DefinePK

Research Objective

To analyze the impact of gender diversity on the financial performance of publicly listed companies in Pakistan.

Methodology

The study employed an exploratory research design using secondary data from the annual reports of the top 100 publicly listed companies in Pakistan from 2017 to 2019. Multiple regression analysis was used to examine the relationship between gender diversity and financial performance, controlling for variables such as firm size, age, leverage, board independence, and board size.

Methodology Flowchart

                        graph TD
    A["Collect Annual Reports of Top 100 Pakistani Companies 2017-2019"] --> B["Extract Data on Gender Diversity, Financial Performance, and Control Variables"];
    B --> C["Perform Multiple Regression Analysis"];
    C --> D["Analyze Results and Interpret Findings"];
    D --> E["Draw Conclusions and Formulate Recommendations"];                    

Discussion

The study suggests a complex relationship between gender diversity and financial performance in Pakistani companies. While some metrics like ROA and Tobin's Q showed potential improvement with increased female board representation, ROE and ethical/social compliance were negatively impacted. The authors posit that a small percentage of female directors may be insufficient to enact substantial change, and the overall board composition influences the effectiveness of female directors. The findings highlight that gender diversity's impact can be contingent on various factors, including the critical mass of women on boards and their integration into the decision-making process.

Key Findings

- Companies with female board members were found to be less profitable and less ethical in their operations, though this did not apply to the rule of law or ethical and social conformity (ESCC).
- The presence of more women on a company's board did not significantly affect net worth or average board age but did impact the amount of money a company could borrow.
- Regression analysis indicated that Tobin's Q and ROA may improve with more women on the board of directors.
- Conversely, there was a negative impact on the company's ROE, and compliance with ethical and social standards was also jeopardized in many instances.
- Women on corporate boards have a positive influence on financial performance and ethical and social compliance, which in turn raises company value.
- ROA has a significant influence on ROE, but little effect on ROS or ROE, suggesting limited indirect financial power of women on boards via ethical and social compliance.

Conclusion

The study concludes that while gender diversity on boards of directors in Pakistan shows a positive influence on financial performance and ethical/social compliance, its impact on specific financial metrics like ROE can be negative. The effectiveness of gender diversity is likely dependent on achieving a critical mass of female directors and the overall governance structure of the company. The findings have implications for businesses globally, emphasizing the nuanced nature of gender diversity's impact on corporate outcomes.

Fact Check

- The study analyzed data from the top 100 publicly listed companies in Pakistan.
- The data collection period for the study was from 2017 to 2019.
- The study used multiple regression analysis to examine the relationships between variables.

Mind Map