Does gender diversity on boards reduce the likelihood of financial distress? Evidence from Malaysia

Abstract

PurposeThe purpose of this paper is to examine the impact of board gender diversity on firm financial distress for a sample of 367 non-financial firms listed on Bursa Malaysia over the period from 2011 to 2019.Design/methodology/approachThe study employs both panel logistic regression and dynamic generalized method of moments estimator to determine the impact of board gender diversity on the likelihood of financial distress. Altman Z-score model is used as a proxy for financial distress indicator. The bigger the Z-score, the smaller the risk of financial distress.FindingsThe results show that board gender diversity could help to improve board effectiveness by preventing corporations from being too exposed to financial distress and bankruptcy. In particular, whether they are independent or inside members, women directors are likely to reduce the likelihood of financial distress. The results also show that the effect of female directors on the likelihood of financial distress is strengthened through more board independence. The results are consistent with those in prior research that documents the benefits of board gender diversity.Practical implicationsThis paper provides insights for corporate decision makers in emerging economies, helping them to determine the board's design in terms of roles and composition that promote governance practices and prevent financial troubles. Furthermore, the findings of this study may be useful regulators as they shed light on the importance to undertake measures and reforms to promote board effectiveness by the introduction of gender diversity. Finally, this study also offers implications for society in general, considering that the practice of enhancing board gender diversity can significantly safeguard the interest of a wide range of stakeholders by reducing the chances of corporate bankruptcy.Originality/valueWhile prior research has examined the effect of board gender diversity on firm performance, this study is the first to investigate the effect of board gender diversity on the likelihood of financial distress in Malaysia.

Vinculum of Green Innovation, Corporate Governance Index, and Impact on Financial Firm Performance: A Comparative Study of Two Southeast Asian Countries

“…al., 2022;Shah et al, 2021). However, the author would like to draw attention to women's participation at managerial and board levels was found to be lower than in Malaysian(Guizani & Abdalkrim, 2022;Lim et al, 2019) and Indonesian(Nainggolan et al, 2022) corporate governance code.Thereby boosting the business's triple bottom line and allowing the rm to relate to the market and investors(Lai et al, 2021). This combination of environmentally friendly practices and support for green government initiatives will directly support the 17 sustainable development goals of the United Nations (Jan et al, 2021).…”

Hope-hype of green innovation, corporate governance index, and impact on firm financial performance: a comparative study of Southeast Asian countries

“…Furthermore, the board of directors must devote significant attention to developing green governance that enables green innovation methods (Shah et al , 2021. However, the authors would like to draw attention to women's participation at managerial and board levels which was found to be lower than that in Malaysian (Lim et al 2019;Guizani and Abdalkrim 2022) and Indonesian (Nainggolan et al 2022) corporate governance code.…”

Does board diversity reduce the likelihood of financial distress in the presence of a powerful Chinese CEO?

“…Board structure diversity principally reflects the true spirit of effective corporate governance mechanisms (Bernile et al, 2018;Harjoto et al, 2018;Li et al, 2020;McGuinness et al, 2017;Talavera et al, 2018). After the global financial crisis and corporate financial scandals, there has been growing interest in examining the role of an effective board in preventing the corporation from being exposed to financial distress (Guizani and Abdalkrim, 2022;Shahwan, 2015;Younas et al, 2021). Theoretically, the board establishes corporate disclosure policies, develops management strategies and engages in more ethical efforts (Jo and Harjoto, 2011).…”

“…However, there is limited evidence on how board diversity mitigates the probability of financial distress. Studies have used only gender as a board diversity attribute to predict financial distress, providing mixed results (Garc ıa and Herrero, 2021; Guizani and Abdalkrim, 2022;Kristanti et al, 2016;Lee and Thong, 2022;Mittal and Lavina, 2018;Santen and Donker, 2009;Salloum et al, 2013). According to some authors, board gender diversity lessens the chance of bankruptcy (e.g.…”