The role of women in corporate financial performance in vietnam

Overview the role of women on board committees and corporate financial performance in Vietnam .... The objectives of this research are to determine whether the role of women on board com

UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES

HO CHI MINH CITY THE HAGUE

VIETNAM THE NETHERLANDS

VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

THE ROLE OF WOMEN IN CORPORATE

FINANCIAL PERFORMANCE IN VIETNAM

BY

NGUYEN THI HONG THU

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

HO CHI MINH CITY, May 2014

UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES

HO CHI MINH CITY THE HAGUE

VIETNAM THE NETHERLANDS

VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

THE ROLE OF WOMEN IN CORPORATE

FINANCIAL PERFORMANCE IN VIETNAM

A thesis submitted in partial fulfilment of the requirements for the degree of

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

By

NGUYEN THI HONG THU

Academic Supervisor:

Dr PHAM KHANH NAM

HO CHI MINH CITY, May 2014

Finally, I am greatly indebted to my family for their love for and support of me, keeping

me in good condition for learning I am also grateful to my close friends for their warm encouragement Thank you very much to all of you

TABLE OF CONTENTS

Chapter 1: INTRODUCTION 1

1.1 Problem Statement 1

1.2 Research Objectives 3

1.3 Research Questions 3

1.4 Research Methodology 3

1.5 Structure of the thesis 3

Chapter 2: LITERATURE REVIEWS 5

2.1 Theoretical relationship between women on board committees and corporate financial performance 5

2.1.1 Resource Dependence Theory 5

2.1.2 The Integrative Theory 6

2.2 Empirical studies 8

2.2.1 Determinants of corporate financial performance 8

2.2.2 The role of women on board committees in corporate financial performance9 2.3 Conceptual framework 13

2.4 Chapter remarks 14

Chapter 3: RESEARCH METHODOLOGY 15

3.1 Overview the role of women on board committees and corporate financial performance in Vietnam 15

3.2 Sample description 17

3.3 Variables 17

3.4 Hypothesis 19

3.5 Model specification 21

3.6 Analytical framework 24

3.7 Chapter remarks 24

Chapter 4: EMPIRICAL RESULTS 27

4.1 Descriptive Statistics 27

4.2 Analysis of the correlation between all variables 34

4.3 Result of the regression analysis 35

4.3.1 Pooled OLS Regression 35

4.3.2 Random Effect Models 37

4.3.3 Moderated Multiple Regression 39

4.4 Chapter remarks 44

Chapter 5: CONCLUSIONS AND RECOMMENDATIONS 45

5.1 Conclusions 45

5.2 Policy recommendation 46

5.3 Limitations 47

Chapter 1: INTRODUCTION

This chapter explains reasons for choosing the research topic, its objectives and research questions In addition, this chapter also presents a brief of methodology and the thesis structure

Financial performance of individual corporations varies markedly over time (Frei, 1999; Shei, 2007; Krestensen, 2008) Corporate financial performance could increase, decrease,

or follow fluctuating patterns Data from 100 listed companies in Ho Chi Minh Stock Exchange (HOSE) for the period 2008-2012 confirms this variation: the average of returns on assets was 8.32% while the highest level was 59.9% and the lowest was -15.5%; returns on equity was around 16.2% while its maximum level was 158.8% and the minimum level was -34.3% Some firms have losses that lead to negative results In addition, Tobin’s Q of these companies had the average level at 1.088, the highest level was 5.19 and the lowest was 0.17 Thus, the role of the financial management is very important in the company

Studies on the effect of the management on corporate financial performance bring inconsistent results In individual corporate, high financial performance is likely to reflect management effectiveness and efficiency in making use of company’s resources and this

in turn contributes to the country’s economy at large (Naser and Mokhtar, 2004) The role

of management in company would be very important For example, one of the most

well-known bankruptcies opened with the spectacular collapse of Enron Corporation in the U.S in 2001 (Enron is the seventh largest listed company) related to the company’s management The role of the Board in Enron’s collapse and bankruptcy is concluded such as: (i) fiduciary failure, (ii) lack of independence between the company and certain Board members, (iii) conflicts of interests, (iv) excessive compensation, (v) high-risk accounting (IFC, 2004) From the bankruptcy in Enron, the result shows that the role of board committees in company is very significant (Zahra and Pearce, 1989)

Several studies have produced estimates of the women’s role in corporate financial performance in developed countries, especially in the United State, Canada, and UK, but

there is still insufficient data for developing countries (Rosa et al., 1996; Lerner, 1997)

However, research results on the role of women on board committees in corporate financial performance are mixed Specifically, it has been found that women on board and financial performance has a positive relationship (Carter, et al., 2003; Adams and Ferreira, 2004; Lang and Stulz, 1993; Campbell and Minguez-Vera, 2008; Smith N., et al., 2006; Dezsö and Ross, 2012), a negative relationship (Frink et al., 2003; Bohren and Strom, 2006), and no-relationship (Rose, 2007; Smith and Verner, 2008)

Studies on the role of women in corporate financial performance in Vietnam as well as in developing countries are still limited Nowadays, the role of women is an important part

of family life and society, and their strong representative in the economy Moreover, they are significant contributors in agriculture, trade, education, social service, and entrepreneurship (Nguyen, 2011) Thus, Vietnamese companies employ proportionally more women top managers compared to similarly populated countries in the same income group (Enterprise survey, 2011) The objectives of this research are to determine whether

the role of women on board committees in corporate financial performance in Vietnam through the period from 2008 to 2012

1.2 Research Objectives

The aims of this paper are to examine whether the role of women on board committees in corporate financial performance in Vietnam through the period from 2008 to 2012 In particular:

(1) To investigate the role of women on board committees in corporate financial performance

(2) To identify the determinants of women’s participation in board committees

1.3 Research Questions

This study attempts to answer the following research question:

(1) Do women on board committees influence corporate financial performance?

(2) What are the determinants of women’s participation in the board?

1.5 Structure of the thesis

This thesis organized in five chapters as follows:

 Chapter 1 explains the reason for choosing the research topic, its objectives and

research questions This chapter also explains briefly about methodology to test the hypotheses

 Chapter 2 reviews the literature It starts with the concept of women on board

committees and corporate financial performance Following is theories relative women on boards and firm performance Empirical studies also presented in this part

 Chapter 3 explains data and variables which be used in the model This chapter

also presents econometric techniques to test hypotheses

 Chapter 4 presents empirical results corresponding to each estimation technique

 Chapter 5 gives conclusion, policy implications, and limitations of the study

Chapter 2: LITERATURE REVIEW

This chapter presents some theories relative to the role of women on board committees in corporate financial performance including the Integrative theory and Resource dependence theory In addition, empirical studies concerning the role of women on board committees also mentioned

2.1 Theoretical relationship between women on board committees and

corporate financial performance

2.1.1 Resource Dependence theory

Resource dependence theory (RDT) grounded in sociology and organizational theory and

it studied of how external environment affect the behavior on the organization (i.e financial performance) Pfeffer and Salancik (1978) stated that the board committees attend the relationship between the company and other external competitors so that appeal environmental dependencies The authors proved that four advantages of external connections: (1) supply resources; (2) creation communication channel with important boards on the firm; (3) supply committees of support from main organizations in industries; and (4) creation authenticity for the firm

According to the resource dependence perspective, the board committee members help companies interface with its general and competitive environments (Zahra and Pearce, 1989) Many empirical studies supported the central argument of this perspective on board committee role (Pfeffer and Salancik, 1978; Pearce and Zahra, 1991) Furthermore, boards not only provide increase coordination between organizations and vital resources but also absorb external environment by providing information, thus enhancing firm performance

Recently, to expand the RDT, Hillman, et al (2009) suggests that different types of directors will provide more different valuable resources to the firm, then, should produce better firm performance The presentation of women on board committees increased ability access to resources (Zahra and Pearce, 1989; Hillman et al., 2007), receive and

feedback information (Boyd, 1990), as well as enhance skills and knowledge of boards (Provan, 1980)

Resource Dependence Theory put a fundamental basic for the most convincing theoretical argument on women leader in a business case Women hold the qualified characteristics in improving the information providing by unique information held by diverse directors Generating unique information sets for better decision making makes women different from men

2.1.2 Corporate financial performance - The Integrative theory

It is necessary to study on corporate financial performance in various synthetic; however, most approaches on this had been separate concepts White and Hamermesh (1981) focus attention on several underlying concepts including industrial organization, organization theory and strategic choice to understand corporate financial performance

Industrial organization theory is a branch of economics that focuses on the

industry-level and corporate-industry-level According to the industrial organization perspective, market structure affects the financial performance Research in the industrial organization tradition typically seeks direct relationships between market structure factors and financial performance, measured at the aggregate level This perspective tends to ignore issues of strategy and organization

Strategic choice theory derives from the study of corporate management and focuses

primarily at the individual corporate level Proponents of this perspective believe that managers, by proactive making decision, can develop strategies that better align the firm with its environment and so improve financial performance Empirical research in the strategic choice tradition typically seeks relationships between strategy factors and corporate financial performance, and tends to place less emphasis on environment and organization variables Such factors as market share, firm growth, firm size, diversification, new product development, quality, advertising, sales force expense, research and development, investment intensity and price have been extensively studied and mostly found relate to financial performance

Contingency theory is a branch of organization theory In contingency theory,

combinations of unit causal factors (derived from the industrial organization, strategic choice or organization theory literatures), may interact and affect financial performance

A classic example of contingency is the positive relationship between increased environmental uncertainty and decreased organizational formalization identified by Lawrence and Lorsch (1967) An example is the role top management teams play in moderating the relationship between firm environment and strategy (Hambrick, 1981) The authors note that the industrial organization field is largely concerned with relationships among industry environment, business position and firm performance; key concepts in organization theory are environment and organization structure, typically focused at the business level but rarely concerned with financial performance The integrative model (White and Hamennesh, 1981) based on sub-models from industrial organization and contingency theory From industrial organization theory, industry environment (market structure) and business position (relative market share, product quality) related to corporate financial performance From contingency theory, environment, organization structure, and administration related to corporate financial

performance (See conceptual framework below)

To summarize, the theoretical framework does not give a clear perspective to the role of women on board committees and corporate financial performance When this paper mentioned the role of women on board committees and corporate financial performance,

it is the integrative theory In the next part, this paper discusses relevant empirical studies

of women on board committees and corporate financial performance that leading to development of the research methodology

2.2 Empirical studies

2.2.1 Determinants of corporate financial performance

Many previous studies analyzed corporate financial performance in various views, in some particular environments or in different economic sectors

Tarawneh (2006) showed that the factors such as bank size, asset management, and operational efficiency have positive effect on corporate financial performance (returns on assets and interest income) between five commercial banks in the Sultanate of Oman, during period from 1999 to 2003 Thus, the bank with higher assets, deposits, credits and shareholder equity does not always mean that has better profitability Another research is

to identify the factors (such as leverage, liquidity, capitalization, investment, size, age, location, export and management efficiency) affect the financial performance (returns on sales-ROS, returns on assets-ROA, returns on equity-ROE) of industrial firms in Greece during the period from 1997 to 2004 The result is efficiency significantly, and implies that profitable of industrial firms in Greece are large, and exporting firms with a competitive management team have an optimal leverage (Liargovas and Skandalis, 2008)

The recent findings show that leverage, liquidity, firm age, firm size, and management significantly affect corporate financial performance (returns on assets-ROA) of Jordanian insurance companies listed at Amman stock exchange during the period from 2002 to

2007 (Almajali, et al., 2012)

The role of women participate in leadership positions is instrumental for listed companies (Huhman, 2012) As the percentage of women on board committees steadily increases, the women play a main role in determining profitability, return on assets, return on equity, and price of stock of companies (Terjesen, 2009) For example, the women on board committees account for 36 percents better stock price growth, 46 percents better return on equity, and lead more profit (Sheridan, 2001) However, it is difficult to undertake research on the role of women on board committees in corporate financial performance (Nielsen & Huse, 2010) Thus, the next of this paper discusses the role of women on board committees in corporate financial performance in relevant studies

2.2.2 The role of women on board committees in corporate financial performance

Lerner et al (1997) represents individual characteristics that have effects on corporate performance of 200 Israeli women-owned companies This study gives five theoretical perspectives relation to firm performance such as social learning; individual motivations and goals; network affiliation; human capital (education background and business skills); and environmental factors (location, industrial sectors) The results show that network, motivation, human capital and environmental factors influenced different aspects of firm performance, while social learning had insignificant effect on firm performance To analyze human capital variables (education background, experience business), this paper presents mixed results The education background of Israeli women do not related to firm performance, and conversely, the experience in the industry is highly correlated with firm performance On the other hand, industrial sectors (manufacturing and services) are different, for example, manufacturing is better firm performance while services are negative

Another study shows that the positive relationship with the corporate performance of Thai governances through by four elements including the experience of management team, number of previous starts, age and scanning intensity (Box et al., 1995) Moreover, Hisrich et al (1997) presents the human capital (level of education, experience and business skill), personal motivations, and strategy of women on board of director effect

on corporate performance

Subsequently, Siong-Choy (2007) studies whether women entrepreneurship influences firm performance in Malaysia This author provides significant results between factors of women (goals and motives, networking and entrepreneurial orientation) effect on their business performance

The role of women on board committees are importance, however, few disputation academic studies address the relationship between women on board committees and

corporate financial performance There are three perspectives about this debate such as the positive, the negative, and non-relationship

The positive relationship

Carter et al., (2003) stipulated that women on board committees enhance the effectiveness of corporate financial performance, by their better understanding of complicated environment and their more astute decisions Additional, the role of the women on boards in a stakeholder framework is to resolve agency problem among managers and shareholders through setting compensation and changing leadership that do not create value for the shareholders The authors find that significant positive relationship between the women (the percentage of women) on the board and firm value (measured by TobinQ) by studying Fortune 1000 firms This result holds after controlling for size, industry sectors, and other corporate governance measures Accordingly, Adams and Ferreira (2004) research on the effect of women as chief executive officer on sensitive stock performance The authors based on the sample of an unbalanced panel of 1,500 director-level firms data from an IRRC annual publication Derived from annual company reports, the dataset contains characteristics of directors such as the gender of director (male and female), their number of directorships each director holds, the tenure

of director as director type, age, and director compensation The lower rate of women the company has, the more strongly its stock price tends to fluctuate stock price is (Klein A., 1998)

One argument stated that firms with at least one woman on its top management board generates one percent more economic value than ones without any woman on top management board, given other factor unchanged By panel data, many studies analyzed the relationship between gender and firm performance with different dependent variables

In instance, Lang and Stulz (1993) used Tobin’s Q, and Campbell and Minguez-Vera 92008) used Tobin’s Q, return on asset (ROA), return on equity (ROE) (accounting-based) Most of studies used independent variable as gender and other control variables including firm size, firm age, leverage, capital expenditure intensity, marketing intensity,

age of capital stock (depreciation expense); and the number of managers on the top management team

Smith et al., (2006) also examined the relationship between management diversity and firm performance in the case of women in top executive jobs and on boards of directors This author used a panel data of 2,500 Danish firms to analyze and to explore positive relationship between the proportion of women in top management (depending on the qualifications of female) and firm performance Moreover, the study indicated that the impact of gender diversity on firm performance depend on the organizational context These findings suggest the gender in board of directors that diversified to enhance the company performance

Dezsö and Ross (2012) found that top female management has impact on business performance However, this study only mentioned the innovation strategy of firm in the context that informational and social advantages of women in management This research uses a large sample with 21,790 firm-times in the period 1992-2006 with its source for financial information, the size, and gender composition of top management teams from S&P’s ExecuComp Database, and find that female representation in top management leads to better firm performance

In another research, Kalleberg and Leicht (1991) proved that the business that women leader was less successful than these owned men business The authors test hypotheses consistent with each theoretical position using longitudinal data of 411 companies with three independent variables: industries, company, and owner to estimate survival and success of company (dependent variables) Rosa et al (1996) suggests that the relationship between gender and small business performance is complex However, gender is still an important factor that effect on business performance after other key factors are controlled The value of assets in male firms is significantly higher than in female businesses In other words, the empirical results suggest that a positive relationship between management group demography (gender diversity) and growth orientation interaction and performance (Dwyeret al., 2003)

Interestingly, the women has succeed do bring capital to the social networks by their board positions The successful women directors have strong backgrounds and significant corporate experience, and the contribution of women on board committees is appreciated better men through their different experiences, styles, responsibilities and voice on the board (Singh and Vinnicombe, 2004)

The negative relationship

Using 409 individuals from forty-five new product teams in five high-technology companies, this study investigates the impact of group demography on group performance and a result is that the negative of gender diversity on corporate performance outweighed the positive through group process As the board committees have different opinions on making decisions, it is very difficult to create the cooperation among members of the Boards Furthermore, any increasingly feasible firm performance

is not large enough to offset (or cover) this costs (Ancona and Caldwell, 1992)

Considerable theoretical study has published to date concerning the relationship between demographic composition of organizations and the performance As power shared among increasingly women on boards, thus lead to lost opportunities to organizational performance (decreased) This result demonstrates support for an inverted U-shaped relationship between women on board committees and firm performance in relative industrial sectors (Frink et al., 2003) Especially, Bohren and Strom (2006) studied all non-financial firms listed on the Oslo Stock Exchange over the period 1989-2002 and found that higher the proportion of women on boards is negatively affect on corporate performance

The non-relationship

Rose (2007) uses a sample of Danish firms listed on Copenhagen Stock Exchange during the period of 1998-2001 in a cross sectional analysis Contrary to a number of other studies, this article does not find any significant link between firm performance as measured by TobinQ and female board representation The author has only focused on

the link between firm performance and board diversity under the presumption that gender

is vital for the financial success of firms

In order to get reliable information, Smith and Verner (2008) collected 10,000 largest

Danish firms observed during from 1994 to 2003 This study shows that the proportion of

women in top management jobs tend to have not affect on firm performance

2.3 Conceptual framework

From above theory reviews, I construct a conceptual framework to position the concept

“women on board committees” in a general framework for financial performance This

framework helps to theoretical see the channels that women on board committees could

influence financial performance

Note: Resource Dependence Theory (1);

The Integrative Theory: Contingency Theory (2); Industrial Organization Theory (3);

Strategic Choice Theory (4)

Source: Author’s reviews

Management

Women on boards

Financial performance

(1)

(2) (3) (4)

2.4 Chapter remarks

This chapter presents three main points Firstly, some main concepts concerning content

of the thesis have explained as determinants of women’s participate in board committees and corporate financial performance Secondly, two main theories that the thesis based on included the integrative theory and resource dependence theory Lastly, this section also gives some empirical evidences on the role of women in corporate financial performance

in developed countries as well as Vietnam context Results of these papers are not consistent Specially, it proved that the relationship between women on board committees and financial performance has a positive, a negative or even more no-relationship From the empirical results, in this thesis I argue that a positive relationship between women on

board committees and corporate financial performance

Chapter 3: RESEARCH METHODOLOGY

This chapter includes four sections The first is the overview of the role of women in corporate financial performance in Vietnam through the period from 2008 to 2012 The second explains data and variables which be used in the model Next, the description of difference estimation models will be introduced including Pooled Ordination Least Square (Pooled OLS), Fixed or Random Effects, and Moderated Multiple Regression (MMR) Finally, this study gives some hypotheses relative to the role women on board committees in corporate financial performance

3.1 Overview the role of women on board committees and corporate financial performance in Vietnam

By the development of the society, women play a very important role in families as well

as in the economic development of Vietnam This part mentions some issues of women in the past and their changing at the present in Vietnam

In the past, the role of Vietnamese women have affected by Chinese culture for a long time (Nguyen, 2011) In family, women almost stayed at home and had to do all housework, take-care children, their fathers and husbands Moreover, they only finished secondary school and some studied high school People though that women should not study high, what they should learn was how to cook well and how to became a good wife, mother

With the developing of economy, the role of women is become balanced in families as well as in societies They appear in most fields and participate in many social positions of the communities Mrs Nguyen Thi Doan, for example, is the vice president of Vietnam The percentage of women, who can read and write, is over 90% including 36.24% graduated university, 33.95% graduated master course and 25.96% graduated doctor

course (Nguyen, 2008) They get the calmness to face with difficult and urgent problems rather than being impatient like men Moreover, they also achieve high positions in their companies

According IFC (2013), the presence of women on board committees is one strategy to enhance corporate financial performance Some listed companies are starting to promote women participate in board of committees in Asia as Japan, Indonesia, and Thailand The percentage of women members on board committees account for slightly less than two percent at top companies in Japan (The Japan Times, 2012) Furthermore, the compies have the presentation of women on board committees accounted for 30 percent of the market capitalization of stock market in Vietnam (Le, 2013) Following the data sample

in Vietnam, some companies have appointed several women members on board committees, including Hau Giang Pharmacy (DHG Pharma) – the country largest local pharmaceutical producer, Phu Nhuan Jewelry (PNJ), Vingroup (VIC) stock companies which each have more than three In specially, Mai Kieu Lien is well-known Chairman in Viet Nam Dairy stock company (Vinamilk) and holding leadership positions during from

2003 to present During her period leadership, she played a key role in transforming Vinamilk not only to become most profitable brands in Vietnam but also a respected name across Asia Moreover, she is the 60th wealthiest individual in Vietnam in terms of stock wealth in late 2012, holding stocks worth almost 200 billion VND According to Forbes (2014), Vinamilk is continuing to increase share prices on the stock market, and rise revenue and profits, for example, in 2013, revenue increased 17 percent, respectively 1.5 billion USD In addition, Mai Kieu Lien said that the revenue increase twofold in

2017 and put the company out of international markets Besides, there are the mirror typical women on board committees affect financial performance in listed companies in Vietnam , for example, Nguyen Thi Mai Thanh – Chairman of the Board and General Director of Refrigeration Electrical Engineering Corporation (REE), and Pham Thi Viet Nga – Chairman of the Board of DHG Pharma

3.2 Sample description

Data set is a balanced panel of the 100 listed companies and 500 firm-years (observations) in Ho Chi Minh Stock Exchange (HOSE) observed during five years period 2008-2012 Data includes extensive information on the companies and the characteristics of board committee members and thus this study use panel estimators and control for causality This study obtains data on the percentage of women on board committees and other corporate governance mechanism variables from company annual reports The primary source of data from financial statement firms to compute the return

on assets, the return on equity, TobinQ, and the natural logarithm of total assets

Furthermore, the industrial sectors base on category of HOSE, and the data set in this topic chooses analysis nine sectors Finance, banks, and insurance companies are excluded due to the difficult calculate TobinQ and the huge leverage for these firms Thus, the empirical result may not exactly if includes firms in this part A minority of firms does not report information about board members’ education and experience, and the amount of stockholders (owning more than 5 percent), so the actual number of stockholders underestimated in the data The remuneration of board committees stated for whole group of firms and not only for the parent company

3.3 Variables

3.3.1 Dependent variable

Corporate financial performance is how a firm can use resources efficiently and achieve target or generate profit (Draft, 2008) There are many ratios to measure corporate financial performance that related accounting-based measures includes return on assets (ROA), return on equity (ROE) (Dwyer et al., 2003; Campbell and Minguez-Vera, 2008; Adam et al., 2009; Carter et al., 2010; Dezsö and Ross, 2012) ROA ratio shows how profitable assets of company generate revenue or gain a net profit, and measured by a company’s net income that divided by its total assets ROE is the ratio of net income of a

company during a year to its stockholders’ equity during that year, and the formula is a company’s net income divided by its shareholder’s equity These ratios usually use in empirical research to measure corporate financial performance In addition, the other criteria review financial performance such as net profit, earning per share, gross earnings,

sales turnover, productivity and growth in sales (Dess and Robinson, 1984; Capon et al.,

1990; Kalleberg and Leicht, 1991; Rosa et al., 1996; Dwyer et al., 2003; Dezsö and Ross, 2012) However, ROA and ROE ratios calculate corporate financial performance not exactly (Tully, 1993) and these measures are very sensitive to management’s choice

of asset valuation principles (Rose, 2007)

One other financial performance measure, market-based measure is Tobin’s Q (TobinQ), defined as the market value of equity plus book value of debt all divided by the book value of total assets (Rose, C., 2007; Campbell and Minguez-Vera, 2008; Adam et al., 2009; Carter et al., 2010; Dezsö and Ross, 2012) The author of this ratio is Tobin (1969) and it used widely by the vast of researchers to measures firm performance TobinQ applied widely to measure within the corporate governance literature serving as a proxy for a firm’s ability to generate shareholder wealth The value of the TobinQ ratio gives a clear yardstick for the calculation of corporate financial performance If the ratio greater than 1, this reflect the investors to be able to create more value by using available resources effectively If on the contrary, a firm’s TobinQ less than 1, it is cheaper to buy capacity in the financial markets than in the real asset markets

In conclusion, there are two methods to measure corporate financial performance including accounting-based and market-based method Accounting results based on events that have already occurred, and thus offer a view of past performance, while TobinQ focuses on expectations of future performance (Demsetz and Villalonga, 2001) Shan and McIver (2011) said that TobinQ ratio not only the good yardstick firm performance but also give positive feedback from financial market through by the characteristics of Board Committees in company Then, the ratio measures approximately

corporate financial performance including ROA, ROE, and TobinQ The empirical result

will prove to convince this effect

The control variables kept fixed to clarify the influence of the women members on board committees and corporate governance mechanism on corporate financial performance Thus, the control variables in the model give better empirical result

This study analyzes control variables firm size (FSIZE) (Cabon, 1990; Dezsö and Ross,

2012; Dwyer et al, 2003; Smith et al., 2006; Campbell and Minguez-Vera, 2008; etc), the

established years of company (FAGE) (Smith et al., 2006; Dezsö and Ross, 2012), the state ownership (STATE), leverage (LEV) (Campbell and Minguez-Vera, 2008; Dezsö and Ross, 2012), industrial sectors (SECTOR)

3.4 Hypotheses

The hypotheses tested were developed from two theories: Resource Dependence Theory and The Integrative Theory These theory offer the most support for a positive link

between women and corporate financial performance

 Hypothesis 1a: The percentage of women on board committees (PWOMEN) has positive effect on corporate financial performance (ROA, ROE, TobinQ)

One argument stated that firms with at least one woman on its top management board generates one percent more economic value than ones without any woman on top management board, given other factor unchanged By panel data, many studies analyzed the relationship between gender and firm performance with different dependent variables

In instance, Lang and Stulz (1993) used Tobin’s Q, and Campbell and Minguez-Vera (2008) used Tobin’s Q, return on asset (ROA), return on equity (ROE) (accounting-based)

Carter et al., (2003) stipulated that women (the percentage of women) on board committees enhance the effectiveness of corporate financial performance (measured by TobinQ) by studying Fortune 1000 firms Furthermore, the lower rate of women the company has, the more strongly its stock price tends to fluctuate stock price is (Klein A., 1998)

 Hypothesis 1b: Women as Chairman (WCHAIRMAN) has positive effect on corporate financial performance (ROA, ROE, TobinQ)

Smith et al., (2006) also examined the relationship between management diversity and firm performance in the case of women in top executive jobs and on boards of directors This author used a panel data of 2,500 Danish firms to analyze and to explore positive relationship between the proportion of women in top management and firm performance

In addition, Dezsö and Ross (2012) found that top female representation in top management leads to better firm performance

Following the hypothesis 1a and 1b, this paper investigates the role of women on board committees in corporate financial performance The empirical results have a positive relationship between women on board committees (PWOMEN and WCHAIRMAN) and corporate financial performance

 Hypothesis 2a: High level of education (EDU) has positively associated with corporate financial performance

 Hypothesis 2b: Experience of board committees (EXP) has positively related to corporate financial performance

 Hypothesis 2c: Industrial sectors (SECTORS) have different effect on performance

According hypothesis 2a, 2b and 2c, this thesis examines the determinants of women’s participation in boards committees Lerner et al (1997) gives five theoretical perspectives relation to firm performance such as social learning; individual motivations and goals; network affiliation; human capital (education background and business skills); and environmental factors (location, industrial sectors) The results human capital variables (education background, experience business) are highly correlated with corporate

financial performance (Hypothesis 2a and 2b) On the other hand, industrial sectors

(manufacturing and services) are different, for example, manufacturing is better corporate

financial performance while services are negative (Hypothesis 2c)

3.5 Model specification

The relationship between women on board committees, corporate governance characteristics, and corporate financial performance has examined by using different empirical techniques of panel regression analysis Using panel data enables this research

to control individual heterogeneity and supply more degrees of freedom as well as more variables Moreover, it also remedies multicollinearity that usually meets time-series data method (Baltagi, 2004) Comparing with only cross-session or times series method, panel data method seem the better method to use for analyzing with both cross-session and time series data and this method is also usually used by many researchers

The study uses a linear regression model as follows:

 Dependent variable (Pit) is a firm performance measure, using return on assets (ROA), return on equity (ROE), and Tobin’s Q is defined as the ratio that the sum

of market value of stock and the book value of debt divided by the book value of total assets;

 Independent variables such as: (i) the percentage of women participation in board committees (PWOMEN) and women as Chairman (WCHAIRMAN) are the key variable and (ii) corporate governance mechanism (GOV);

 control variables (CV) affect on corporate financial performance;

 i is random individual-specific effects;

A simple OLS regression of the parameters is straightforward to analyze

 For Fixed Effects model

 For Random Effects model: