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The Relationship between Gender Diversity of Board Members and Firm’s Financial Performance: A Case of NZ Listed Companies

Student’s Name

Institutional Affiliation

Table of Contents

Chapter One: Introduction. 4

1.1.       Background. 4

1.2.       Historical Development or Current Trend. 5

1.3.       Importance. 6

1.4.       The Gap the Topic Answers. 7

1.5.       Motivations for Doing this Topic. 7

1.6.       Plan for the Rest of the Report 7

Chapter Two: Literature Review.. 9

2.1.       Introduction. 9

2.1.1.        Board Diversity. 9

2.1.2.        Financial Performance. 10

2.2.       Empirical Review.. 10

2.3.       Theoretical Review.. 12

2.3.1.        The Agency Theory. 13

2.4.       A Summary of the Literature. 14

Chapter 3: Methods and Data. 16

3.1.       Introduction of the Source of Data. 16

3.2.       Data Collection. 18

3.3.       Analysis. 18

3.4.       Reconciliation. 19

3.5.       Rationale. 19

Chapter 4: Results and Analysis. 20

4.1.       An Introduction and Formulation of Hypotheses. 20

4.2.       Descriptive Statistics. 20

4.3.       The Regression Statistics. 22

4.3.1         The Test of ANOVA.. 22

4.3.2         The Coefficients Analysis. 23

4.3.3         The Model Summary (R Squared Analysis). 24

Chapter 5: Conclusion and Discussion. 27

5.1.       Findings and Discussions. 27

5.2.       Conclusion. 30

5.3.       Recommendations. 31

5.4.       Future Research Suggestions. 32

5.5.       Limitations. 33

References. 35

Appendix. 40

Chapter One: Introduction

1.1.           Background

The importance of board diversity cannot be overstated considering that it would play a critical role in the development or underdevelopment of a company. A debate has been ongoing on the topic (Ararat et al., 2010). Some scholars and researchers have stated that a diverse board of directors is good since they would be able to bring in different skills, experiences, ideas, knowledge, decisions and so on which would improve the financial performance of New Zealand Listed companies. Other researchers and scholars stated that board diversity is not useful or beneficial for New Zealand Listed firms since the board would experience lack of coordination, thus deteriorating the financial performance of New Zealand listed companies. Before globalization, advancement of technology and industrialization, women were not allowed to lead in top positions of companies, leave alone inherit property. The society viewed women as people who could derail the performance of something. They were, therefore, not appointed in the board of directors since the managers of large companies did not want their companies to lag behind. However, after various advancements in technology, industrialization, globalization and many countries attaining their independence, the culture of women not being leaders was long forgotten. Governments in different countries were able to pass a rule that a third of the members of the Congress or Parliament were women and that equality should be ensured in all organizations even in their boards.

Despite this, men were still the majority in the top positions of companies and BOD of those firms since they represented two-thirds while the women represented a-third. This could be attributed to the fact that the society does not believe in women dominating the world and therefore women had to be allocated very few posts in the top positions of corporations. This is a topic of interest since no scholar has ever come up with a conclusion concerning this issue since their evidence was inconclusive which resulted to empirical discrepancies (Bear et al., 2010; Boubaker et al., 2014). This research, therefore, tries to conclude on the topic at hand.

1.2.           Historical Development or Current Trend

Many experts in corporate governance believe that a diverse board regarding background, gender, experience, race, nationality and so forth may enhance the effectiveness of boards and thus improve the long-term success and financial performance of the company.  Corporates have resulted in allowing more women to represent on the board (Bonn, 2004). Long ago, women were not allowed to be at top positions in the corporate sector. The society believed that their work was at home and therefore they were not required to lead. In fact, there were no female directors since corporates thought that having female directors on the board could make them lag behind due to poor decision-making skills that females have. However, this is bound to change. Large companies are beginning to advocate for diversity in their operations.

Currently, it is evident that organizations with higher market capitalizations have a higher level of gender, ethnic and racial diversity than those with smaller market capitalizations. Experts suggest that the reason those corporations have a high market capitalization is that they ensured that they have a diverse board which improved their success. Over the past five years, there has been an increase in the diversity of the board (Adams & Ferreira, 2009). Statistics suggest that 98% of the boards of companies listed in S&P 500 which are significant market capitalization firms have at least one female director which is an increase from 89% in 2010, 84% of the boards of mid-market capitalization corporations have at least one female director which is an incline from 74% in 2010, and 69% of boards of small market capitalization businesses have at least one female director which is a rise from 54% in 2010 (consider graph below). With an increase in this diversity, some companies have performed well while others have not. This research will, therefore, determine whether having a diverse board will improve or derail the performance of New Zealand Listed Companies.

1.3.           Importance

Board diversity has been a matter of debate for many decades. Prior studies have been conducted relating to the topic, but mostly in more developed like the USA, Europe, India and New Zealand. This field is, therefore, vital since it holds a lot of potential for further academic research and to determine whether diversity of boards has any correlation with financial performance. The findings that will be derived from this analysis will contribute to providing information regarding the impact of the diversity of boards concerning maximizing the wealth of shareholders through improving the overall financial performance and success of New Zealand Listed Companies (Allen, Gail & Wheatley, 2008). This research will, therefore, be able to give advice or recommendations on various aspects that need to be taken into consideration to improve the financial performance of New Zealand corporations (Cannella et al., 2008).

1.4.           The Gap the Topic Answers

Prior studies have been conducted regarding the topic, but many scholars have been inconclusive. This is because some scholars concluded that the diversity of boards could improve the financial performance of New Zealand listed firms while others found that it could derail their performance since they would be unable to coordinate with each other, thus enhancing poor making of decisions by the board (Darmadi, 2010). The qualities of the board can determine the kind of decisions that will be made by the organization, and this will affect the performance of New Zealand companies (Erhardt et al., 2003). This topic, therefore, determines whether having a diverse board would be beneficial or not for corporates in NZ.

1.5.           Motivations for Doing this Topic

The reason why I chose this topic was the fact that various media are giving importance to the girl child or rather females. In fact, many governments are implementing measures to ensure that women have an equal representation in the Congress or Parliament (García-Meca et al., 2015). The government believes that diversity is the key to success and therefore they have advocated that corporates implement the same in their businesses. Besides, I was motivated by the fact that various researchers have not been able to conclude with regards to this topic.

1.6.           Plan for the Rest of the Report

Event Period
Theoretical review Four days
Empirical review Five days
Conceptual framework Two days
Data collection Two weeks
Data analysis Two weeks
Discussion of findings Two days
Conclusion and recommendations One day
Proofreading and final submission Two days

 

Chapter Two: Literature Review

2.1.           Introduction

This part examines various literature regarding the topic of study. Ideally, the chapter considers the empirical research, the theoretical literature and the conclusions derived from the literature. Mugenda and Mugenda (2003) define literature review as identifying, analyzing and examining the findings arrived at by various scholars with regards to the study. Its aim is to understand past conclusions reached in to determine what needs to be achieved to fill the gap about the survey.

2.1.1.      Board Diversity

Board diversity talks about having different backgrounds, gender, race, ethnicity, experience, nationality, age and so on in the boards of companies (Wang and Cliff, 2009). Debates have been ongoing in the diversity of boards regarding age, physical impairment, gender, education, experience and so forth. Some scholars believe that gender diversity is good for the corporate world since it would improve the success of companies while others think that having a diverse board could lead to lack of coordination and thus cause corporate failure. With globalization and industrialization, corporations have been able to undertake numerous campaigns to increase board diversity by focusing on corporate governance, diversity standards, and networking metrics. Many experts believe that despite some companies experiencing a decrease in their financial performance after diversifying their boards, they are bound to perform well in the long run.

Over the years, there has been an increment in the involvement of women in the boards (Chanavat & Ramsden, 2013). Freeman (1984) stated that board diversity entails the aptitude of the board and various board assorted qualities such as the age, gender, and ethnicity of the board while Marimuthu (2008) clarified that diversity is all about being the minority in the group which was in line with Freeman (1984) views. Corporate boards are formed due to the attributes, the perspectives, the experiences and the skills that the director brings forth which are relevant in pushing the organization to success.

2.1.2.      Financial Performance

Financial performance is the degree to which the financial objectives of the business are being achieved which should be quantified in monetary. According to Alamet (2011), for a corporation to determine whether it is performing well or not, it should consider its execution of human resource, whether they satisfy their employees, its profitability when compared to the industry, its innovative and creative ideas, its supply chain management, consumer loyalty, whether it retains its clients, its financial performance in terms of ROA, ROI, market share, revenue, price-earnings ratio, EPS and so on. Shah et al. (2011) commented that corporations would need to use market-based measures to determine their performance. These market-based measures may include ROE and ROI. Bhagat and Black (1999), on the other hand, measured the financial performance of firms using ROA, turnover ratio, that is, sales/assets, operating margin, net income, gross margin, Sales, employees turnover and Cash flows and so forth. Using these measures, an organization would be able to measure its financial position or performance and thus make decisions regarding its prosperity.

2.2.   Empirical Review

Some scholars such as Allen, Gail & Wheatley (2008) and Marimuthu (2008) had the view that diversity would improve the performance of companies. Fan (2012) concurred with their argument since, after the data analysis, his findings were that gender connected positively with the financial execution of the board. Apparently, Allen et al. (2008) determined that the performance of an organization was critically linked to its diversity since diverse boards had the opportunity to bring in different skills and experience which would make the directors make rational decisions regarding innovation of products, research and development and so forth, thus enhancing the success of corporations. Other studies such as Niclas et al. (2003); Kevin & Antonio (2008); Miller & Maria (2009); Lamers (2016); Mattis (2000); Maznevski (1994); Miller, & del Carmen Triana (2009) also had the same view that gender has a positive link with financial performance (Kevin & Antonio, 2008). This would mean that having a diverse board improved the ROA, ROI, led to more exceptional creativity and innovation, increased firms’ value, increased the reputation of companies, their profitability, maximized the benefit of shareholders and so forth.

Another scholar, Prihatiningtias (2012), performed an analysis of the financial performance of an organization given that it had a diverse board. Using metrics like Return On Assets and Tobin’s Q, Prihatiningtias (2012) determined that gender diversity had both positive and adverse effects on the financial performance of firms. However, other scholars differed with this and argued that there was no correlation between diversity and performance. A study was conducted with regards to the topic on Indian firms which focused on diversity factors such as gender, age, and experience (Gary et al., 2010). Its main aim was to ascertain whether there was any correlation between the performance of Indian firms and diversity of boards. Its findings were that there was no link between the two variables in Indian firms (Goodstein et al., 1994). Additionally, Goodstein et al. (1994) had the view that diversity provided a constraint in implementing strategic decisions since the directors had different opinions on the choices and this caused lack of coordination. It is, therefore, be concluded by these scholars that having female directors on board did not have any impact on Indian firms. Other scholars still had the same views as Goodstein et al. (1994), Prihatiningtias (2012) and Gary et al. (2010). Carter et al. (2010) researched ethnic minority, gender, and ROA. They concluded that these diversity attributes did not have any impact on the performance of organizations based on the Return on Assets. Walt et al. (2006) agreed with this and found that there was no evidence that diversity had any link with the decisions made by New Zealand firms (Pechersky, 2016; Reguera-Alvarado et al., 2017).

According to Jhunjhunwala, & Mishra (2012), heterogeneous teams were more productive than homogenous ones, and this helped determine the behavior of companies. Jhunjhunwala, & Mishra (2012) stated that a mixed group is a team that is diverse. This team could bring a lot of innovation and creativity to the business, thus leading to the success of companies (Hassan et al., 2015). A homogenous team, on the other hand, is a team that is not diverse in that they have the same skills, experience, qualifications, nationality, age, race, gender, ethnicity and so on. This team often tends to be bored from work since they possess the same qualities, thus leading to lack of motivation and morale to work. As a result, this would reduce the productivity of the team (Hutchinson et al., 2015; Kakabadse et al., 2015). Researchers, therefore, argued that having a diverse board would be crucial to the success of a company as it would enhance its productivity. Schwizer et, al. (2012) who conducted their study on Italy Listed Firms found that there was no relationship between having female directors and the performance of firms listed on the Italian Stock Exchange. From this, it is evident that studies conducted on board diversity and financial performance show mixed findings, thus calling for further research on the topic, especially on New Zealand Listed Firms.

2.3.     Theoretical Review

This part of the chapter aims to analyze the theories that are related to the diversity of boards in order to understand the topic. This analysis will only cover the agency theory. Discussing this approach would help us link performance and diversity from the perspective of various scholars.

2.3.1.      The Agency Theory

This theory is currently the most prominent in ascertaining the relationship between diversity and performance (Low et al., 2005). Jensen and Meckling (1976) stated that an agency problem might arise where a company has more equity than debt, and the actions of the managers tend to differ from the interests of the shareholders, that is, wealth maximization. Since the firm has higher equity, it would mean that the shareholders have a lot of control over the business and thus when the actions of the managers are different from what the shareholders would wish, a conflict of interest may arise, which would cause an agency problem. In an office setup, an agency problem may occur when the objectives of the principal and those of the agents differ or when it may be hard for the principal to determine what operations are being conducted by the agent (Eisenhardit, 1989).

Experts argued that having women on the board would bring in fresh perspectives and thus improve the decision-making and problem-solving process. Besides, having a diverse board regarding gender would go a long way in solving agency costs problems (Finegold et al., 2007). For instance, if the board is comprised of men only, they may have their private pursuits such as creating loopholes in the organization so that they can loot money for their selfish gains. Here, they would all work together in their private pursuits. However, if the board is comprised of a diverse board of both men and women, fear may be created if one male director wants to loot and this would make him evade from creating loopholes in the organization. Another example would be that a diverse board would be able to maximize the interests of the shareholders, thus reducing agency problem costs while a board that is not diverse would have its private pursuits which may increase the costs related to agency problems.

Furthermore, Singh and Vinicombe (2004) noted that women who have been appointed in top positions of the organization tend to take their roles more seriously and this would go a long way in improving corporate governance. All these conclude that a diverse board is suitable for companies since it would help reduce the costs related to agency problems. Evidence of the fact that diversity reduces agency problem costs is research conducted that showed that having more female directors improved the attendance of the male directors (Adams and Ferreira, 2009). Various scholars who did their research in different countries found that diversity enhanced financial performance about the reduction of agency problem costs. Carter et al. (2003) conducted their study in the United States and discovered that there was a link between the two variables. Campbell and Minguez-Vera (2008) who did their research on Spanish companies found that diversity regarding gender also had a positive impact on the performance of Spanish firms. Lastly, Julizaerma and Sori (2012) who conducted their study on Malaysian Listed Companies discovered a positive link between women directors and performance of businesses. All these researchers concluded that having women in the boardroom would not only improve the competitive edge of companies but also improve the attendance of male directors in board meetings, thus enabling them to make decisions promptly which could go a long way in corporate success.

2.4.     A Summary of the Literature

The arrangement of the board will determine how well companies solve problems and make decisions (Daily, Johnson & Dalton, 1999). Components of the board such as the size and structure are also dependents on the success of corporations. Various reforms made by organizations have encouraged women to participate in corporate affairs with an aim to advance gender diversity in companies. The new change is now requiring firms to ensure that their directors have a different ethnicity, gender, experience, and age and this would help maximize the interests of stakeholders (Van der Walt et al., 2006). This analysis, therefore, tries to form a conclusion on the topic relating to NZ listed firms.

Chapter 3: Methods and Data

3.1.           Introduction of the Source of Data

This chapter depicts the techniques used to collect the data; the procedure followed in data collection, the population used in arriving at the conclusions, how the data will be analyzed, any reconciliation and the rationale for the data collection. This study considers causal and explorative research design since it seeks to determine whether board diversity has any impact on the performance of NZ listed firms. Additionally, the study is explanatory since it explains how the various determinants of financial performance such as ROA and leverage are affected by the presence of women on the boardroom (Carter et al., 2010). The influence of the diversity of a board on the financial performance of NZ listed organizations for only the financial year ending 2016. The population for this study was derived from all NZ registered organizations. These organizations sum up to 176 which would be representative of the analysis. The data that will be needed for this study will include financial performance metrics of New Zealand enterprises such as ROA, leverage, number of directors, the size of the firm, revenue, firm value, shareholders’ value and so on. This data can be easily obtained from the financial statements of the NZ listed companies which would be gotten from their annual reports or the Bloomberg database (Chanavat & Ramsden, 2013). Using this data, the researcher can ascertain whether there is any link between gender diversity and performance of NZ firms. Consider the table below.

Variable Name Definition
ROA The ROA is the Return on Assets for a company. It is computed by taking the PAT (Profit After Tax) of a firm divided by its total assets.
PWOMEN This is the number of women directors divided by the total number of directors in the NZ listed company.
DWOMEN This shows whether the firms have female directors or not. In this research: If any female director= 1 If no female director= 0
Leverage This is the proportion of the source of funding available to a firm whether equity or debt. It can be calculated by dividing debt by shareholders’ equity.
Firm size These are the total assets that the firm has which can be gotten from the balance sheet of the NZ firms.
Board size This is the total number of directors in the NZ listed firm.
Ω This is the unobservable bias or the error term.

For this research, the DWOMEN, PWOMEN, leverage, board size, firm size and the error term have been used in the derivation of the ROA in the error term.

3.2.           Data Collection

The data that will be used for this research will be collected from the database of Bloomberg and the annual reports of publicly listed companies in the New Zealand Securities Exchange (NZX). Using quantitative research methods, the researcher would obtain the financial statements of the 176 NZ listed corporations and compute their leverage by finding the ratio of debt to equity, compute the size of the firm by finding the total assets available at the NZ companies, and obtain the Return on Assets (ROA) from the Bloomberg website. Besides, the related literature on the topic will be retrieved from the library database, that is, EBSCO host (Erhardt, Werbel & Shrader, 2003). Using this research, the researcher would be able to perform a literature review and determine what other scholars have concluded with regards to the topic. This would, therefore, form a basis for the research and analysis.

3.3.           Analysis

A multivariate regression method will be used to test the null hypothesis. The data will be passed through SPSS since it is the best statistical tool in analyzing such multivariate data. Using SPSS, the researcher will perform the multivariate regression analysis (Finegold, Benson & Hecht, 2007). For every data that is examined, it would be prudent to ascertain the dependent, the independent variables, and the control variables, if any. For this analysis, a regression model was formed as shown below.

Using the regression model depicted above, the Return on Assets (ROA) is the dependent variable, the PWOMEN, and the DWOMEN are the independent variables while the board size, the firm size, the leverage and the Ω stands for unobservable bias are the control variables. Using this knowledge on the dependent, independent and the control variables, the researcher would be able to analyze the null hypothesis and thus form a conclusion with regards to the topic.

3.4.           Reconciliation

This section reconciles the reason for the use of quantitative research method and not qualitative research method. First, the data given is numeric and therefore the best research to conduct is the quantitative research method. If a qualitative research method were performed, the researcher would not generate accurate findings. Second, the sample size used for this study is significant, and therefore a quantitative research method had to be used (Gary, David, & Frank, 2010). Apparently, the sample size used for this study consists of 176 NZ listed companies which means that using the quantitative research method was the most suitable option. Third, quantitative research method is objective oriented and less bias. This means that the researcher used the quantitative research method since it would enable him or her realize the objectives of the study, and it would not favor one side of the hypothesis.

3.5.           Rationale

The primary rationale for conducting this study using the multivariate regression method is to determine whether a link exists (Hassan, Marimuthu & Johl, 2015). The researcher, therefore, wants to determine whether having a female director in the board improves or derails the financial performance of NZX companies.

Chapter 4: Results and Analysis

4.1. An Introduction and Formulation of Hypotheses

A multiple regression analysis was performed in SPSS with the aim of answering the research question (Haldar, Shah & Rao, 2014). This research contains dependent (Y), control and independent (X) variables. For this analysis, the PWOMEN is the X; the board size, the firm size, the leverage and the error term are the control variables while the ROA is the Y which is derived from the equation below.

The first step of performing this analysis is the formulation of the hypotheses, that is, the null and alternate hypothesis (Jensen & Meckling, 1976). According to this research, the null hypothesis is that there is a positive relationship between gender diversity and financial performance in NZ Listed Companies while the alternate hypothesis is that no positive correlation between gender diversity and financial performance of NZ Listed Companies as described below:

Ho: There is a positive relationship between gender diversity and financial performance of NZ Listed Companies.

Ha: There is no positive relationship between gender diversity and financial performance of NZ Listed Companies.

4.2.                       Descriptive Statistics

The next step is generating the descriptive statistics from the variables using SPSS (Kakabadse et al., 2015). Here, the variables are ROA, leverage, firm size, board size, number of directors, female directors, PWOMEN and DWOMEN. To generate this in SPSS, a researcher would click the analyze button then descriptive statistics button which would create the output in the next window. The descriptive statistics as generated by SPSS is shown below.

Descriptives
N Minimum Maximum Mean Std. Deviation Variance
ROA 176 -367.4 143.28 -2.9133 35.321 1247.557
Leverage 176 0 5074.3 70.7685 386.99 149763.501
Firm_size 176 0 914869 11936.5 94037 8842870035
No_of_directors 176 0 13 4.97 2.701 7.296
Female_director 176 0 4 0.84 1.002 1.003
PWOMEN 176 0 0.6 0.138 0.1596 0.025
DWOMEN 176 0 1 0.51 0.501 0.251
Valid N (listwise) 176

From the descriptive statistics table above, 176 items were analyzed for all the variables including the control variables. The statistics indicated that the ROA had a minimum range of -367.4, a maximum range of 143.28, an average of -2.9133, a std dev of 35.321 and a variance of 1,247.557. Second, the leverage of the firms had a minimum range of 0, a maximum range of 5074.3, a mean of 70.7685, a standard deviation of 386.99 and a variance of 149763.501. Third, the assets of the companies had a minimum range of -0, a maximum range of 914869, an average  of 11936.5, a std dev of 94037 and a variance of 8842870035. Fourth, the number of directors had a minimum range of 0, a maximum range of 13, a mean of 4.97, a standard deviation of 2.701 and a variance of 7.296. Fifth, female directors have a minimum range of 0, a maximum range of 4, an average of 0.84, a std dev of 1.002 and a variance of 1.003. Sixth, PWOMEN had a minimum range of 0, a maximum range of 0.6, a mean of 0.138, a standard deviation of 0.1596 and a variance of 0.025. Lastly, DWOMEN had a minimum range of 0, a maximum range of 1, an average of 0.51, a std dev of 0.501 and a variance of 0.251.

4.3.                       The Regression Statistics

The next step after generating the descriptive statistics is performing the multivariate regression analysis in SPSS to create the regression summary output. To achieve the multivariate regression analysis in SPSS, the researcher would input the required data in SPSS (Lamers, 2016). After he or she has input the data, the researcher would determine which variable is scale data, nominal data and which one is ordinal data. Next, the researcher would click the analyze tab and go to the regression tab. Under the regression tab, the researcher would be able to find the linear model. He or she would click it, and a table would form. After that, the researcher would input the X (independent) variable, input the Y (dependent variable), select the 95% confidence interval as well as the option to generate a histogram and a normal plot graph (Mattis, 2000). He or she would then click OK, and the output would be produced in the next window. Using the multivariate regression analysis in SPSS, the researcher would generate the regression statistics, the coefficient analysis, the model summary and the test of ANOVA.

4.3.1        The Test of ANOVA

The ANOVA test is a test that would help a researcher assess whether there is significant statistical difference. Using the analysis of ANOVA, a researcher can determine whether there is a correlation between the variables and thus whether to reject the null hypothesis or not (Miller & del Carmen Triana, 2009). The test of ANOVA involves comparing the F-stat and the alpha.  If F is higher than alpha, the researcher should reject the null hypothesis while if it is lesser than the alpha value, the researcher should fail to reject the null hypothesis. In this research, the F-stat is 1.836 while the alpha is 0.05 given that the confidence interval is 95%. Since F-stat is higher than the alpha, the researcher should reject the null hypothesis and conclude that there is no relationship between gender diversity and financial performance of NZ listed firms.

ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression 2280.026 1 2280.026 1.836 .177b
Residual 216042.5 174 1241.624
Total 218322.6 175
a Dependent Variable: ROA
b Predictors: (Constant), PWOMEN

4.3.2        The Coefficients Analysis

The researcher could also compare the t-stat and the significance value. If the t-test is higher than the significance value, the researcher should reject the null hypothesis. However, if it is less than the significance value, the researcher should fail to reject the null hypothesis, but instead, reject the alternate hypothesis (Pechersky, 2016). In this study, the t-stat for the PWOMEN is 1.355 while the significance value is 0.05. Since the t-test is higher than the significance value, the researcher should reject the null hypothesis and conclude that there is no link between diversity concerning gender and the performance of New Zealand organizations.

Coefficientsa
Model Unstandardized Coefficients Standardized Coefficients t Sig. 95.0% Confidence Interval for B
B Std. Error Beta Lower Bound Upper Bound
1 (Constant) -6.033 3.515 -1.716 0.088 -12.97 0.904
PWOMEN 22.612 16.686 0.102 1.355 0.177 -10.322 55.546
a Dependent Variable: ROA

4.3.3        The Model Summary (R Squared Analysis)

Additionally, the researcher could evaluate the R squared to determine whether there is a correlation or a link between the variables. Ideally, the R squared ranges between 0 and 1. If it is close to zero, it would mean that the data is not close to the regression line; thus the researcher would reject the null hypothesis (Miller & del Carmen Triana, 2009). On the other hand, if it is close to one, the data would be said to be tightly fitted to the regression line; therefore, the researcher would fail to reject the null hypothesis. In this study, the R squared is 0.01 which means that it is close to zero. As a result, the researcher would reject the null hypothesis since it would be said that the data is not closely fitted to the regression line since it is close to zero (consider the table below and the normal standardized plot).

Model Summaryb
Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson
1 .102a 0.01 0.005 35.23668 1.998
a Predictors: (Constant), PWOMEN
b Dependent Variable: ROA


Chapter 5: Conclusion and Discussion

5.1.           Findings and Discussions

Based on the outcome of this quantitative study, the conclusions have been summarized. According to the quantitative analysis, the researcher performed a multivariate regression analysis through SPSS statistical tool with the aim of determining whether there is any correlation between the variables and thus make a conclusion on the null hypothesis (Mattis, 2000).

A multivariate regression analysis was performed in SPSS to analyze whether there is any link between gender diversity and the financial performance of New Zealand Listed firms. Ideally, a multivariate regression analysis is a type of regression that factors in one dependent variable and several independent variables. Using this study, the researcher would be in a position to determine whether there is any correlation between the variables in consideration (Lamers, 2016). The researcher decided to perform this multivariate regression analysis in SPSS since it is accurate, it is fast, and it would be able to analyze a large volume of data because a sample size of 176 New Zealand Listed companies would be investigated. According to the analysis, a test of ANOVA, a model summary, and a coefficients analysis was generated. 

First, the test of ANOVA is a test that is conducted to determine whether there is any correlation between diversity and performance. Using the test of ANOVA, the researcher would be able to compare between the F-stat and the significance level. Apparently, if the F-stat is higher than the significance, the researcher should conclude that there is no correlation (Kakabadse et al., 2015). On the other hand, if it is less than the significance, the researcher should find that there is a correlation. The findings of this test were that the F-stat was higher than the significance level which could mean that there is no correlation or link between gender diversity and the financial performance of NZX corporations.

Second, the model summary is a test that generates the R, R squared, the adjusted R squared the standard error of estimates and the Durbin Watson error term. Using the R squared, the researcher would be able to determine whether the data is closely fitted to the regression line or not. Ideally, if the R squared is close to 0, then the researcher would conclude that the information is not closely fitted to the regression line (Jensen & Meckling, 1976). However, if it is near 1, the researcher would find that the data is carefully adjusted to the regression line. Besides, the model summary can help the researcher determine whether or not the information is normally distributed without plotting the normal distribution plot. Here, if the data is not closely fitted to the regression line, it would be said that it is not normally distributed. On the other hand, if it is closely matched to the regression line, the researcher would conclude that the data is closely fitted to the regression line (Haldar, Shah & Rao, 2014). The findings of this analysis were that the R squared was close to zero which would mean that the data was not closely fitted to the regression line. This is evident in the normal plot graph where the information is scattered but not close to the regression line. 

Lastly, the coefficient analysis is another way that the researcher can determine whether or not there is any correlation between gender diversity and the financial performance of NZX businesses. Using the coefficients analysis, the researcher can compare the t-stat and the alpha. Ideally, if the t-stat is higher than the alpha, the research can conclude that there is no link between gender diversity and the financial performance of NZX companies while if it is less than the alpha, the researcher can find that there is a link (Hassan, Marimuthu & Johl, 2015). The findings of this analysis were that the t-stat was higher than the alpha which would mean that there is no link between gender diversity and the financial performance of firms listed on the New Zealand Securities Exchange.

Overall, all these three outputs of the multivariate regression analysis performed in SPSS derive the same conclusion. From the results, it is evident that the F-stat is higher than the significance value, the t-stat is higher than the alpha value and the R squared is closer to zero and thus the researcher would reject the null hypothesis (Gary, David & Frank, 2010). Besides, using the graphs plotted, that is, the histogram and the normal plot graph, one would say that there is no correlation between the variables in consideration.

According to the literature review, this topic has been debated for years. In fact, several scholars have been inconclusive since their conclusions differed from other scholars. From this, my study tries to bridge the gap that exists between the various literature analyzed. Apparently, some found out that the having women in the boardroom or different skills, experiences, age, backgrounds, nationalities, races and so forth had a positive impact on the financial performance of firms, their value, and profitability (Finegold, Benson & Hecht, 2007). Others, on the other hand, differed. This research, therefore, tries to bridge the gap between the two varieties of scholars, that is, those who thought that diversity was positively related to performance and those who believed that diversity had no link to the financial performance by using New Zealand Listed companies as an example. Financial performance could be attributed to other factors such as competition, increased productivity, increased morale and motivation, higher strategy and so on, but not gender diversity.

The theoretical research performed previously is not in line with the quantitative results since according to the theoretical study, the expected outcome was that gender diversity could improve corporate’s financial performance in NZ listed companies. The theoretical research performed favored gender diversity in the boardroom since the market capitalization of large firms was attributed to the diversity of the boards regarding backgrounds, gender, experiences, age, race, nationality, skills and so on (Erhardt, Werbel & Shrader, 2003). Experts had the view that diversity would enhance innovation, improve problem-solving and decision making, increasing companies’ profitability and the value of firms, maximize the value of shareholders and increase the attendance rate of male directors in board meetings. Besides, it could be able to deal with the agency problem costs in that having a diverse board would ensure that the interests of the shareholders are achieved, thus preventing conflict.

5.2.           Conclusion

The age of the directors, their experience, gender and their level of education may have a huge impact on the performance of NZX organizations. According to research done, scholars found that the market capitalization of large companies could be as a result of the diversity of the board since the board members or directors could bring in different skills and experience which would aid in problem-solving and decision making promptly (Chanavat & Ramsden, 2013). However, conducting this study helped the researcher conclude that the financial performance of many corporations may not be attributed to gender diversity. For instance, some countries found that their companies performed better when their boards were only composed of men while businesses in other countries found that their companies showed better performance when they had at least one female in the board. The primary reason why women directors are few is that most women lack the required job training and experience to be in a board and thus they are not able to help the board to make rational decisions (Grosvold, 2007).

As a researcher, I conducted my research on NZX Listed firms to ascertain whether there is any link. During my study, I performed a literature review to determine what other scholars thought regarding on the topic. All the researchers were inconclusive since some thought that there was a link between the two variables while others felt that there was no link (Carter et al., 2010). After an analysis performed in SPSS, I concluded that gender diversity had no connection with the financial performance which means that having a diverse BOD did not alter the financial performance of NZX listed companies.

In conclusion, this analysis discovered that there is no relationship between gender diversity and the financial performance of NZX listed enterprises. Consequently, having a gender diverse board did not change the financial performance of NZX registered organizations (Allen, Gail & Wheatley, 2008). However, the Agency Theory favored diversity and stated that having a diverse board would likely ensure that the company maximizes the value of the shareholders by avoiding any conflict. This paper conducted a multivariate regression analysis to answer the topic. While diversity may not have a significant influence on the performance of companies, it was found that having female directors could improve decision making, the creativity and innovation of the board, problem solving, the value of the organization, the value of the investors and the attendance of male directors in board meetings (Adams & Ferreira, 2009). In this way, it is evident that board diversity is beneficial to the financial performance of NZX listed businesses in the long run. Generally, having at least one female director may not be a determinant of the financial performance of a firm. Besides, even if females are considered more innovative and creative, it does not mean the company will perform well.

5.3.           Recommendations

Based on the outcome, the following proposals have been made. NZX corporations should have a diverse board size since it will assist them to maximize the value of the shareholders, improve the value of the firm, enhance problem-solving, decision making and improve the attendance of male directors in board meetings (Allen, Gail & Wheatley, 2008). Besides, NZX listed companies should also try to involve more women in the boardroom as it would go a long way in enhancing creativity and innovation, thus translating into better financial performance for NZX listed companies. From this, it can be concluded that it is vital that both genders be mixed in the boardroom to enhance financial performance in the NZX listed companies. Additionally, the board should be diverse regarding experience, skills and education level since this could strengthen decision-making of NZX organizations (Carter et al., 2010). Lastly, NZX companies who value their ROA as their basis of financial performance measurement should ensure that their board members a shorter time and have more experience. Therefore, if NZX companies want to improve their financial performance, they should develop a code for corporate governance that should focus on the dynamics of the board.

5.4.           Future Research Suggestions

Besides performing further research on this topic, scholars can conduct additional analysis to assess the factors that affect how much compensation a director will receive. From this study, scholars will be able to determine whether the performance of a director and gender diversity will affect how much benefit the director will receive (Chanavat & Ramsden, 2013). For instance, whether male directors are compensated more than their female counterparts. Additionally, on directors’ compensation, further data on the value of options or shares would need to be obtained to determine whether a gender pay gap exists between the directors.

Another area of further research that should be considered is whether directors should be paid in shares or monetary compensation since it would be able to provide valuable insights on why women directors are being paid more in shares and less in financial compensation (Erhardt, Werbel & Shrader, 2003). For instance, if companies prefer monetary compensation over shares, scholars should consider researching on why female directors are paid more regarding shares. Further, it may be valuable to perform further research on the topic while considering market-based performance factors such as Tobin’s Q to assess whether gender diversity affects financial performance. Ideally, the Tobin’s Q is the most accurate market-based performance measure since it considers the proportion of the market value of the assets of the company divided by the book value or the replacement cost of those assets (Finegold, Benson & Hecht, 2007). Lastly, it may be valuable if the study  out researched other countries so that scholars can be able to come up with a conclusion on whether board diversity attributes affect the performance of corporations. Apparently, as seen from the literature review, researchers who conducted their study in different countries had different conclusions (Gary, David, & Frank, 2010). Performing further research based on different countries with regards to this topic would help the researchers come up with an overall conclusion on the issue of study.

5.5.           Limitations

Despite performing this study, the researcher experienced three limitations or drawbacks of the study. First, the sample size used may not represent the entire population, that is, depending on the country where the analysis is conducted, the results may differ (Hassan, Marimuthu & Johl, 2015). For example, the scholars who analyzed the United States listed corporations found that there was a correlation while those researched on Indian Listed Companies found that there was no link. This is a limitation since the results may not be accurate as they may vary depending on the country where the study is conducted. 

Second, there was lack of there was lack of time for collecting data. Ideally, there are other methods of data collection which are more reliable than seeking information online such interviews and questionnaires (Hassan, Marimuthu & Johl, 2015). If the researcher had enough time, he or she would have used interviews to find information from the board of directors on whether they think diversity affected their performance in any given year or not. Besides, using interviews, the researcher could be able to seek information on the number of female directors on the board. This is a limitation since the researcher was constrained to one data collection method.

Lastly, this study faced a challenge in collecting data. Most board and financial information for the financial year ended 2016 was not available, and from the Excel file, it is evident that such data that was not available is labelled NA since it was not available on Bloomberg and the annual reports of the New Zealand Listed companies (Hassan, Marimuthu & Johl, 2015). Besides, some of the data that was presented in the annual financial reports of the New Zealand Listed corporations had inconsistent figures in terms of the total number of directors, the total assets of the firms and their debt or equity in that there was some variance between the figures in the annual reports and the figures in Bloomberg.

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Appendix

Casewise Diagnosticsa
Case Number Std. Residual ROA Predicted Value Residual
73 -10.255 -367.39 -6.0327 -361.357
115 -3.026 -112.66 -6.0327 -106.627
159 4.237 143.28 -6.0327 149.3127
a Dependent Variable: ROA
Residuals Statisticsa
Minimum Maximum Mean Std. Deviation N
Predicted Value -6.0327 7.5345 -2.9133 3.60953 176
Residual -361.357 149.3127 0 35.13586 176
Std. Predicted Value -0.864 2.894 0 1 176
Std. Residual -10.255 4.237 0 0.997 176
a Dependent Variable: ROA
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