GENDER DIVERSITY ON BOARD AND ITS RELEVANCE TO FIRM PERFORMANCE: A STUDY ON PHARMACEUTICAL INDUSTRY OF BANGLADESH
Keywords:
Gender Diversity, Profitability, Board, Pharmaceutical Sector, Bangladesh.
Abstract
The study tries to examine the relationship between gender diversity on the Board and firms' profitability in Bangladesh's Pharmaceutical industry. The study employs a panel data approach with all the Pharmaceutical companies listed under Dhaka Stock Exchanges. The sample period covers eight years from 2012-2019. To conduct the study, Return on Equity and Tobin's Q was taken as a proxy of accounting measure of profitability and market measure of profitability, respectively. The proportion of women on board structure was taken as a proxy for gender diversity. Some other variables: board size, firm age, leverage, and firm size, were incorporated to control the effect of these variables on profitability. The study reveals that gender diversity shows a positive but insignificant relationship with the firm's performance in terms of ROE. The R square of this model was 11.67%. In terms of Tobin's Q, gender diversity exhibited a significant positive relationship with firm performance. The R square of this model was 17%. This implies that the market ascribes a great value to the inclusion of women in board structure since it increases the board structure's independence and profitability.
JEL Classification Codes: C12, F65, L25.
References
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Coad, A., Segarra A., & Teruel M. (2013). Like milk or wine: Does firm performance improve with age? Structural Change and Economic Dynamics, 24(1), 173-189.
Erhardt, N.L., Werbel, J.D., & Shrader, C.B. (2003). Board of director diversity and firm financial performance. Corp. Gov. Int. Rev., 11(2), 102–111.
Goddard, J., Tavakoli, M., John, O., & Wilson, S. (2005). Determinants of profitability in European manufacturing and services: evidence from a dynamic panel model. Applied Financial Economics, 15(18), 1269-1282. https://doi.org/10.1080/09603100500387139
Gregory, I. S., Main, B. G. M., & O'Reilly, C. A. (2014). Appointments, pay and performance in U.K. boardrooms by gender. The Economic Journal, 124(574), 109–128.
Haslam, S.A., Ryan, M.K., Kulich, C., Trojanowski, G., & Atkins, C. (2010). Investing with Prejudice: The Relationship between Women's Presence on Company Boards and Objective and Subjective Measures of Company Performance, British Journal of Management, 21(2), 484–497.
Hambrick, D.C., & Mason, P.A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9(2), 193-206.
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Islam, M. (2018). Board diversity and firm's financial performance: A study on DSE listed pharmaceutical companies in Bangladesh. IOSR Journal of Business and Management, 20(12), 26-32.
Ionascu, M., Ionascu, I., Sacarin, M., & Minu, M. (2018). Women on boards and financial performance: evidence from a European emerging market. Sustainability, 10(5), 1644, 1-18. https://doi.org/10.3390/su10051644
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Luoma, P., & Goodstein, J. (1999). Stakeholders and corporate boards: Institutional influences on board composition and structure. Academy of Management Journal, 42(5), 553–563.
Munira, S. (2020). Gender diversity in the boardroom and the firm financial performance of DSE listed companies in Bangladesh. Global Disclosure of Economics and Business, 9(2), 89-96. https://doi.org/10.18034/gdeb.v9i2.513.
Meca, G., E., Sánchez, G., María, I., & Ferrero, M., J. (2015). Board diversity and its effects on bank performance: An international analysis. Journal of Banking & Finance, Elsevier, 53(C), 202-214.
Nguyen, T., Locke, S., & Reddy, K. (2015). Does boardroom gender diversity matter? Evidence from a transitional economy. International Review of Economics and Finance, 37, 184-202. https://doi.org/10.1016/j.iref.2014.11.022
Nakatani, R. (2019). Firm performance and corporate finance in New Zealand. Applied Economics Letters, 26(13), 1118-1124.
Nunes, M. P. J., Serrasqueiro, Z. M., & Sequeira, T. N. (2009). Profitability in Portuguese service industries: A panel data approach. Service Industries Journal, 29(5), 693-707.
Pratheepan, T. (2014). A panel data analysis of profitability determinants: Empirical results from Sri Lankan manufacturing companies. International Journal of Economics, Commerce and Management, 2(12), 1-9.
Rezina, S., Ashraf, A., & Khan, M. A. (2020). An inferential study on the profitability determinants of the cement industry in Bangladesh. Asian Finance and Banking Review, 4(2), 8-21. https://doi.org/10.46281/asfbr.v4i2.684
Sá, T. M., Neves, E. D., & Góis C. G. (2017). The influence of corporate governance on changes in risk following the global financial crisis: evidence from the Portuguese stock market. Journal of Management & Governance, Springer; Accademia Italiana di Economia Aziendale (AIDEA), 21(4), 841-878.
Ujunwa, A. (2012). Board characteristics and the financial performance of Nigerian quoted firms. Corporate Governance (Bingley). 12(5), 656-674. https://doi.org/10.1108/14720701211275587
Vafaei, A., Ahmed, K., & Mather, P. (2015), Board diversity and financial performance in the top 500 Australian firms. Australian Accounting Review, 75(25), 414–427.
Asimakopoulus, I., Samitas, A., & Papadogonas T. (2009). Firm-specific and economy wide determinants of firm profitability: Greek evidence using panel data. Managerial Finance, 35(11), 930-939.
Blažková, I., & Dvouletý, O. (2019). Investigating the differences in entrepreneurial success through the firm-specific factors: Microeconomic evidence from the Czech food industry. Journal of Entrepreneurship in Emerging Economies, 11(2), 154-176.
Brown, D. A. H., Brown, D. L., & Anastasopoulos, V. (2002). Women on boards: Not just the right thing…but the "bright" thing. The Conference Board of Canada. Retrieved from https://www.worldcat.org/title/women-on-boards-not-just-the-right-thing-but-the-bright-thing/oclc/832335679?referer=di&ht=edition&fbclid=IwAR0QKUGiVZBvZmvHa6mIOSpVKRBinBcotlCsqftFThTq4NJ6PoCImIdLhak
Carter, D.A., Simkins, B.J., & Simpson, W.G. (2003). Corporate governance, board diversity, and firm value. Finance Review, 38(1), 33–53.
Coad, A., Segarra A., & Teruel M. (2013). Like milk or wine: Does firm performance improve with age? Structural Change and Economic Dynamics, 24(1), 173-189.
Erhardt, N.L., Werbel, J.D., & Shrader, C.B. (2003). Board of director diversity and firm financial performance. Corp. Gov. Int. Rev., 11(2), 102–111.
Goddard, J., Tavakoli, M., John, O., & Wilson, S. (2005). Determinants of profitability in European manufacturing and services: evidence from a dynamic panel model. Applied Financial Economics, 15(18), 1269-1282. https://doi.org/10.1080/09603100500387139
Gregory, I. S., Main, B. G. M., & O'Reilly, C. A. (2014). Appointments, pay and performance in U.K. boardrooms by gender. The Economic Journal, 124(574), 109–128.
Haslam, S.A., Ryan, M.K., Kulich, C., Trojanowski, G., & Atkins, C. (2010). Investing with Prejudice: The Relationship between Women's Presence on Company Boards and Objective and Subjective Measures of Company Performance, British Journal of Management, 21(2), 484–497.
Hambrick, D.C., & Mason, P.A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9(2), 193-206.
Huse, M. (2007). Boards, Governance and Value Creation: The Human Side of Corporate Governance. USA: Wiley.
Islam, M. (2018). Board diversity and firm's financial performance: A study on DSE listed pharmaceutical companies in Bangladesh. IOSR Journal of Business and Management, 20(12), 26-32.
Ionascu, M., Ionascu, I., Sacarin, M., & Minu, M. (2018). Women on boards and financial performance: evidence from a European emerging market. Sustainability, 10(5), 1644, 1-18. https://doi.org/10.3390/su10051644
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360.
Joy, L., Harvey, M., Wagner, Narayanan, S (2008). The Bottom Line: Corporate Performance and Women's Representation on Boards. Catalyst. Retrieved from https://www.catalyst.org/research/the-bottom-line-corporate-performance-and-womens-representation-on-boards/?fbclid=IwAR2KJG8Qzm1CJUGrXF59rbiF_wfKSUbyescxsfXvzUuccKBWkeuhpbHzGEo
Kalsie, A., & Shrivastav, S. (2016). Analysis of board size and firm performance: evidence from NSE companies using panel data approach. Indian Journal of Corporate Governance, 9(2), 148-172. https://doi.org/10.1177/0974686216666456
Lee, L. E., Marshall, R., Rallis, D., & Moscardi, M. (2015). Women on boards: global trends in gender diversity on corporate boards. MSCI ESG Research, Inc. Retrieved from https://www.msci.com/documents/10199/04b6f646-d638-4878-9c61-4eb91748a82b
Luoma, P., & Goodstein, J. (1999). Stakeholders and corporate boards: Institutional influences on board composition and structure. Academy of Management Journal, 42(5), 553–563.
Munira, S. (2020). Gender diversity in the boardroom and the firm financial performance of DSE listed companies in Bangladesh. Global Disclosure of Economics and Business, 9(2), 89-96. https://doi.org/10.18034/gdeb.v9i2.513.
Meca, G., E., Sánchez, G., María, I., & Ferrero, M., J. (2015). Board diversity and its effects on bank performance: An international analysis. Journal of Banking & Finance, Elsevier, 53(C), 202-214.
Nguyen, T., Locke, S., & Reddy, K. (2015). Does boardroom gender diversity matter? Evidence from a transitional economy. International Review of Economics and Finance, 37, 184-202. https://doi.org/10.1016/j.iref.2014.11.022
Nakatani, R. (2019). Firm performance and corporate finance in New Zealand. Applied Economics Letters, 26(13), 1118-1124.
Nunes, M. P. J., Serrasqueiro, Z. M., & Sequeira, T. N. (2009). Profitability in Portuguese service industries: A panel data approach. Service Industries Journal, 29(5), 693-707.
Pratheepan, T. (2014). A panel data analysis of profitability determinants: Empirical results from Sri Lankan manufacturing companies. International Journal of Economics, Commerce and Management, 2(12), 1-9.
Rezina, S., Ashraf, A., & Khan, M. A. (2020). An inferential study on the profitability determinants of the cement industry in Bangladesh. Asian Finance and Banking Review, 4(2), 8-21. https://doi.org/10.46281/asfbr.v4i2.684
Sá, T. M., Neves, E. D., & Góis C. G. (2017). The influence of corporate governance on changes in risk following the global financial crisis: evidence from the Portuguese stock market. Journal of Management & Governance, Springer; Accademia Italiana di Economia Aziendale (AIDEA), 21(4), 841-878.
Ujunwa, A. (2012). Board characteristics and the financial performance of Nigerian quoted firms. Corporate Governance (Bingley). 12(5), 656-674. https://doi.org/10.1108/14720701211275587
Vafaei, A., Ahmed, K., & Mather, P. (2015), Board diversity and financial performance in the top 500 Australian firms. Australian Accounting Review, 75(25), 414–427.
Published
2022-01-01
How to Cite
Fahad, H. A., Mahmud, I., & Rahman, A. N. (2022). GENDER DIVERSITY ON BOARD AND ITS RELEVANCE TO FIRM PERFORMANCE: A STUDY ON PHARMACEUTICAL INDUSTRY OF BANGLADESH. Asian Finance & Banking Review, 6(1), 1-15. https://doi.org/10.46281/asfbr.v6i1.1520
Section
Research Paper/Theoretical Paper/Review Paper/Short Communication Paper
Copyright (c) 2022 Hossain Ahmmed Fahad, Imran Mahmud, Atkia Nabiha Rahman
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