effect that accounting academic qualifications could have on the association between women on board and firms’ performance by applying resource dependence theory. To this end, this study formulates two hypotheses relating to the women board of director members. The analysis used publicly available information of the top 200 Malaysian public listed companies for the financial year 2011 to 2013 in order to determine the early adopters of the diversity policy. This study investigates the effects of different aspects of corporate governance mechanisms involving women participation on boards, board composition including gender diversity, and the academic background of the women directors on boards on firm performance (ROA). The firm characteristics, the ownership type of the firm (family-owned and government-owned firm), board size, firm size, firm industry and year were controlled for. The multiple regressions analysis was used to estimate the relationship between the firm performance (ROA) as the dependent variable and the independent variables. The research concludes that there is a significant relationship between women board representation and firm performance though the direction coefficient is negative. This study contributes to the rising literature on women board member representation in effecting the firm performance of the top 200 listed companies in Malaysia. The findings encourage public listed companies to appoint women as members of the board of directors and to analyse the effects of the diversity policy introduced by the government.