Analysis of the effectiveness of women on company boards remains a tangled mess. Some studies show they make no difference to financial outcomes whilst others point out the problems of ‘tokenism’ rendering analysis a flawed proposition from the get go.
Researchers of the paper highlighted today wanted to narrow the focus of inquiry to the issue of corporate governance and address the question ‘Does the presence of highly regarded women on company boards affect governance, and if so, in which direction?’
Researchers Shihuan Chen, Yulin Chen and Khalil Jebran, all from the Dongbei University of Finance and Economics took a look at Chinese companies from 2008~2019 for some answers.
What makes the study unique is the researchers went out of their way to identify the relative status of female board members. They note that failing to adjust for this important variable may be one reason why some studies have concluded that the presence of women board members may have led to certain poor corporate outcomes [Tokenism related effects my guess].
The work is made possible by a unique characteristic of Chinese company reporting where board members are neither listed in random nor alphabetical order but in terms of their ‘importance’. Thus it’s easy to see where women Directors have real clout.
They digress along the way into how a ‘Confucian’ ethos (the effects of which they rigorously define) may be especially bad news for women and in turn their potential moderating effects on corporate shenanigans.
The bottom line for practitioners investing in Chinese companies is this: companies with higher status women on their boards, especially where the Chairperson is a woman, suffer less corporate misconduct.
The researchers sign off noting an important limitation of their study is that it covers only Chinese companies so the results may not translate to other markets like the U.K or the U.S. [I’ll bet they do!].
For more on the mechanics of this effect and a worthwhile ramble into the whole gender-effect argument you can read the paper in full by following this link More Women: Better Outcomes.
Happy Sunday