The Role of Women Directors on Corporate Boards and Firm Financial Performance in Malaysia

Abstract

Malaysia's Labour Force Participation Rate is at 67.8 % in June 2017 with the female labour participation rate at 54.3%. The target of Malaysia is to have women's representation of 30% in senior decision-making positions and on boards by 2016 as to accelerate the development of high-potential women leaders in the labour market and in decision-making positions across all industry sectors and business functions. The purpose of this paper is to look at various facets of corporate governance, notably the effectiveness of boards of directors and the composition of boards. In this context, the current study gauges the effects of women directors regarding firm performance issues and the benefits of female representation on boards. The research purpose is to examine the effect of board gender diversity and independence on firm performance in Malaysia's listed companies in consumer products and properties sectors covering a 10-year period from 2007 to 2016. This study also examines number of female and directors affecting the firm performance in terms of Return on Asset (ROA) and Return on Equity (ROE) specifically in two sectors which is consumer products and properties. Quantitative data was collected from the Bloomberg website and annual reports of the public listed companies in Bursa Malaysia. Board Gender diversity was found to be positively related to the firm performance. However, independent director is found insignificant to firm performance. The findings may provide some implications for future research regarding the effectiveness of board of directors towards firm performance. Nevertheless, the finding may not reflect the true picture since the percentage of female directors quite constant in Malaysia. It is recommended to promote gender equality in terms of recruiting women into the corporate board and increase the participation of women in the labour force.