Impact of female directors on Chinese Companies’ performance
Thesis supervisor:
Dr. C.K.D.(Charles) Adjasi
Impact of female directors on Chinese Companies’ performance
Abstract
In recent years, the role of women in enterprises’ management is increasingly important. This article studies the impact of the participation of female directors on companies performance, by using panel data from over 700 Chinese listed companies in the span of 2009- 2018. The findings demonstrate that either women on board’s presence or females on board’s percentage exert no significant impacts upon company performance, while both employing women as chairpersons and possessing more female independent directors have an insignificant impact on company performance, indicating that Chinese board is still male-dominated. Furthermore, this article finds that the effect of gender diversity on firm performance is different and conditional across 5 industries that are included in the sample. Women on board’s presence exerts significant and negative effects upon firm performance in the business industry; meanwhile recruiting women as chairpersons is of positive and significant association with the performance of company in the industry of real estate field. Besides, companies with better educated boards within the comprehensive sector are having more satisfactory performance on condition that chairpersons are women, and with better independence, company performance is positively influenced by having women chairpersons in the public services and facilities sector. Finally, this paper suggests that hiring new women on board should be based on the real superior skills of women, and women should have the same opportunities as men on the board.
Introduction
Can board diversity lead to a better company performance? There are more CEOs who recognize that the board can be expanded by not only recruiting people with different ages, races, and educational background but also the diversifying genders. In recent years, the role of women in enterprises’ management is increasingly important. According to the corresponding data, the percentage of global boards (MSCI, ACWI) with at least three females in 2016 (27.4%) had an increase to 31.5% in 2017 (Eastman, 2017). From global perspectives, European firms are made up of the most women on board, and on average, 23% of the board members are females. Moreover, European countries have mandated the quotas of female directors in the past few years, which require the proportion of female directors on board in state-owned and listed companies have to be at least 30% to 40% depending on countries. In contrast, there is no relevant requirement in China. According to a survey of Deloitte on female directors of listed companies in China in 2019, China’s boards have about 11% of female directors on average, which is lower than half of that percentage in Europe. However, can the participation of female directors really help to gain improvement in company performance?
Aiming to deal with this question, there are a number of researches which have been exploring the connection between women representation on board and company performance. Nevertheless, these papers’ conclusions feature inclusion. According to the research conducted by Carter, Simpkins, and Simpson (2003), recruiting more female directors affects company's performance positively and significantly. Besides, as the sizes of the company and board increase, the percentage of women on board is also on the increases. On the contrary, Adams and Ferreira (2009) discovered the connection of gender diversity on board and firm performance in virtue of U.S. companies’ panel data from 1996 to 2003. These statements made the argument that excessive monitoring on board brought by the participation of female directors was able to cut down the value of shareholders. In addition, Dale-Olsen, Schone, and Verber (2013) revealed the relationship between the quota reform of Norwegian boards in 2003 and firm performance could be ignored. Besides, newly employed female directors derived from the reform do not have more resources and perspectives, compared to male directors.
Amidst the backdrop, this article is targeting to examine the effect of female directors represented by the proportion of female directors on board, the share of female independent directors and women chairpersons on Chinese companies’ performance (on the measurement by return on assets), and further explores these impacts on companies in different industries respectively. In virtue of applying a panel data of over 700 listed companies in China for the span of 2009-2018, the evidence has been found that the influence of either the presence of women on board or having more female directors on firm performance is insignificant. Also, neither women as chairpersons nor the proportion of female independent directors can affect companies' performance significantly. Nevertheless, this paper reveals the findings that there is a positive and significant relationship of having women chairpersons on firm performance in the real estate industry, and employing women on board affects firm performance negatively and significantly in the business industry.
This paper makes some contribution to the related literature in several aspects. First of all, this literature explores the impact of the participation of female directors on companies’ performance in China rather than other developed countries. Secondly, the thesis examines the effect on the basis of different industry and separate the female directors into independent directors and women chairpersons. Last but not least, relatively complete latest panel data are employed in this paper; and some other similar literature employs one-year data only or old data from previous years.
The rest of this article is divided in several parts. The second part presents the background of Chinese corporate governance and a brief introduction of the board structure in China. And then, the third part summarizes some literature on gender diversity on board and companies' performance, and draw hypotheses. The fourth part shows the data and methodology, and then the fifth part explains the results of the empirical analysis. The final section offers the conclusion of this research.
Background on corporate governance and board structure in China
Stock Exchanges, and Company Security Laws launched successively. This framework contains the board of directors, the board of supervisors, and annual shareholder meetings, which means the modern enterprise system is establishing. Thirdly, from 2000 to present, the revision of corporate laws and corporate governance’s code for listed companies were launched. These new rules aimed to improve the quality of disclosure and transparency, and these standards started to converge to international standards, such as the quota of independent directors.
At present, a two-tier board structure has formed in China, containing a board of directors and a board of supervisors. As for directors’ board, according to Chinese "corporation law", listed companies should have 5- 19 directors on board, and the share of independent directors should be more than one-third; directors’ board in China includes executive directors, which include shareholders and employees, and non-executive directors containing independent directors and external non-independent directors; shareholders who hold more than 3% of the company's shares individually or collectively may nominate directors; directors are elected by shareholders' meetings; board of directors in the state-owned enterprise must have employees' representatives. Directors are responsible for holding meetings, carrying out the resolutions of shareholders, making important operational and financial decisions, and evaluating the firm’s senior management (Jiang and Kim, 2015). In terms of the supervisory board, the minimum number of supervisors in a China’s listed company is three and the main tasks of them are supervising and evaluating board members and top managers (Jiang and Kim, 2015).
Kim (2015)'s data, the reform also decreased the ownership concentration, which is a problem mentioned above. Third, the political connection in China is critical, so many companies want to be consistent with the government so as to build their political networks (Lin et al., 2015). And, improving social welfare is one of the government's goals, so many firms join in corporate social responsibility (CSR) to support the government and increase their firm value. Furthermore, engaging in CSR is also a way of corporate governance, which means managers may put more effort into work because they should be responsible to all of the stakeholders of firms socially and ethically rather than be pushed by mandated rules of firms (Jiang and Kim, 2015).
Current Chinese corporate governance still exists some issues. For instance, first of all, the independent directors in China become “vase” directors. One of the rules of independent directors is monitoring large shareholders, and the nomination of independent director candidates for listed companies in China mainly comes from large shareholders. Therefore, the study of Jiang and Kim (2015) indicates that these controlling shareholders always minimize the number of independent directors. Besides, Zhu et al. (2016) argued that most corporates put all of the independent directors at the bottom of their board lists. Second, the legal environment in China is weak. Kato and Long (2006) indicated that Chinese legal rules is hard to protect minority shareholders and implement the existing laws and regulations efficiently. But Jiang and Kim (2015) show that the Chinese legal environment is improving and could be strong in the near future.
Literature review and hypotheses
Following the trend of previous papers, the review is done according to three categories. The first one is the group of studies that show a positive link between the participation of female directors and corporate performance, the second one is the group of papers that find evidence that the participation of women on board decreases firm performance, and the last part is the studies indicating that the effect of having women directors on corporate performance is insignificant.
and there are both ethical and economic arguments to support the compulsory quota of female directors. However, they fail to consider the cultural and institutional factors and only analyze listed companies. Therefore, this finding may be not suitable for other countries and unlisted companies. The article of Campbell and Mínguez-Vera (2008) shows the same results by using the data in Spain. They find that having more than one female directors on board is uncorrelated to performance of company, but the correlation between the ratio of women to men on boards and firm value is positive and significant. Furthermore, they argue that board with mixed gender can create the competitive advantage of the company because gender diversity means more characteristics and perspectives, which can enhance the company's creativity and innovation and increase the efficiency of problem-solving. They also suggest that Spanish companies should pay more attention to find an optimal combination of women and men on board instead of recruiting women because of social pressure. Moreover, there are some papers show that the positive link mentioned above is conditional. In the findings of Dezso and Ross (2012), the participation of female on the senior management teams only improves the performance of firms, whose strategy is mainly related to innovation. They use 15- year panel data from senior management teams of S&P’s 1,500 companies and state that the participation of women makes top management team gain more informational and social diversity advantages and motivates women in middle management, improving top and middle management task performance and thus having better firm performance. In line with this finding, Chen, Leung, and Evans (2018) find evidence that companies with more women on boards are more successful in innovation, leading to better firm performance. Furthermore, they argue that the positive impact of female board representations on companies’ performance only works for companies, which are more innovative and creative. The literature indicates that the more excellent monitoring carried by recruiting more women on board can weaken agency problems and push managers who dislike break standard routine and the harmful effect of innovation failures to focus on innovative and value-creating projects. In addition, another study in the U.S. finds that the participation of female directors is only significantly positive related to firm performance during the Great Recession of 2008 (Papangkorn, Chatjuthamard, Jiraporn, and Chueykamhang, 2019). Authors argue that firms need tougher monitoring and diversified perspectives during the time of crisis than normal time, therefore the new ideas and perspectives brought by women are highlighted at that time.
shareholder rights because additional monitoring only works for these companies. In the case of Norwegian firms, by using a panel of 248 listed firms between 2001 and 2009, Ahern and Dittmar (2012) find that the mandatory quota of women on board in Norway makes the stock price drop dramatically at the time of announcement and Tobin’s Q decrease over the following years. They represent that characters like education level, age and professional experience will improve the ability of directors to monitor and advise, but the new female directors due to the quota are younger, more highly educated and have less CEO experience, making firms have higher leverage, bear more acquisitions and have fewer cash holdings. However, this paper only involves 248 publicly companies, which may not represent all. Besides, the findings of Ahern and Dittmar, BøHREN, and STRøM (2010) state that firms with boards that have no employee directors and low level of gender diversity may perform better than other firms by using the data in Norway as well. They argue that too much independence carried by female directors reduces the information production of the company, break the company's advisory role and may reduce the monitoring function. As for the case in Asia, using the data of period over 2006-2010 in Sri Lanka, Locke (2013) finds the evidence that there is a significant negative relationship between the percentage of female directors on board and firm value along with increasing agency cost in the firm. The literature notes that gender diversity in board may lead to communication problems and boardroom conflicts because of more perspectives and boards with more women need more time and effort to make decisions.
the relationship between the diversity of the board and firm financial performance seems to be endogenous. They explain that this link may be different at different times and in different environments, and the results may cancel out and have no effect by analyzing several companies over time. An example given is that the innovation and creativity brought by female directors could be eliminated by internal conflicts due to female directors. Therefore, they suggest that the decision making related to employing women on board should not be based on firm financial performance. In case of developing country in Asia, the findings of Unite, Sullivan, and Shi (2019) show that there is no significant link between women's participation on board and firm performance in either long term or short term through using a sample of over 200 companies in the period of 2003- 2014. They find that the competency levels of women and men leaders are comparable, hence containing female directors has no discernible influence on firm performance. This study also recommends that compared to consider the better performance brought by greater board gender diversity, policymakers should pay more attention to the social equality, business reputation and ethical grounds that are from gender diversity.
Hypotheses
Based on previous literature, on the one hand, some studies find that mixed groups may have different perspectives due to differences in skills and experience, handling complicated problems by providing additional creative and innovative solutions. Additionally, female directors can deal with the relationships with stakeholders, such as customers, organizations, suppliers and so on, more appropriately, and women are more conservative and more risk-averse when they are making decisions. Furthermore, boards with more female directors also have greater independence and monitoring (Martínez and Rambaud, 2019). On the other hands, some literature indicate that too much monitoring caused by the participation of female directors may decrease firms value; female directors who are mandated by law are younger and have fewer experiences, which lead them to make immature decisions; different perspectives caused by women on board can also lead to communication problems and internal conflicts (Adams and Ferreira, 2009; Ahern and Dittmar, 2012; Locke, 2013). Although the relationship between board gender diversity and firm performance is inconclusive, this paper argues that the positive aspect caused by female directors can outweigh the negative aspects. Therefore, this paper predicts that having more women on board is related to better firm performance.
Hypothesis 1: There is a positive correlation between the participation of female directors and companies' performance in China.
talents so as to achieve a managerial position in the male-dominated business world, therefore firms with women chairpersons may have better performance (Peni, 2014). In addition, Hu and Zhou (2016) argue that women chairpersons have more decisive speaking rights, which may highlight the positive aspects caused by female chairpersons. However, China is a highly male-dominated society, and few firms have women chairpersons. In a sample of over 2,000 firms listed companies in Shanghai and Shenzhen Stock Exchanges over the period of 1999-2011, there are only 4.1% of board chairs are women (Liu, Wei, and Xie, 2014). In addition, the percentage of firms with women chairpersons is also about 4% in 2013 over 1,024 A-share listed companies in Shanghai and Shenzhen Stock Exchanges (Hu and Zhou, 2016). Therefore, although chairpersons may have superior skills or create more value for companies, this paper predicts that there is no relationship between women chairpersons and corporates performance because of the minority of female chairpersons.
Hypothesis 2: There is no link between women chairpersons and firm performance in China.
If there are more independent female directors, will firms have better performance? As for this question, Sanan (2016) finds evidence that there is a positive relationship between the percentage of independent women directors and firms' performance measured by ROA and Tobin's Q by using the data of 148 listed companies in India. He argues that more female independent directors can improve the independence of board and provide tougher monitoring, which enhances firm performance. Moreover, Terjesen, Couto, and Francisco (2015) find that the greater share of female and independent directors is positively correlated to better firm performance, but gender diversity board contributes more to firm performance than a board with independent directors do through analyzing 3,876 companies in 47 countries in 2010. Therefore, if the independent directors are women, firms may have better performance. However, as this paper mentioned before, independent directors in China become “vase directors and most companies list all independent directors as the bottom of their board lists. Therefore, this paper predicts that more female independent directors maybe not related to better performance because independent directors in China may not function well.
Hypothesis 3: The share of female independent directors has no influence on Chinese firm
performance.
these skills, female directors may do better in industries, which need more communication with clients or customers, such as the service industry. In addition, women may understand the needs of women better than men do, thus female directors may perform better on industries focusing on mainly providing services for women. Therefore, due to the different features of each sector and the unique skills of female, this paper predicts that the impact of gender diversity board measured by the percentage of women on board, the share of female independent directors and women as chairpersons, on firm performance is different in industries.
Hypothesis 4: The link between gender diversity board and firm performance is different in different industries in China.
Data and methodology
SampleThe initial financial and relative data on board in Chinese listed firms are collected on the Chinese Securities Market and Accounting Research (CSMAR) organizations and required board composition data are calculated manually. The original sample of this paper includes all A-share listed companies in Shanghai Stock Exchanges between 2009 and 2018. Inspired by earlier literature of Lin and Ning (2018), Hu and Zhou (2016), this paper screens the initial sample based on three standards in order to ensure the feasibility of empirical research and effectiveness. First, the sample excludes companies in the financial industry because this industry has special requirements for the content of its internal control evaluation report. Hence, in order to maintain the universality of the research conclusion, these companies should be excluded. Second, the sample excludes S.T. listed companies because their data are unstable and unrepresentative. Third, the sample excludes companies with a serious lack of data. Hence, 742 firms during the ten years are included in the ultimate sample, and there are 7,420 firm-year observations in total.
Dependent variables
share prices may not reflect their fundamental values (Liu, Wei, and Xie, 2014). In this paper, return on assets (ROA) is derived from net income divided by total assets.
Independent variables
Inspired by the study of Hu and Zhou (2016), this paper uses four variables to proxy the participation of female directors. First, it is a dummy variable, Women, which is equal to 1 when there is more than one female directors and 0 otherwise. The second one is the proportion of female directors on board, Prowb, which is captured as the number of women on board over the total number of board members. Third, it is a dummy variable as well, Wchair, which will be equal to 1 when the chairperson or vice-chairperson is female and zero otherwise. The last one is the share of independent female directors, Proinw, calculating as the number of independent female directors over the total number of independent directors.
Control variables
Motivated by past studies (Hu and Zhou, 2016; Lin and Ning, 2018; Liu, Wei, and Xie, 2014; Gordini and Rancati, 2016), this paper employs eight control variables. First of all, it is
Boardsize, which is the logarithm of the total number of board members. The second control
variable is the ratio of the total number of independent directors to the number of board members, independence. The next one is the average age of the whole board members, Age of
Board Members. Fourthly, it is the average education level of total board members, AverEdu.
Table 1. Description of the variables Variables Description
ROA Return on assets calculated as net income divided by total assets
Women Dummy variable equals to 1 when there are at least on women on board, 0 otherwise
Prowb The number of female directors divided by the total number of directors
Wchair Dummy variable equals to 1 when the chairpersons or vice-chairpersons are women, 0 otherwise
Proinw The number of independent female directors divided by the total number of independent directors
Boardsize Calculated as the natural logarithm of the total number of board members
Independence The total number of independent directors on board divided by the total number of board members
Age of Board Members
Average age of total board members
AverEdu The total educational level of board members divided by the number of members Size Calculated as the natural logarithm of total assets
FirmAge The number of months when companies existed divided by 12 Leverage Calculated as the ratio of total debt to total equity
Lcode Location dummy variables Table 2. Descriptive statistics from sample
Variables Observations Mean SD Minimum Maximum
ROA 7,420 3.43% 0.135 -1.495 7.696 Women 7,420 70% 0.458 0 1 Prowb 7,420 13.9% 0.135 0 0.857 Wchair 7,420 9.18% 0.289 0 1 Proinw 7,420 18.46% 0.232 0 1 Boardsize 7,420 2.19 0.204 1.099 2.89 Independence 7,420 37.18% 0.057 0.091 0.8 Age of Board Members 7,420 51.72 3.602 39 64 AverEdu 7,420 3.43 0.613 1 6 Size 7,420 9.82 0.657 6.696 12.386 Firm Age 7.420 18.28 4.927 1 37 Leverage 7,241 35.29% 0.216 0.003 0.943
studies in China, such as 65.4% in the study of Lin and Ning (2018). In addition, in the sample, the mean value of the percentage of women on board is 13.9%, while the minimum value is 0 and the maximum one is 85.7%. Overall, even though most companies employ female directors, the share of women on board is still low, which indicates that "the glass ceiling” for women still exists in China's firms. Additionally, on average, there are 9.18% of companies have women chairpersons or vice-chairpersons, which is higher than the value in some other studies in China. For instance, Liu, Wei, and Xie (2014), Hu and Zhou (2016) report the value of 4.1% and 5% respectively. One of the reasons is that this paper uses both women chairpersons and women vice-chairpersons, but the other studies use chairpersons only. In terms of female independent directors, this paper finds the mean value of the ratio of women independent directors to total independent directors is 18.46%, which implies that even in independent board the share of women is still low. As for control variables in this paper, the mean value of
Boardsize is 2.19, implying that an average board has about 9 or 10 members. Moreover, on
average 37.18% of board members are independent directors, which in line with the quota of one-third of independent directors on board and also implies that large shareholders always maintain the minimum number of independent directors so as to avoid tougher monitoring. In addition, the mean values of Age of Board Members and AverEdu are 51.72 and 3.43, indicating that board members in the sample are on average 52 years old and most of members have college or master’s degree. The average firm size and age are 9.82 and 18.28 respectively, which also in line with some Chinese researches. Additionally, the mean value of leverage is 35.29%, and the minimum and maximum value are 0.003 and 0.943 respectively, showing that some firms almost have no debt and some firms are almost fully in debt.
Table 3 Distribution of women on board in industries
Industry Num of companies Women Prowb Wchair Proinw
Industrial 447 68.68% 13.17% 6.06% 19.44%
Public services and facilities
109 69.82% 12.84% 9.36% 16.82%
Real estate 83 66.63% 14.22% 14.58% 13.84%
Business 75 80.93% 18.96% 20.8% 20.24%
Comprehensive sectors 28 72.5% 15.27% 11.07% 18.08%
Table 4 Distribution of women on board in locations
Location group Num of companies Women Prowb Wchair Proinw
1 512 69.03% 13.64% 9.95% 16.85%
2 155 71.62% 13.47% 6.59% 20.85%
3 113 72.37% 15.74% 9.08% 22.82%
Methodology
Following Liu, Wei, and Xie (2014) and Gordini, Rancati (2016), this paper employs a panel data analysis providing a dependable picture compared to cross-sectional analysis and eliminates any unobservable heterogeneity that may exist in the sample. This paper incorporates the Hausman test so as to choose the better method between the fixed-effect and the random-effect estimations. The null hypothesis of this test is that the error term is uncorrelated to the explanatory variables. The random effects will be both inconsistently and biased, and the fixed effects estimations would be preferred, when the null hypothesis is rejected. After running the Hausman test, the null hypothesis is rejected at the significant level of 1%, hence the fixed effect estimation is employed, which can also deal with endogeneity problems. In addition, motivated by some past studies (Liu, Wei, and Xie, 2014; Hu and Zhou, 2016), this paper use panel data with ordinary least squares (OLS) estimator to carry out the F.E. estimation.
Based on the study of Hu and Zhou (2016), to test hypothesis 1, the following model 1 and 2 are run:
(1) ROA=i +1 Boardsizeit + 2 Independenceit +3 AverAgeit +4 AverEduit +5 Sizeit+6
Ageit + 7 Leverageit +8 Lcodeit + 9 Womenit + λt + it
(2) ROA=i +1 Boardsizeit + 2 Independenceit +3 AverAgeit +4 AverEduit +5 Sizeit+6
Ageit +7 Leverageit +8 Lcodeit + 9 Prowbit + λt + it
(3) ROA=i +1 Boardsizeit + 2 Independenceit +3 AverAgeit +4 AverEduit +5 Sizeit+6
Ageit +7 Leverageit +8 Lcodeit + 9 Wchairit + λt+ it
For hypothesis 3, the following model 4 is run:
(4) ROA=i +1 Boardsizeit + 2 Independenceit +3 AverAgeit +4 AverEduit +5 Sizeit+6
Ageit +7 Leverageit +8 Lcodeit+ 9 Proinwit +λt+ it
Extended the study of Hu and Zhou (2016), this paper adds hypothesis 4 to test whether the influence of gender diversity board on firms' performance will be different in five industries included in the sample. Hence, for hypothesis 4, this paper runs the 4 models mentioned above in each industry separately.
Results
perspectives brought by employing more female directors may be eliminated by the internal conflicts because of gender diversity board and inefficient decision making caused by more views and opinions from women.
Column (3) illustrates the relationships found between women as chairpersons (Wchair) and ROA, showing that the former has a negative impact on the latter, but it is insignificant, confirming H2. It implies that employing women as chairpersons or vice-chairpersons will not improve firm performance in the sample. A possible reason for this is that women as chairpersons may have less CEO or top management experiences than male chairpersons have, thereby women chairpersons cannot improve firm performance in short-run (Ahern and Dittmar, 2012). Boards in China are still male-dominated, thus the probability of recruiting women as chairpersons is relatively small. Compared to chairmen who have many years of management experience, newly recruited women chairpersons may have no superior performance and may not improve firm performance. Furthermore, another possible reason is that the Chinese board is still traditional “old boys club” mentioned above in which board members may have chosen to join in the traditional club, thus inhibiting any special ability of board members with uncommon background like women chairpersons (Rose, 2007). Thereby, the positive influence of women chairpersons on firm performance will not be realized. Finally, women chairpersons are risk-averse and tend to avoid losses (Peni, 2014). There is a trade-off between risk and return in the finance area, thus firms with women chairpersons are willing to take less risk thereby they will not gain a better return.
independent directors given the low variation of the independent ratio (Jiang and Kim, 2015). Moreover, the rankings of independent directors are positively related to firm value, however, in China, most of companies list all the independent directors at the bottom of the director list (Zhu, Ye, Tucker, and Chan, 2016). Therefore, no matter they are male or female, independent directors in China do not have much speaking right and may have no effect on firm performance. Regarding the control variables, the four initial regressions have the same results. The significant control variables with respect to firm performance are Size, Firm Age, and
Leverage.
Further analysis is to control for industries however reveals some interesting gender effects, and the results are shown in table 6-9. Table 6 shows that having more than one women on board is negatively related to ROA at a significant level of 10% in the business industry, implying that women representation may decrease firm performance in the business sector. One possible reason for this is that newly recruited women on board are more educated and have less experience, leading firms to increase leverage, undertake more acquisitions and reduce cash holdings (Ahern and Dittmar, 2012). Furthermore, one feature of companies in the business industry in China is having short operating cycle and fast capital turnover (Tao, Wei, and Chun, 2015). Therefore, high leverage and less cash holding caused by women representation on board may decrease firms performance in the business sector. According to table 7, there is a positive effect of women chairpersons on ROA in real estate industry at a significant level of 10%, implying that women as chairpersons may positively impact firm performance in the real estate sector. There is some possible interpretation for this. First of all, women chairpersons have better communication skills and do better in group problem-solving and decision- making tasks (Peni, 2014). In Chinese real estate industry, operating activities such as land acquisition, demolition, land development, land transfer and so on are necessary, and a lot of negotiation and coordination will inevitably occur in these processes (Ye, 2014). Hence, the better communication skills that women chairpersons have may help companies in the real estate sector to increase performance. Secondly, women chairpersons can understand consumers' needs and behaviours better, thus companies with women chairpersons may have a competitive advantage (Peni, 2014). As a populous country, the demand of houses in China is enormous, and having own houses are especially important and need to take many factors into account, thus understanding what customers want is necessary (Ye, 2014). Therefore, the competitive advantage created by women chairpersons may be especially obvious in the real estate industry in China.
Table 5 The effects of board gender diversity on firm performance
(1) (2) (3) (4)
VARIABLES ROA ROA ROA ROA
Size 0.0627*** 0.0628*** 0.0626*** 0.0627***
(0.0191) (0.0191) (0.0192) (0.0192)
Age of Board Members 4.91e-05 8.73e-05 3.51e-05 4.03e-05
(0.000937) (0.000945) (0.000928) (0.000930) Boardsize -0.0305 -0.0292 -0.0300 -0.0296 (0.0344) (0.0326) (0.0338) (0.0335) Independence -0.0200 -0.0207 -0.0197 -0.0190 (0.0291) (0.0297) (0.0291) (0.0288) AverEdu 0.00111 0.00118 0.00111 0.00114 (0.00258) (0.00254) (0.00258) (0.00257) FirmAge -0.00334*** -0.00342*** -0.00329*** -0.00333*** (0.000724) (0.000691) (0.000753) (0.000729) Leverage -0.170*** -0.170*** -0.170*** -0.170*** (0.0161) (0.0159) (0.0161) (0.0161) Women 0.00241 (0.00339) Prowb 0.0150 (0.0298) Wchair -0.000822 (0.00573) Proinw 0.00311 (0.00701) 2.Lcode -0.000965 -0.000915 -0.000617 -0.000774 (0.0154) (0.0153) (0.0154) (0.0153) 3.Lcode -0.0405 -0.0408 -0.0403 -0.0404 (0.0388) (0.0387) (0.0388) (0.0388) Constant -0.390** -0.394** -0.388** -0.390** (0.194) (0.187) (0.195) (0.193) Observations 7,241 7,241 7,241 7,241 R-squared 0.035 0.035 0.035 0.035 Number of company 742 742 742 742
Table 6 The impact of the presence of women on board on firm performance in five industries Industrial Public services
and facilities
Real estate Business Comprehensive sector
VARIABLES ROA ROA ROA ROA ROA
Size 0.0733*** 0.133* 0.0113 0.0716*** -0.0646
(0.0202) (0.0752) (0.0216) (0.0224) (0.0939)
Age of Board Members 0.000971 -0.00477 -0.00170 0.00126 -0.00181
(0.000877) (0.00369) (0.00104) (0.00116) (0.00168) Boardsize 0.00391 0.0431 -0.310 -0.0306 -0.0689 (0.0129) (0.0325) (0.255) (0.0195) (0.0405) Independence 0.0110 -0.0520 -0.239 -0.0124 0.0649 (0.0324) (0.0574) (0.202) (0.0709) (0.104) AverEdu 0.00360 -0.00761 -0.0193 0.00224 0.0156 (0.00327) (0.00586) (0.0193) (0.00907) (0.0146) FirmAge -0.00341*** -0.00659** -0.00109 -0.00479*** -0.00216 (0.000925) (0.00271) (0.00148) (0.00138) (0.00320) Leverage -0.195*** -0.135*** -0.105* -0.149*** -0.0789 (0.0152) (0.0422) (0.0596) (0.0440) (0.0623) Women 0.00114 -0.00371 0.0244 -0.0119* -0.00362 (0.00306) (0.00857) (0.0224) (0.00681) (0.0141) 2.Lcode -0.00833 0.0338 0.00470 0.0378** -0.00387 (0.0235) (0.0497) (0.0130) (0.0163) (0.0132) 3.Lcode -0.0428 0.0362 0.0779 -0.0141** -0.00660 (0.0522) (0.0232) (0.0908) (0.00655) (0.194) Constant -0.627*** -0.926 0.880 -0.505** 0.871 (0.173) (0.564) (0.766) (0.202) (0.707) Observations 4,361 1,065 816 731 268 R-squared 0.071 0.136 0.035 0.076 0.130 Number of company 447 109 83 75 28
Table 7 The impact of the percentage of women on board in five industries Industrial Public services
and facilities
Real estate Business Comprehensive sector
VARIABLES ROA ROA ROA ROA ROA
Size 0.0732*** 0.134* 0.00727 0.0713*** -0.0652
(0.0201) (0.0758) (0.0228) (0.0224) (0.0940)
Age of Board Members 0.000918 -0.00474 -0.000990 0.00131 -0.00186
(0.000854) (0.00367) (0.00135) (0.00118) (0.00173) Boardsize 0.00325 0.0413 -0.293 -0.0342* -0.0694* (0.0133) (0.0297) (0.241) (0.0204) (0.0391) Independence 0.0122 -0.0524 -0.237 -0.0138 0.0739 (0.0329) (0.0579) (0.199) (0.0738) (0.110) AverEdu 0.00352 -0.00734 -0.0201 0.00205 0.0167 (0.00328) (0.00575) (0.0204) (0.00885) (0.0154) FirmAge -0.00327*** -0.00670** -0.00317 -0.00485*** -0.00194 (0.000908) (0.00282) (0.00227) (0.00141) (0.00345) Leverage -0.195*** -0.135*** -0.0897* -0.147*** -0.0763 (0.0152) (0.0428) (0.0519) (0.0439) (0.0643) Prowb -0.0154 0.00239 0.233 -0.0113 -0.0225 (0.0179) (0.0311) (0.227) (0.0341) (0.0448) 2.Lcode -0.00807 0.0341 0.000352 0.0326* -0.00201 (0.0237) (0.0505) (0.0110) (0.0187) (0.0144) 3.Lcode -0.0424 0.0353 0.0704 -0.0114* -0.00374 (0.0522) (0.0234) (0.0842) (0.00601) (0.196) Constant -0.621*** -0.930 0.864 -0.503** 0.869 (0.171) (0.564) (0.752) (0.202) (0.699) Observations 4,361 1,065 816 731 268 R-squared 0.071 0.136 0.046 0.073 0.131 Number of company 447 109 83 75 28
Table 8 The impact of Women chair in five industries. Industrial Public services
and facilities
Real estate Business Comprehensive sector
VARIABLES ROA ROA ROA ROA ROA
Size 0.0733*** 0.134* 0.00698 0.0713*** -0.0654
(0.0202) (0.0765) (0.0229) (0.0227) (0.0941)
Age of Board Members 0.000969 -0.00467 -0.00193* 0.00145 -0.00189
(0.000876) (0.00374) (0.00116) (0.00115) (0.00189) Boardsize 0.00378 0.0422 -0.306 -0.0316 -0.0682* (0.0131) (0.0293) (0.246) (0.0198) (0.0381) Independence 0.0109 -0.0557 -0.236 -0.00367 0.0709 (0.0324) (0.0588) (0.190) (0.0771) (0.102) AverEdu 0.00364 -0.00764 -0.0175 0.00214 0.0154 (0.00327) (0.00548) (0.0178) (0.00877) (0.0148) FirmAge -0.00336*** -0.00664** -0.000638 -0.00506*** -0.00201 (0.000944) (0.00289) (0.00159) (0.00144) (0.00311) Leverage -0.196*** -0.135*** -0.107* -0.149*** -0.0761 (0.0153) (0.0417) (0.0609) (0.0442) (0.0654) Wchair -0.00615 -0.0109 0.0184* 0.0120 0.00757 (0.00777) (0.0248) (0.0101) (0.00958) (0.0311) 2.Lcode -0.00804 0.0350 0.00924 0.0283* -0.00379 (0.0235) (0.0513) (0.0136) (0.0146) (0.0132) 3.Lcode -0.0423 0.0370 0.0733 -0.0120* -0.00743 (0.0523) (0.0244) (0.0850) (0.00636) (0.192) Constant -0.626*** -0.930 0.925 -0.518** 0.873 (0.174) (0.570) (0.798) (0.204) (0.704) Observations 4,361 1,065 816 731 268 R-squared 0.071 0.137 0.033 0.076 0.130 Number of company 447 109 83 75 28
Table 9 The impact of share of female independent directors in five industries Industrial Public services
and facilities
Real estate Business Comprehensive sector
VARIABLES ROA ROA ROA ROA ROA
Size 0.0734*** 0.135* 0.00747 0.0701*** -0.0673
(0.0203) (0.0763) (0.0225) (0.0221) (0.0970)
Age of Board Members 0.000965 -0.00470 -0.00220* 0.00133 -0.00158
(0.000874) (0.00365) (0.00121) (0.00117) (0.00188) Boardsize 0.00382 0.0407 -0.295 -0.0334* -0.0698* (0.0132) (0.0295) (0.241) (0.0199) (0.0390) Independence 0.0106 -0.0508 -0.205 -0.0165 0.0688 (0.0325) (0.0565) (0.175) (0.0732) (0.108) AverEdu 0.00358 -0.00720 -0.0178 0.00162 0.0161 (0.00327) (0.00563) (0.0180) (0.00876) (0.0153) FirmAge -0.00337*** -0.00680** -0.000724 -0.00465*** -0.00191 (0.000923) (0.00291) (0.00149) (0.00125) (0.00345) Leverage -0.195*** -0.135*** -0.109* -0.146*** -0.0760 (0.0152) (0.0423) (0.0617) (0.0434) (0.0652) Proinw -0.00174 0.0117 0.0441 -0.0169 -0.0148 (0.00737) (0.0218) (0.0517) (0.0178) (0.0281) 2.Lcode -0.00815 0.0347 0.00673 0.0368* -0.00180 (0.0236) (0.0501) (0.0107) (0.0187) (0.0145) 3.Lcode -0.0428 0.0345 0.0654 -0.0116* -0.00111 (0.0523) (0.0236) (0.0791) (0.00612) (0.200) Constant -0.626*** -0.941 0.900 -0.495** 0.877 (0.173) (0.570) (0.780) (0.199) (0.710) Observations 4,361 1,065 816 731 268 R-squared 0.071 0.136 0.034 0.075 0.131 Number of company 447 109 83 75 28
Table 10 The results with interaction terms
Robust standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1
Control variable 1 means Size; 2 means Age of Board Members; 3 means Boardsize; 4 means Independence; 5 means AverEdu; 6 means FirmAge; 7 means Leverage.
Industrial Public services and
facilities
Real estate Business Comprehensive sector
Whole Sample
Women Control variable
Interaction Women 1 -0.0007 -0.0041 -0.0862 -0.0159 -0.0659 -0.0101 Interaction Women 2 -0.0004 -0.0009 -0.0006 -0.0013 -0.0030 -0.0003 Interaction Women 3 -0.0188 -0.0082 -0.1394 -0.0058 -0.0802 -0.0257 Interaction Women 4 0.0152 -0.0030 0.2399 -0.0686 0.0546 0.0373 Interaction Women 5 -0.0050 0.0271 -0.0512 0.0004 -0.0127 -0.0054 Interaction Women 6 0.0002 -0.0002 0.0025 0.0001 0.0005 0.0001 Interaction Women 7 -0.0175 0.0127 -0.2150 -0.0256 -0.0513 -0.0298 Prowb Control variable
Interaction Prowb 1 0.0684 -0.0301 -0.8035 -0.1376 -0.0530 -0.0907 Interaction Prowb 2 0.0010 0.0023 -0.0005 -0.0045 -0.0032 0.0029 Interaction Prowb 3 -0.0927 -0.0819 -0.1280 -0.1573 -0.3351 -0.1420 Interaction Prowb 4 0.2264 0.2109 0.8459 0.3585 0.5699 0.3880 Interaction Prowb 5 -0.0048 0.0403 -0.4855 -0.0247 -0.0504 0.0562 Interaction Prowb 6 -0.0031 -0.0011 -0.0047 -0.0025 -0.0122 -0.0029 Interaction Prowb 7 -0.0461 0.0422 -1.4155 -0.1219 -0.2532 -0.1932 Wchair Control variable
Interaction Wchair 1 0.0121 -0.0197 0.0127 -0.0500 -0.0704 -0.0072 Interaction Wchair 2 -0.0023 0.0064 -0.0018 -0.0020 0.0012 -0.0013 Interaction Wchair 3 0.0350 -0.0623 0.1903 0.0060 -0.0523 0.0236 Interaction Wchair 4 -0.1021 0.5234** -0.5228 0.0310 -0.2246 -0.0765 Interaction Wchair 5 -0.0027 0.0413 -0.0092 -0.0024 0.1124* 0.0045 Interaction Wchair 6 0.0008 -0.0067 0.0020 -0.0006 -0.0011 -0.0013 Interaction Wchair 7 -0.0041 0.0423 -0.0143 -0.0531 -0.1101 0.0110 Proinw Control variable
Conclusions
In conclusion, the thesis provides a new outlook on the gender diversity board’s influence upon the performance of the company in China. Meanwhile, this paper is broadening these previous literature in addition to supplementing women chairpersons’ impacts and the share held by female independent directors as well as their impacts on different industries. This research analyzes data from over 700 listed companies in China in the past ten years (2009-2018), and employs panel data analysis with the fixed effect estimation. The findings demonstrate that either women on board’s presence or females on board’s percentage exert no significant impacts upon company performance under the measurement by return on assets in China, while both employing women as chairpersons and possessing more female independent directors have an insignificant impact on company performance. These results support that China is still a male-dominated society, and Chinese board is still featured by a traditional “old boys” club. Besides, “the glass ceiling” for women still exists in China’s companies, and the independent directors' role in China are neglected. Moreover, the thesis concludes that gender diversity board has different effects upon the performance of the company across five industries contained in the sample. According to the results, women on board’s presence exerts significant and negative effects upon firm performance in the business industry; meanwhile recruiting women as chairpersons is of positive and significant association with the performance of company in the industry of real estate field. The article explores the in-depth documents that companies with better educated boards within the comprehensive sector are having more satisfactory performance on condition that chairpersons are women. Additionally, with better independence, company performance is positively influenced by having women chairpersons in the public services and facilities sector.
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