Skip to main content

Advertisement

SpringerLink
Log in

The causes of gender diversity in Malaysian large firms

  • Published:
Journal of Management & Governance Aims and scope Submit manuscript

Abstract

The issue of women’s representation at the decision-making level in Malaysia has received special attention from the Government since 2004, the year in which it adopted a policy requiring that 30 % of the posts at the decision-making level in the public sector be filled by women. In 2011, the policy was extended to the private sector where 30 % of listed firms’ board seats are to be allocated to women with 2016 being the deadline for compliance. To this end, this paper aims at examining the factors that determine the appointment of women to the boards of Malaysian large firms. Large firms were chosen in this study because they have the resources and the capacity to adopt the policy more readily than smaller firms. The results reveal that gender diversity is positively associated with board size and the presence of family on the board. That is, the larger the board, the more likely it is that women sit on it. The fact that the presence of women on the board is associated with the presence of one or more family members on the board means that the appointment of women to the board is very much influenced by family ties rather than commercial reasons. The results also reveal a positive association between board independence and the proportion of women directors. Further, it is found that board independence is associated positively with the presence of independent women directors. Finally, the results show that firm performance is negatively associated with gender diversity. That is, firms with low financial performance are more likely to have women on their boards. Hence, taken altogether, the evidence suggests that the appointment of women to the board is very much driven by tokenism and family connection rather than by the business case.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Abdullah, S. N., Ku Ismail, K. N. I., & Nachum, L. (2012). Women on boards of Malaysian firms: Impact on market and accounting performance. Available online at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2145007. Accessed 10 Feb 2012.

  • Abdullah, S. N., Mohamad, N. R., & Mokhtar, Z. (2011). Board independence, ownership and CSR of Malaysian Large Firms. Corporate Ownership & Control, 8(3), 417–431.

    Google Scholar 

  • Abdullah, S. N., & Mohd Nasir, N. (2004). Accrual management and the independence of the boards of directors and audit committees. IIUM Journal of Economics and Management Sciences, 12(1), 49–80.

    Google Scholar 

  • Across the Board. (1994). Gender chills? 1 September.

  • Adams, R., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of Financial Economics, 94, 291–309.

    Article  Google Scholar 

  • Adida, C. L., Laitin, D. D., & Valfort, M. A. (2012). Gender, economic development and Islam: A perspective from France. The Institute for the Study of Labor (IZA) discussion paper no. 6421, Bonn.

  • Adler, R. D. (2001) Women in the executive suite correlate to high profit. Glass Ceiling Research Center. http://glassceiling.com/InTheNewsFolder/HBRArticlePrintablePage.html. Accessed 30 June 2009.

  • Anderson, R. C., & Reeb, D. M. (2003). Founding-family ownership and firm performance: Evidence from the S&P 500. Journal of Finance, 58(3), 1301–1327.

    Article  Google Scholar 

  • Andrew, B. H., Gul, F. A., Guthrie, J. E., & Teoh, H. Y. (1989). A note on corporate social disclosure practices in developing countries: The case of Malaysia and Singapore. British Accounting Review, 21(4), 371–376.

    Article  Google Scholar 

  • Anonymous. (2012). IPT disaran tubuh tabung endowmen, Berita Harian (Daily News). 19 July 2012.

  • Bartov, E., Gul, F. A., & Tsui, J. S. L. (2000). Discretionary accruals models and audit qualifications. Journal of Accounting and Economics, 30(3), 421–452.

    Article  Google Scholar 

  • Beasley, M. S. (1996). An empirical analysis of the relation between the board of director composition and financial statement fraud. The Accounting Review, 71(4), 443–465.

    Google Scholar 

  • Bilimora, D. (2000). Building the business case for women corporate directors. In R. J. Burke & M. Mattis (Eds.), Women on corporate boards of directors: International challenges and opportunities (pp. 25–40). Dordrecht, The Netherlands: Kluwer Academic Publishers.

    Chapter  Google Scholar 

  • Brammer, S., Millington, A., & Pavelin, S. (2007). Gender diversity among UK corporate boards. Corporate Governance: An International Review, 15(2), 393–403.

    Article  Google Scholar 

  • Brown, W. A. (2002). Racial diversity and performance of nonprofit board of directors. Journal of Applied Management and Entrepreneurship. http://www.asu.edu/copp/nonprofit/res/racialdiversityandboardperformance.pdf.

  • Burke, R. J. (1997). Women on corporate boards of directors: A needed resource. Journal of Business Ethics, 16(9), 909–915.

    Article  Google Scholar 

  • Bursa Malaysia. (2002). Practice note no. 13: Requirements relating to directors and signatory to statutory declaration accompanying annual audited accounts. Kuala Lumpur: Bursa Malaysia.

  • Campbell, K., & Minguez Vera, A. (2010). Female board appointments and firm valuation: Short and long-term effects. Journal of Management and Governance, 14, 37–59.

    Article  Google Scholar 

  • Carter, D. A., D’Souza, F. P., Simkins, B. J., & Simpson, W. G. (2010). The gender and ethnic diversity of US boards and board committees and firm financial performance. Corporate Governance: An International Review, 18(5), 396–414.

    Article  Google Scholar 

  • Carter, D. A., Simkins, B. J., & Simpson, W. G. (2003). Corporate governance, board diversity and firm value. Finance Review, 8, 33–53.

    Article  Google Scholar 

  • Carver, J. (2002). On board leadership. New York: Wiley.

    Google Scholar 

  • Catalyst. (1995). The CEO view; women on corporate boards. New York: Catalyst.

  • Catalyst. (1999). Catalyst census of women board directors of the fortune 500. New York: Catalyst.

  • Catalyst. (2003). The catalyst census of women board of directors of the fortune 1000. New York: Catalyst.

  • Catalyst. (2004). The bottom line: Connecting corporate performance and gender diversity. New York: Catalyst Publication Code D58.

  • Catalyst. (2011). Women on boards. http://www.som.cranfield.ac.uk/som/dinamic-content/media/Research/Researchpercent20Centres/Centre%20for%20Women%20Leaders/6%20month%20monitoring%20report-final%20pdf.pdf. Accessed 1 Apr 2012.

  • Chen, C. J. P., & Jaggi, B. (2000). Association between independent non-executive directors, family control and financial disclosures in Hong Kong. Journal of Accounting and Public Policy, 19(4–5), 285–310.

    Article  Google Scholar 

  • Claessens, S., Djankov, S., Fan, J. P. H., & Lang, L. H. P. (1999) Expropriation of minority shareholders: Evidence from East Asia. World bank working paper 2088.

  • Claessens, S., Djankov, S., & Lang, L. H. P. (2000). The separation of ownership and control in East Asian corporations. Journal of Financial Economics, 58, 81–112.

    Article  Google Scholar 

  • Clarkson, M. B. E. (1995). A stakeholder framework for analyzing and evaluating corporate social performance. Academy of Management Review, 20, 65–91.

    Google Scholar 

  • Conyon, M. J., & Mallin, C. (1997). Women in the boardroom: Evidence from Large UK companies. Corporate Governance: An International Review, 5(3), 112–117.

    Article  Google Scholar 

  • Corporate Women Directors International. (2009). http://www.globewomen.org/CWDI/2009%20Japan%20Report/Press.Release.html. Accessed 10 June 2011.

  • Daily, C. N., Certo, S. T., & Dalton, D. R. (1999). A decade of corporate women: Some progress in the boardroom, none in the executive suite. Strategic Management Journal, 20(1), 93–99.

    Article  Google Scholar 

  • Daily, C. M., & Dalton, D. R. (2003). Women in the boardroom: A business imperative. Journal of Business Strategy, 24(5), 8–10.

    Google Scholar 

  • DeFond, M., & Jiambalvo, J. (1994). Debt covenant violation and the manipulation of accruals. Journal of Accounting and Economics, 17, 145–176.

    Article  Google Scholar 

  • Deszo, C., & Ross, D. G. (2012). Does female representation in top management improve performance? A panel data investigation. Strategic Management Journal, 33(9), 1072–1089.

    Article  Google Scholar 

  • Donaldson, T., & Preston, E. (1995). The stakeholder theory of the corporation: concepts, evidence, and implications. Academy of Management Review, 20(1), 65–91.

    Google Scholar 

  • Equal Opportunity for Women in the Workplace Agency. (2006). EOWA Australian census of women in leadership. Canberra: AGPS.

    Google Scholar 

  • Erhardt, N. L., Werbel, J. D., & Shrader, C. B. (2003). Board of director diversity and firm performance. Corporate Governance: an International Review, 11(2), 102–111.

    Article  Google Scholar 

  • European Professional Women’s Network. (2004). The European PWN board women monitor 2004. http://www.europeanpwn.net/index.php?article_id=8. Accessed 20 Aug 2010.

  • Fama, E. F. (1980). Agency problems and theory of the firm. Journal of Political Economy, 88(2), 288–307.

    Article  Google Scholar 

  • Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. Journal of Law and Economics, 26(2), 301–325.

    Article  Google Scholar 

  • Financial Reporting Council. (2010). The UK corporate governance code. London: Financial Reporting Council.

  • Freeman, R. (1983). Strategic management: A stakeholder approach. Advances in Strategic Management, 1, 31–60.

    Google Scholar 

  • Freeman, R. E. (1984). Strategic management: A stakeholder approach. New York: Basic Books.

    Google Scholar 

  • Garatt, B. (2005). A portrait of professional directors: UK corporate governance in 2015. Corporate Governance: An International Review, 13(2), 122–126.

    Article  Google Scholar 

  • Grady, D. (1999). Board games: Finding the right fit. Company Director, 8–20.

  • Grosvold, J., Brammer, S., & Rayton, B. (2007). Board diversity in the United Kingdom and Norway: An exploratory analysis. Business Ethics: A European Review, 16(4), 344–357.

    Article  Google Scholar 

  • Hall, D. L., & Ames, R. T. (2000). Sexism, with Chinese characteristics. In C. Li (Ed.), The sage and the second sex: Confucianism, ethics, and gender. Chicago: Open Court.

    Google Scholar 

  • Haniffa, R. M., & Cooke, T. E. (2005). The impact of culture and governance on corporate social reporting. Journal of Accounting and Public Policy, 24, 391–430.

    Article  Google Scholar 

  • Higgs, D. (2003). Review of the role and effectiveness of non-executive directors. London: Department of Trade and Industry/HMSO.

    Google Scholar 

  • Hillman, A. J., Canella, A. A, Jr., & Paetzold, R. L. (2000). The resource dependence role of corporate directors: Strategic adaptation of board composition in response to environmental change. Journal of Management Studies, 37, 235–255.

    Article  Google Scholar 

  • Inglehart, R. (Ed.). (2003). Islam, gender, culture, and democracy: Findings from the World Values Survey and the European Values Survey) (Vol. 4). Willowdale, Canada: de Sitter Publications.

    Google Scholar 

  • Janis, I. L. (1972). Victims of groupthink: A psychological study of foreign-policy decisions and fiascoes. Oxford, UK: Houghton Mifflin.

    Google Scholar 

  • Jensen, M. (1993). The modern industrial revolution, exit and the failure of internal control systems. Journal of Finance, 48, 831–880.

    Article  Google Scholar 

  • 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.

    Article  Google Scholar 

  • Jones, T. M. (1995). Instrumental stakeholder theory: A synthesis of ethics and economics. Academy of Management Review, 20(2), 404–437.

    Google Scholar 

  • Kang, H., Cheng, M., & Gray, S. J. (2007). Corporate governance and board composition: Diversity and independence of Australian boards. Corporate Governance: An International Review, 15(2), 194–207.

    Article  Google Scholar 

  • Kang, E., Ding, D. A., & Charoenwong, C. (2010). Investor reaction to women directors. Journal of Business Research, 53, 888–894.

    Article  Google Scholar 

  • Kesner, I. F. (1988). Directors’ characteristics and committee memberships: An investigation of type, occupation, tenure and gender. Academy of Management Journal, 22, 409–438.

    Google Scholar 

  • Keys, P. Y., Ellis, K. M., Newsome, P. T., & Friday, S. S. (2003). Shareholder benefits of diversity. http://fisher.osu.edu/fin/dice/seminars/diversity20.pdf. Accessed 10 Dec 2010.

  • King, E. M., & Andrew, D. M. (2001). Engendering development through gender equality in rights, resources and voice. New York: Oxford University Press.

  • Klein, A. (2002). Economic determinants of audit committee independence. The Accounting Review, 77(2), 435–452.

    Article  Google Scholar 

  • Konrad, A. M., Kramer, V. W., & Erkut, S. (2008). Critical mass: The impact of three or more women on corporate boards. Organizational Dynamics, 37(2), 145–164.

    Article  Google Scholar 

  • Korac-Kakabadse, N., Kakabadse, A. K., & Kouzmin, A. (2001). Board governance and company performance: Any correlations? Corporate Governance, 1(1), 24–30.

    Article  Google Scholar 

  • Lemmon, M. L., & Lins, K. V. (2003). Ownership structure, corporate governance, and firm value: Evidence from the East Asian financial crisis. Journal of Finance, 58(4), 1445–1468.

    Article  Google Scholar 

  • Li, C. (2000). Introduction: Can confucianism come to terms with feminism. In C. Li (Ed.), The sage and the second sex: Confucianism, ethics, and gender. Chicago: Open Court.

    Google Scholar 

  • Luckerath-Rovers, M. (2011). Women on boards and firm performance. Journal of Management and Governance,. doi:10.1007/s10997-011-9186-1.

    Google Scholar 

  • Luoma, P., & Goodstein, J. (1999). Stakeholders and corporate boards; institutional influences on board composition, research note. Academy of Management Journal, 42, 553–563.

    Article  Google Scholar 

  • Malaysian Government Statistics Department. (2010). Population, household and living quarters. Kuala Lumpur: Malaysian Department of Statistics.

  • Mallette, P., & Fowler, K. L. (1992). Additional evidence on equity ownership on the adoption of “poison pills”. Academy of Management Journal, 35(5), 1010–1035.

    Article  Google Scholar 

  • Mattis, M. C. (2000). Women corporate directors in the United States. In R. J. Burke & M. C. Mattis (Eds.), Women on corporate boards of directors (pp. 43–56). The Netherlands: Kluwer.

    Chapter  Google Scholar 

  • Merican, J. (2012). The women agenda. The Star. 12 Oct 2012. Available online at http http://mystarjob.com/articles/story.aspx?file=/2012/10/6/mystarjob_careerguide/12087244&sec=mystarjob_careerguide. Accessed 19 Dec 2012.

  • Mitchell, R., Agle, B., & Wood, W. (1997). Towards a theory of stakeholder identification and salience: Defining the principle of who and what really counts. Academy of Management Review, 22(4), 853–886.

    Google Scholar 

  • Mok, H., Lam, K., & Cheung, I. (1992). Family control and return covariation in Hong Kong’s common stocks. Journal of Business Finance and Accounting, 19(2), 277–293.

    Article  Google Scholar 

  • National Association of Corporate Directors. (1994). Report of the NACD Blue Ribbon Commission on value evaluation of chief executive officers, board and directors. Washington, DC: National Association of Corporate Directors.

    Google Scholar 

  • Nielsen, S., & Huse, M. (2010). Women directors’ contribution to board decision-making and strategic involvement: The role of equality perception. European Management Review, 7, 16–29.

    Article  Google Scholar 

  • Norburn, D. (1989). The CEO: A breed apart. Strategic Management Journal, 10, 1–15.

    Article  Google Scholar 

  • Orlando, R. C. (2000). Racial diversity, business strategy and firm performance: A resource based view. Academy of Management Journal, 42, 164–177.

    Google Scholar 

  • Palmer, D., & Barber, B. M. (2001). Challengers, elites, and owning families: A social class theory of corporate acquisitions in the 1960s. Administrative Science Quarterly, 46, 87–120.

    Article  Google Scholar 

  • Pfeffer, J. (1973). Size, composition and function of hospital boards of directors: A study of organization environment linkage. Administrative Science Quarterly, 18, 349–363.

    Article  Google Scholar 

  • Pfeffer, J., & Salancik, G. R. (1978). The external control of organizations: A resource dependence perspective. New York: Harper and Row.

    Google Scholar 

  • Phillips, K. W., Liljenquist, K. A., & Neale, M. A. (2009). Is the pain worth the gain? The advantages and liabilities of agreeing with socially distinct newcomers. Personality and Social Psychology Bulletin, 35(3), 336–350.

    Article  Google Scholar 

  • Razak, N. (2011) The 2012 budget speech, Prime Minister Office. Available online at http://www.pmo.gov.my/?menu=speech&page=1676&speech_cat=2&news_id=529. Accessed 13 Dec 2012.

  • Robinson, G., & Denchant, K. (1997). Building a business case for diversity. Academy of Management Executive, 11(3), 21–30.

    Google Scholar 

  • Rose, S. (1993). Introduction to dialogue: Gender history: is feminist scholarship losing its critical edge? Journal of Women’s history, 5(1), 89–101.

    Article  Google Scholar 

  • Rose, C. (2007). Does female board representation influence firm performance? Danish evidence. Corporate Governance: An International Review, 15(2), 404–413.

    Article  Google Scholar 

  • Rosener, J. B. (1990). Way women lead. Harvard Business Review, 68, 119–269.

    Google Scholar 

  • Rutledge, J. M. (1994). Building board diversity. Washington, DC: National Center for Nonprofit Boards.

  • Ryan, M. K., & Haslam, S. A. (2005). The glass cliff: Evidence that women are over-represented in precarious leadership position. British Journal of Management, 16(2), 81–90.

    Article  Google Scholar 

  • Saleh, M. N., Iskandar, M. T., & Rahmat, M. M. (2005). Earnings management and board characteristics: Evidence from Malaysia. Jurnal Pengurusan, 24, 77–103.

    Google Scholar 

  • Securities Commission. (2000). Malaysian code on corporate governance. Kuala Lumpur: Securities Commission.

  • Securities Commission. (2012). Malaysian code on corporate governance 2012. Kuala Lumpur: Securities Commission.

  • Shrader, C. B., Blackburn, V. B., & Iles, P. (1997). Women in management and firm financial value: An exploratory study. Journal of Managerial Issues, 9(3), 355–372.

    Google Scholar 

  • Siciliano, J. (1996). The relationship of board member diversity to organizational performance. Journal of Business Ethics, 15(12), 1313–1321.

    Article  Google Scholar 

  • Singh, V., Terjesen, S., & Vinnicombe, S. (2009). Newly appointed directors in the boardroom: How do Women and men differ? European Management Journal, 26, 48–58.

    Article  Google Scholar 

  • Singh, V., Vinnicombe, S., & Johnson, P. P. (2001). Women directors on top UK boards. Corporate Governance: An International review, 9(3), 206–216.

    Article  Google Scholar 

  • Smith, Laan, Adhikari, J. A., & Tondkar, R. H. (2005). Exploring differences in social disclosures: A stakeholder perspective. Journal of Accounting and Public Policy, 24(2), 123–151.

    Article  Google Scholar 

  • Spencer Stuart. (2007). 2006 Board diversity report. Toronto: Spencer Stuart Limited.

  • Stephenson, C. (2004). Leveraging diversity to maximum advantage: The business case for appointing more women to boards. Ivey Business Journal, 69(1), 1–5.

    Google Scholar 

  • Stock Exchange of Hong Kong Limited. (1996). Rules governing the listing of securities on the Stock Exchange of Hong Kong Limited (3rd ed.). Hong Kong: Stock Exchange of Hong Kong Limited.

    Google Scholar 

  • Tan, J. (2007). Breaking the “Bamboo Curtain” and the “Glass Ceiling”: The experience of women entrepreneurs in high-tech industries in an emerging market. Journal of Business Ethic, 80(3), 547–564.

    Article  Google Scholar 

  • Tracey, P. (2012) Religion and organization: A critical review of current trends and future directions. The Academy of Management Annals, 6, Routledge, Reading, 1–48.

  • Tunimez, A. (2012) Rising to the top? Women’s Leadership in Asia. A report prepared for the third annual women leaders of New Asia summit, April, Zhenjiang, China.

  • Vinnicombe, S., & Singh, V. (2003). The female FTSE index. Cranfield, UK: Cranfield School of Management.

    Google Scholar 

  • Virtanen, A. (2012). Women on the boards of listed companies; evidence from Finland. Journal of Management and Governance, 16, 571–593.

    Article  Google Scholar 

  • Weisbach, M. S. (1988). Outside directors and CEO turnover. Journal of Financial Economics, 20(Jan-March), 431–460.

    Google Scholar 

  • Women in Corporate Boardrooms. (2011). A global perspective. Deloitte consulting report 2011, p. 9.

  • Wood, D., & Jones, R. (1995). Stakeholder mismatching: A theoretical problem in empirical research on corporate social performance. The International Journal of Organizational Analysis, 3(3), 229–267.

    Article  Google Scholar 

  • Zahra, S. A., & Pearce, J. A. (1989) Board of directors and corporate financial performance: A review and integrative model. Journal of Management, 1592, 291–334.

    Google Scholar 

  • Zahra, S. A., & Stanton, W. W. (1988). The implication of board of directors composition for corporate strategy and value. International Journal of Management, 5(2), 229–236.

    Google Scholar 

Download references

Acknowledgments

The author wishes to thanks the three anonymous reviewers for their helpful and insightful comments on earlier drafts of the paper. The financial support from University of Malaysia Terengganu and the International Islamic University is gratefully appreciated. Any remaining errors are of the responsibility of the author.

Author information

Authors and Affiliations

  1. International Islamic University Malaysia, Kuala Lumpur, Malaysia

    Shamsul Nahar Abdullah

Authors
  1. Shamsul Nahar Abdullah
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Shamsul Nahar Abdullah.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Abdullah, S.N. The causes of gender diversity in Malaysian large firms. J Manag Gov 18, 1137–1159 (2014). https://doi.org/10.1007/s10997-013-9279-0

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10997-013-9279-0

Keywords

JEL Classifications

Search

Navigation