A study by National University of Singapore (NUS) Business School study has found that gender diversity on boards has a positive impact on financial performance of companies.
The findings also indicated that women independent board directors increased financial performance by elevating the company’s market value, vis-a-vis the company’s book value.
The study of about 500 Singapore-listed companies pooled across 5 years was conducted by NUS Business School’s Centre for Governance, Institutions and Organisations (CGIO). It examined the impact of women board representation on a company’s corporate governance scores and financial performance.
The findings suggest that board gender diversity has an indirect effect on financial performance, acting through its intermediate effect on corporate governance scores.
Companies should also pay more attention to the number of women independent directors on their boards. According to the study, if the average number of woman independent directors on boards increases by one, the company’s financial performance is expected to increase by 11.8 percent.
“The findings of CGIO’s study point to what many have suggested about the business benefits of having gender diversity on the board," said Mr Loh Boon Chye, Chairman of the Diversity Action Committee (DAC). "We are seeing more women being appointed to the boards of SGX’s largest listed companies, and we hope that companies will now appreciate the benefits and take action to bring more women onto their boards.”
Associate Professor Lawrence Loh, Director of CGIO, NUS Business School, added that, “Up to now, studies across the world have found that the impact of board gender diversity on financial performance is either non-existent or weakly positive. Through econometric techniques, our study is the first in the Singapore context to establish that such a relationship exists through corporate governance.”