Gender Diversity in the Board and Its Effects on Firm

Performance : Empirical evidence from the listed Insurance

companies of Bangladesh

Group-10
ID Name

23017 Naznin Sultana Rini

23020 Afsana Mimi

23029 Md Sohag Hossain

23085 Md. Jahirol Islam

23152 Md. Sadin

 Abstract
 Aim of this study: find out the association between female directors’ presence
in the boardroom and firm financial performance.

 Evidence :this research study uses 150 firm years along with 13 independent
variables during the period of 2015 to 2019 of 30 listed insurance companies of
Bangladesh.

 Result : exists a positive association of female directors with the firm financial
performance although others female directors’ characteristics affect the
performance differently.
 Recommends: country, culture and business sector should be taken into account on the
eve of taking any decision regarding female directors.
 Introduction
Board diversity interest emphasizing more particularly on the gender & involvement of
female directors on the board is a most studied topic. Gender inequality and ensuring equal
opportunity for women have become a subject of interest and concern .The combination of
men and women in their work environment is gender diversity and it is being treated by
way of a corporate governance mechanism variable observing how much the gender
diversity affects the firm performance ultimately. India, Japan and China represent 2.4%,
9.5% and 7% female directors ,Bangladesh is not so far diverse. In Consequences there still
lack a transparent understanding, this empirical study scrutinizes the presence and
proportion of female directors and its impact on firm performance.
This study adds to the literature of gender diversity in the following two ways:
 Firstly, this study will provide a clear understanding regarding the impact on
performance in insurance sector due to presence of female directors on the board
 secondly, it will enhance value to the literature of gender diversity in insurance sector of
Bangladesh.
 Research Objective

To determine the presence and proportion of female directors in the board and its effects on firm

financial performance in insurance sector of Bangladesh is the prime goal of this empirical research

study.

Literature Review
Insurance industry in Bangladesh is struggling for many reasons. In spite of having a large number

of insurance companies in our country, their growth as per the population coverage is not at

satisfactory level & firm performance is less examined so far. (Nurul, 2008).

Argued by studies shows that there exists a positive relationship between the gender diversity on the

board and firm performance and has a strong effect while others studies fade away this conclusion.
 Howlader et al. (2020) showed that there is no relation, also recommend to
ensure a healthier environment and opportunities to accomplish a role as a
director.
 In the contrary, Sheikh et al. (2018) notified a noteworthy relationship with the
return on equity (ROE) but not the return on asset (ROA).
 More interestingly, Adams and Ferreira (2008) showed a complete negative
relationship. Analyses S&P 1500 companies reveals that-
a) Too tough to reach a conclusion,
b) The turnover of CEO of diverse board are very sensitive
c) Equity-based compensation for directors is comparatively higher. Dutta and Bose
(2006) revealed that is, the reflection of the work of Adams and Ferreira (2008), a
negative relationship between gender diversity and firm performance.
Background of the Study & Hypothesis
Development
 Results
-Positive relation
Traditionally maleGender
-NegativeIncreasing
directors Diversity
participation
association in thedirectors
of female Board
-No strong evidence

<H1> There is a positive relationship between the presence of female directors

and firm performance in insurance sector of Bangladesh.
 The Ownership of Female Directors

 Directors have to hold a percentage of ownership to ensure the transparency,

accountability and more involvement.

 Holding more ownership by executive directors than the other directors has positive
impact.

 The insurance sector in Bangladesh, more percentage of ownership are on the hand of
family members which does not mean the actual responsibility and accountability.

<H2> Female directors’ ownership has no impact on firm financial performance in

insurance sector of Bangladesh.
 Meeting Attendance & Female Independent Directors

Result
Board independence
Family Ownership increased financial
Attendance -No obligation result
-Affect performance -Show off
-No effect

<H3> Positive relationship between the board meeting attendance of female directors and
firm performance.

<H4> Positive impact of female independent directors on firm performance in insurance

sector of Bangladesh.
 Female Directors in Core Board Committee

 Audit committee

 Risk management committee and

 Nomination & remuneration committee (compulsory by CG guidelines-2018)

 The presence and proportion of female directors in these committee is

comparatively insignificant particularly in insurance sector of Bangladesh.

<H5> There is no association of female directors in core board committee (AC,

RMC, NRC) with the firm performance.
 Academic Qualification & Years of Experience
 Both positive and negative relationship.
 Having PhD degree increased performance through their experience, intellectual
power and risky decisions.
 There is negative relationship between the female directors’ academic
qualification and the firm performance (Arena et al. 2015) because higher
educated female directors in the board are more willing to show their abilities
and ideas. This over eagerness hampers the board dynamics profoundly.

<H6> Positive relationship between the female directors’ academic qualification and
firm performance in insurance sector of Bangladesh.
<H7> Positive association of the female directors’ years of experience and firm
performance in insurance sector of Bangladesh.
 Family & Political Relationship

 Most of the insurance sector in Bangladesh are family owned firms.

 Female directors are either the chairman or the other directors of board are
appointed solely on the source of family relationship.

 Sometimes, political relationship is also considered to appoint female directors in

the board.

<H8> There exists a negative relationship between the female directors’ family
relationship & political relationship in appointment and firm performance.
 Control Variables

 Firm size: The larger firms get several advantages than the smaller firms
(Increase profitability, diversified board etc.)

 Firm leverage: It indicates how much assets of a firm has to pay the
liabilities. Capital structure of a firm is influenced by firm leverage which
finally affects the firm performance.
Methodology
 Methodology

Sample and Data Sources

 Quantitative in nature
 Panel data is used for the study
 30 listed insurance companies have been taken as sample

Secondary sources are used to collect the necessary data-

 Annual report of these insurance companies
 Dhaka stock exchange &
 Lanka Bangla financial portal
 Research model
A multiple regression model is introduced to test the relationship between the
presence of female directors and the firm performance. OLS method has been used to
run the regression. Here the regression equation-

ROA = β0 + β1 FD + β2 FDOWN + β3 FDATT + β4 FDID + β5 FDAC + β6 FDRMC + β7

FDNRC+ β8 FDAQ + β9 FDYE + β10 LN FDFR + β11 FDPR + β12 LN FS + β13 LN LEV

+ εi …………(1)

ROE = β0 + β1 FD + β2 FDOWN + β3 FDATT + β4 FDID + β5 FDAC + β6 FDRMC + β7

FDNRC+ β8 FDAQ + β9 FDYE + β10 LN FDFR + β11 FDPR + β12 LN FS + β13 LN LEV
 Research Model (Continued)
Variables used in research model –
Dependent variables-
 ROA
 ROE
Independent variables are-
 FD
 FDOWN
 FDATT
 FDID
 FDAC
 FDRMC
 FDNRC
 Independent Director (Continued)

 FDAQ
 FDYE
 FDFR
 FDPR
 LNFS
 LEV
Findings & Interpretation
 Descriptive Analysis
Variable Obs. Mean Min Median Max SD

 Among 150 0bs. The FD (%) 150 21% 0% 20% 50% 13%

average of FDOWN is very FDOWN (%) 150 9% 0% 8% 40% 10%

insignificant as it is between
FDAT (%) 150 74% 0% 86% 100% 35%
8%-9%, However, FDAT is FDID (%) 150 4% 0% 0% 67% 14%

quite good, it is between FDAC (%) 150 7% 0% 0% 40% 12%

74%-86% FDRMC (%) 150 1% 0% 0% 35% 5%

FDNRC (%) 150 1% 0% 0% 67% 7%

 FDID is on an average 4%, FDAQ (%) 150 62% 0% 62% 100% 4%

that means the FD who play FDYE 150 7 0 7 17 4.77

ID is quite a few in numbers

FDFR (%) 150 59% 0% 52% 100% 4%

FDPR (%) 150 23% 0% 0% 100% 4%

among 150 obs. FS(million) 150 5920.03 619.56 1647.91 45367.11 12136.26

 FD in audit committee is
LEV (%) 150 41% -6% 38% 98% 22%
7%, while in RMC and ROA (%) 150 13% 1% 7% 158% 26%

NRC, the percentage is 1%, ROE (%) 150 26% 4% 11% 243% 50%

which is very depressing. Total 150 26% 0% 22% 100% 16%

 Trend Analysis

 The analysis shows that the 12

presence and proportion of the
female directors on the board 10
is 21%.
8
FD FDO

 The mean of female directors’ 6

FDAT FDID
academic qualification, years 4 FDAC FDRM
of experience, family and
political relationship are 62%, 2
7, 59% and 23% respectively.
While different board 0
2015 2016 2017 2018 2019
participation are 7%, 1% and
1% respectively.
 Yearly Descriptive Statistics of Subcategories of Female
Directors’ Characteristics
 This chart shows the PROVATIINS 1
3
PRAGATIINS
participation of total 107 RUPALIINS
PHENIXINS
3
7
1
female directors of 30 listed PEOPLESINS
PADMALIFE 1
1
NITOLINS
Insurance Companies. NATLIFEINS
MERCINS 1
4

MEGHNALIFE 6
 Janata Insurance company is KARNAPHULI
JANATAINS
6
9
7
pioneer in case of recruiting
ISLAMIINS
GREENDELT 4
GLOBALINS 3
female directors, while FEDERALINS
FAREASTLIF
4
5
4
Phoenix Insurance Company EIL
EASTLAND
4
5
EASTERNINS
has the second highest FD. DHAKAINS
DELTALIFE
2
3
CRYSTALINS 6
 However, United Insurance CITYGENINS
CENTRALINS
4
6
BNICL 4
and Padma Insurance BGIC 0
UNITEDINS 1

companies have the lowest ASIAINS

AGRANINS 0
2

FD. 0 1 2 3 4 5 6 7 8 9
 Female Directors’ Academic Qualification

Among these 30 companies, only 2 12

FDs have PhDs, 2 FDs have 10

8
professional degrees and another 02
6
FDs have foreign degrees. Along with
4
these, 11 female directors have 2
completed post–graduation, 12 FDs 0
D ee ee on on
S.
C
Ph g r gr
at
i
at
i .
have completed their graduation as .D
e
D
e
d u d u H
f g n ra r a
o ei G G
Pr r s t
well as 02 female directors have only Fo Po

HSC.
Findings & Interpretation (Continue..)


Female Directors’ Years of Experience

Female Directors’ Family Relationship & Political
Relationship

Regression Analysis

Hypothesis Testing

 Female Directors’ Years of Experience

• Years of experience is also a factor

of consideration.
• Years of experience indicates the
quality of taking decision, the
functions and roles, efficiency and
effectiveness and finally the firm
performance.
 Female Directors’ Family Relationship & Political Relationship
• Some insurance companies appoint their
female directors on the boardrooms only on
the basis of family relationship or political
relationship.
• 16 companies where female directors have
directly linkage with the chairman of the
board or other directors
• 07 companies’ female directors have
political relationship. Rest other companies
did not disclose these information.
• Some companies’ female directors are the
Member of Parliament (MP) and some
others’ have indirect political connection.
 Regression Analysis OLS Regression Estimates

ROA ROE

• Female director as an   Coefficients P-value Coefficients P-value

independent director affects the Intercept 0.21233 0.02459 0.00613 0.04605

ROA and ROE positively FD 0.40398 0.03974 0.86839 0.05098

FDOWN -0.44698 0.02636 -0.99189 0.0379

where their presence in core FDAT 0.03513 0.04197 0.03940 0.04855
board committee negatively FDID 0.29510 0.04833 0.67806 0.04057
affects the firm performance. FDAC -0.52576 0.07046 -1.04581 0.06152

FDRMC -0.01126 0.05821 -0.07173 0.05784

• Female directors’ years of FDNRC -0.09862 0.05566 -0.12151 0.05857

experience affects the firm FDAQ -0.09614 0.03953 -0.17461 0.00829

performance positively where FDYE 0.00654 0.00266 0.00645 0.01034

FDFR -0.00681 0.00764 0.04534 0.00782

the family and political
FDPR -0.10228 0.04497 -0.21969 0.04683
relationship affects negatively. LNFS 0.00226 0.03737 0.02519 0.04829

LEV -0.16497 0.02088 0.19910 0.03942

 Hypothesis Testing Summary of Hypotheses Results
• There exists a positive association of Independent variable Dependent P value Hypotheses
female directors with the firm variable Conclusion

financial performance. The presence 1. Female Directors ROA & ROE P < 0.05 Accepted

& proportion of female directors’ in 2. FD Ownership ROA & ROE P < 0.05 Rejected
core board committee are less in 3. FD Attendance ROA & ROE P < 0.05 Accepted
number and their performance are not
4. FD as Independent Director ROA & ROE P < 0.05 Accepted
positively related.
5. Female Directors in      
• Family and political relationship and Audit Committee ROA & ROE P > 0.05 Accepted
Risk Mgt. Committee ROA & ROE P > 0.05 Accepted
ownership also affect the performance Nomi. & Remu. Committtee ROA & ROE P > 0.05 Accepted
negatively.
6. FD Academic Qualification ROA & ROE P > 0.05 Accepted
• Oppositely, female directors’
7. FD Years of Experience ROA & ROE P < 0.05 Accepted
attendance, female independent
directors and years of experience 8. FD Family Relationship ROA & ROE P < 0.05 Accepted
Political Relationship ROA & ROE P < 0.05 Accepted
positively influence the firm
performance.
 Conclusion
 The equal opportunity for the women is a subject of frequently discussion.

 The impact of female directors’ participation on the boardroom on the firm

performance is less examined particularly in insurance sector of Bangladesh.

 This study recommends that some factors should be taken into account on

the eve of appointing female directors.

 A better work environment and opportunities should be ensured for female

directors to play a vital role in insurance sector of Bangladesh.

 Limitation of this Study

 The constraints of this empirical research study must be considered on the eve
of reaching any conclusion on the basis of this research.

 The major limitation is that the result varies in terms of country, culture and
sectors.

 So, these three things along with other factors should be taken into account.

 This research uses 150 firm years during the period of 2015 to 2019.

 So, all of these things should be considered before generalization.

Thank You