Gender diversity and firm performance: evidence from Malaysia boardrooms

This study contributes to the literatures on the influence of Malaysia’s board of directors’ gender diversification requirement (soft law) on women’s participation in such positions. In addition, it examines the effect of gender diversification requirement of the board of directors’ on firm performance, board size, and board member characteristics. The empirical analysis was based on data taken from the Orbis (Bureau van Dijk) database and annual reports posted on the Bursa Malaysia Stock market for 452 large and very large publicly listed firms for the period 2007–2016. The requirement significantly increased female participation in the board of directors, although the 30% set target was not achieved. The findings show that gender diversification of the board of directors has a negative effect on firm size (total revenue and total asset) in only higher technology intensive manufacturing sector and firms in good competition sectors; it has no effect on other sectors. This negative effect finding is consistent with social identity theory. Gender diversification of the board of directors has no impact on firm efficiency (profit margin, Return on Equity (ROE), Tobin’s Q). This result does not support resource dependency and agency theory, or social identity theory. The gender diversity requirement adversely affects the board directors’ level of experience and age with no effect on board members’ size and educational qualifications. The findings are robust across different econometrics models [fixed effect and Instrumental variables (IV)] that deal with endogeneity issues, and alternative firm size and firm efficiency measurements.All communities understood the role of females in economic development. In many countries, Non-Governmental and Governmental organizations are working on gender diversification. This study identifies the effect of gender diversification requirement of Malaysian board of directors on firm performance. This requirement increases female participation in the board of directors. Gender’s diversification of the directors had a negative effect on firm size in only higher technology intensive manufacturing sector and firms in good competition sectors; it has no effect on other sectors. In addition, board of directors’ gender diversity has no impact on firm efficiency measurement.