Does Diversity Matter for Religious Firms Too? Board Gender Diversity and Corporate Choices of Shar¯ı‘ah Compliant Firms

Abstract

Governance mechanisms of religion-adhering firms offer a great debate topic in contemporary business and finance research. Though at nascent stages, yet there exists a growing body of knowledge regarding Islamic corporate finance. With an emphasis on this body of knowledge, the current study aims at examining the relationship between gender diversity in corporate sector boards on corporate choices of Shar¯ı‘ah compliant firms. Specifically, this study examines whether gender diverse boards of Shar¯ı‘ah compliant firms have any influence towards business diversification, dividend pay-out, and firm’s financial performance or not? Study used data from Karachi-Meezan Index (KMI-30) of Shar¯ı‘ahcompliant firms and employed panel data analysis technique. Results of the study show that gender diversity does matter for Shar¯ı‘ah compliant firms too. Representation of women on boards of Shar¯ı‘ah compliant firms results in more business diversification, dividend pay-out and better financial performance. The results are robust and carry crucial implications for policy makers of the Shar¯ı‘ah compliant firms, regulators and the government. Results of the study suggest that efforts should be deliberated to enhance women’s inclusion in boards of Shar¯ı‘ah compliant firms. Our results must be interpreted with caution as they only relate to a specific type of stocks i.e. Islamic stocks and specific country i.e. an Islamic Republic of Pakistan.