Women on Board, Firm Financial Performance and Agency Costs

Asian Journal of Business Ethics (2012)

18 Pages Posted: 23 Jul 2012

See all articles by Nirosha Hewa Wellalage

Nirosha Hewa Wellalage

University of Waikato - Management School

Stuart Locke

University of Waikato - Management School

Date Written: July 22, 2012

Abstract

This study investigates the link between female board directors and company financial performance and agency costs in Sri Lanka's publicly listed companies. In order to investigate the impact of board gender diversity on firm financial performance a dynamic panel generalised method of moment estimation is applied. Three variables are used as proxies for gender diversity of the board of directors, namely the percentage of women on the board, a dichotomotons dummy, and the Blau index. A Tobit model with endogenous regressors is used to investigate the impact of female board members on agency cost, using growth opportunities as a measure of agency cost. After controlling for size, industry, and other corporate governance measures, this study finds a significant negative relationship between the proportion of women on boards and firm value along with an increase in company agency cost. This evidence provides insights for governments and academic institutions in their efforts to provide resources that will help enhance women's leadership skills.

Keywords: Women, financial performance, agency costs and emerging market

JEL Classification: G32

Suggested Citation

Hewa Wellalage, Nirosha and Locke, Stuart, Women on Board, Firm Financial Performance and Agency Costs (July 22, 2012). Asian Journal of Business Ethics (2012), Available at SSRN: https://ssrn.com/abstract=2115263

Nirosha Hewa Wellalage (Contact Author)

University of Waikato - Management School ( email )

Hamilton
New Zealand

Stuart Locke

University of Waikato - Management School ( email )

Hamilton
New Zealand

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