A recent study by Professors Lawrence Loh and Mai Huong Nguyen of NUS Business School, the National University of Singapore, entitled "Board Diversity and Business Performance in Singapore - Listed Companies the role of Corporate Governance" examined the relationship between board gender diversity and corporate governance and the implications for a company’s financial performance.
It used a combination of a publicly available data of director profiles, company corporate governance scores from the Singapore Governance and Transparency Index (SGTI), and company financial performance indicators obtained from Bloomberg. For the financial performance indicators, both return on equity (book measure) and Tobin’s Q (hybrid measure) were considered. The relationship between board gender diversity and corporate governance score was analysed, and that between these variables and financial performance was investigated as well. Both relationships were tested empirically with ordinary least squares (OLS) regression models. Board gender diversity was found to have a positive and statistically significant impact on corporate governance score.
Corporate governance score was found to have a positive and statistically significant impact on company financial performance, whereas no such effect by board gender diversity on company financial performance was found. This appears to suggest that board gender diversity has an indirect effect on financial performance, acting through its intermediate effect on corporate governance scores. The exception to this is the effect of the fraction of female independent directors on Tobin’s Q, which was positive and statistically significant, which seems to suggest that companies should pay more attention to the number of female independent directors on their boards.
Keywords: #boarddiversity, #businessperformance, #corporategovernance, #financialperformance indicator, #regressionmodel.