Abstract
Board diversity has lately being a heavily contested topic of research. Women, having a unique pool of resources and human capital, bring unique and diverse skills to the board that could improve board performance which positively impacts firm value. This study aims to investigate board gender diversity and its impact on firms’ performance in Pakistan. More specifically, this study compares different performance characteristic of firms with and without gender diversity in boards. We also analyzed the effect of women on board (WOB) on different performance measures in the presence of control variables. These measures included Return to assets, equity and sales, TOBIN Q, and Ethical and Social Compliance (ESCC). For this, panel data of 4 years from 2015 to 2018 were collected from 100 companies, and ANOVA and regression analysis were performed. The comparative analysis showed that non-women component has a significantly higher ROA than women, whereas ROE is higher for women. Moreover, non-women board companies seem to take a higher financial risk by taking more leverage. Surprisingly, the ESCC factor seems to be significantly higher for non-women board companies showing better social compliance. Evidence from regression found remains inconclusive. In fact, the performance measures like Tobin Q, and ROA seems to be negatively affected by WOB, whereas ROE was positively and significantly affected. ESCC seems to have a strong and positive effect on Tobin Q in companies with WOB, as well as ROA in overall companies. Evidence also suggested that WOB also seems to have a negative effect on ESCC. Hence, in the case of Pakistan, the findings remained inconclusive because women representation on board is not enough to have an influencing role in the board. The size of the female representation on the board needs to be sufficiently large to have an influencing role on corporate boards.
Highlights
1.1 Background of the StudyVariety of people with different culture and background can enhance the higher quality absorption of the marketplace, just because the marketplace is having a variety of people who have cultural differences and different mindsets (Carter et al, 2003)
The present paper presents the idea of women's direct effect on corporate board (WOB) in the context of control variables on firm value, financial performance and ethical and social compliance
The current paper offers some concepts of the indirect impact women have on corporate board on firm value through financial performance and ethical and social compliance that have never been previously studied, and shares the results of recent female presence on corporate board in Pakistan
Summary
Variety of people with different culture and background can enhance the higher quality absorption of the marketplace, just because the marketplace is having a variety of people who have cultural differences and different mindsets (Carter et al, 2003). Boards with females indicate that a company is well placed to evaluate the needs of a diverse market and competitive business conditions (Miller and Triana, 2009). Women represent almost 49% population of the world so firms have to provide an equal opportunity to females at the workplace and give them the chances to work on corporate board where they utilize their skills, education and abilities for the betterment of the company. Norway making compulsory for their companies making sure that 40 percent of the members of board rooms must be females
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