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1. Gender Diversity in the Board and Its Effects on Firm
Performance : Empirical evidence from the listed Insurance
companies of Bangladesh
ID Name
23017 Naznin Sultana Rini
23020 Afsana Mimi
23029 Md Sohag Hossain
23085 Md. Jahirol Islam
23152 Md. Sadin
Group-10
2. Abstract
Aim of this study: find out the association between female directors’ presence
in the boardroom and firm financial performance.
Evidence :this research study uses 150 firm years along with 13 independent
variables during the period of 2015 to 2019 of 30 listed insurance companies of
Bangladesh.
Result : exists a positive association of female directors with the firm financial
performance although others female directors’ characteristics affect the
performance differently.
Recommends: country, culture and business sector should be taken into account on the
eve of taking any decision regarding female directors.
3. Introduction
Board diversity interest emphasizing more particularly on the gender & involvement of
female directors on the board is a most studied topic. Gender inequality and ensuring equal
opportunity for women have become a subject of interest and concern .The combination of
men and women in their work environment is gender diversity and it is being treated by
way of a corporate governance mechanism variable observing how much the gender
diversity affects the firm performance ultimately. India, Japan and China represent 2.4%,
9.5% and 7% female directors ,Bangladesh is not so far diverse. In Consequences there still
lack a transparent understanding, this empirical study scrutinizes the presence and
proportion of female directors and its impact on firm performance.
This study adds to the literature of gender diversity in the following two ways:
Firstly, this study will provide a clear understanding regarding the impact on
performance in insurance sector due to presence of female directors on the board
secondly, it will enhance value to the literature of gender diversity in insurance sector of
Bangladesh.
4. Research Objective
To determine the presence and proportion of female directors in the board and its effects on firm
financial performance in insurance sector of Bangladesh is the prime goal of this empirical
research study.
Literature Review
Insurance industry in Bangladesh is struggling for many reasons. In spite of having a large
number of insurance companies in our country, their growth as per the population coverage is not
at satisfactory level & firm performance is less examined so far. (Nurul, 2008).
Argued by studies shows that there exists a positive relationship between the gender diversity on
the board and firm performance and has a strong effect while others studies fade away this
conclusion.
5. Howlader et al. (2020) showed that there is no relation, also recommend to
ensure a healthier environment and opportunities to accomplish a role as a
director.
In the contrary, Sheikh et al. (2018) notified a noteworthy relationship with the
return on equity (ROE) but not the return on asset (ROA).
More interestingly, Adams and Ferreira (2008) showed a complete negative
relationship. Analyses S&P 1500 companies reveals that-
a) Too tough to reach a conclusion,
b) The turnover of CEO of diverse board are very sensitive
c) Equity-based compensation for directors is comparatively higher. Dutta and Bose
(2006) revealed that is, the reflection of the work of Adams and Ferreira (2008), a
negative relationship between gender diversity and firm performance.
7. Gender Diversity in the Board
Traditionally
male
directors
Increasing
participation
of female
directors
Results
-Positive relation
•-Negative
association
•-No strong evidence
<H1> There is a positive relationship between the presence of female directors
and firm performance in insurance sector of Bangladesh.
8. The Ownership of Female Directors
Directors have to hold a percentage of ownership to ensure the transparency,
accountability and more involvement.
Holding more ownership by executive directors than the other directors has positive
impact.
The insurance sector in Bangladesh, more percentage of ownership are on the hand of
family members which does not mean the actual responsibility and accountability.
<H2> Female directors’ ownership has no impact on firm financial performance in
insurance sector of Bangladesh.
9. Meeting Attendance & Female Independent Directors
<H3> Positive relationship between the board meeting attendance of female directors and
firm performance.
<H4> Positive impact of female independent directors on firm performance in insurance
sector of Bangladesh.
Attendance
-Affect performance
-No effect
Family Ownership
-No obligation
-Show off
Result
Board independence
increased financial
result
10. Female Directors in Core Board Committee
Audit committee
Risk management committee and
Nomination & remuneration committee (compulsory by CG guidelines-2018)
The presence and proportion of female directors in these committee is
comparatively insignificant particularly in insurance sector of Bangladesh.
<H5> There is no association of female directors in core board committee (AC,
RMC, NRC) with the firm performance.
11. Academic Qualification & Years of Experience
Both positive and negative relationship.
Having PhD degree increased performance through their experience, intellectual
power and risky decisions.
There is negative relationship between the female directors’ academic
qualification and the firm performance (Arena et al. 2015) because higher
educated female directors in the board are more willing to show their abilities and
ideas. This over eagerness hampers the board dynamics profoundly.
<H6> Positive relationship between the female directors’ academic qualification and
firm performance in insurance sector of Bangladesh.
<H7> Positive association of the female directors’ years of experience and firm
performance in insurance sector of Bangladesh.
12. Family & Political Relationship
Most of the insurance sector in Bangladesh are family owned firms.
Female directors are either the chairman or the other directors of board are
appointed solely on the source of family relationship.
Sometimes, political relationship is also considered to appoint female directors in
the board.
<H8> There exists a negative relationship between the female directors’ family
relationship & political relationship in appointment and firm performance.
13. Control Variables
Firm size: The larger firms get several advantages than the smaller firms
(Increase profitability, diversified board etc.)
Firm leverage: It indicates how much assets of a firm has to pay the
liabilities. Capital structure of a firm is influenced by firm leverage which
finally affects the firm performance.
15. Methodology
Sample and Data Sources
Quantitative in nature
Panel data is used for the study
30 listed insurance companies have been taken as sample
Secondary sources are used to collect the necessary data-
Annual report of these insurance companies
Dhaka stock exchange &
Lanka Bangla financial portal
16. Research model
A multiple regression model is introduced to test the relationship between the
presence of female directors and the firm performance. OLS method has been used to
run the regression. Here the regression equation-
ROA = β0 + β1 FD + β2 FDOWN + β3 FDATT + β4 FDID + β5 FDAC + β6 FDRMC +
β7 FDNRC+ β8 FDAQ + β9 FDYE + β10 LN FDFR + β11 FDPR + β12 LN FS + β13 LN
LEV + εi …………(1)
ROE = β0 + β1 FD + β2 FDOWN + β3 FDATT + β4 FDID + β5 FDAC + β6 FDRMC +
β7 FDNRC+ β8 FDAQ + β9 FDYE + β10 LN FDFR + β11 FDPR + β12 LN FS + β13 LN
LEV + εi …………(2)
17. Research Model (Continued)
Variables used in research model –
Dependent variables-
ROA
ROE
Independent variables are-
FD
FDOWN
FDATT
FDID
FDAC
FDRMC
FDNRC
20. Descriptive Analysis
Among 150 0bs. The
average of FDOWN is very
insignificant as it is between
8%-9%, However, FDAT is
quite good, it is between
74%-86%
FDID is on an average 4%,
that means the FD who play
ID is quite a few in numbers
among 150 obs.
FD in audit committee is 7%,
while in RMC and NRC, the
percentage is 1%, which is
very depressing.
Variable Obs. Mean Min Median Max SD
FD (%) 150 21% 0% 20% 50% 13%
FDOWN (%) 150 9% 0% 8% 40% 10%
FDAT (%) 150 74% 0% 86% 100% 35%
FDID (%) 150 4% 0% 0% 67% 14%
FDAC (%) 150 7% 0% 0% 40% 12%
FDRMC (%) 150 1% 0% 0% 35% 5%
FDNRC (%) 150 1% 0% 0% 67% 7%
FDAQ (%) 150 62% 0% 62% 100% 4%
FDYE 150 7 0 7 17 4.77
FDFR (%) 150 59% 0% 52% 100% 4%
FDPR (%) 150 23% 0% 0% 100% 4%
FS(million) 150 5920.03 619.56 1647.91 45367.11 12136.26
LEV (%) 150 41% -6% 38% 98% 22%
ROA (%) 150 13% 1% 7% 158% 26%
ROE (%) 150 26% 4% 11% 243% 50%
Total 150 26% 0% 22% 100% 16%
21. Trend Analysis
The analysis shows that the
presence and proportion of the
female directors on the board
is 21%.
The mean of female directors’
academic qualification, years
of experience, family and
political relationship are 62%,
7, 59% and 23% respectively.
While different board
participation are 7%, 1% and
1% respectively.
0
2
4
6
8
10
12
2015 2016 2017 2018 2019
FD
FDOWN
FDAT
FDID
FDAC
FDRMC
22. Yearly Descriptive Statistics of Subcategories of Female
Directors’ Characteristics
This chart shows the
participation of total 107
female directors of 30 listed
Insurance Companies.
Janata Insurance company is
pioneer in case of recruiting
female directors, while
Phoenix Insurance
Company has the second
highest FD.
However, United Insurance
and Padma Insurance
companies have the lowest
FD. 0 1 2 3 4 5 6 7 8 9
AGRANINS
UNITEDINS
BNICL
CITYGENINS
DELTALIFE
EASTERNINS
EIL
FEDERALINS
GREENDELT
JANATAINS
MEGHNALIFE
NATLIFEINS
PADMALIFE
PHENIXINS
PRAGATIINS
0
2
1
0
4
6
4
6
3
2
4
5
4
5
4
3
4
7
9
6
6
1
4
1
1
1
7
3
3
1
23. Female Directors’Academic Qualification
Among these 30 companies, only 2
FDs have PhDs, 2 FDs have
professional degrees and another 02
FDs have foreign degrees. Along with
these, 11 female directors have
completed post–graduation, 12 FDs
have completed their graduation as
well as 02 female directors have only
HSC.
0
2
4
6
8
10
12
24. Female Directors’Years of Experience
Female Directors’ Family Relationship & Political
Relationship
Regression Analysis
Hypothesis Testing
Findings & Interpretation (Continue..)
25. Female Directors’Years of Experience
• Years of experience is also a factor
of consideration.
• Years of experience indicates the
quality of taking decision, the
functions and roles, efficiency and
effectiveness and finally the firm
performance.
26. Female Directors’ Family Relationship & Political Relationship
• Some insurance companies appoint their
female directors on the boardrooms only on
the basis of family relationship or political
relationship.
• 16 companies where female directors have
directly linkage with the chairman of the
board or other directors
• 07 companies’ female directors have political
relationship. Rest other companies did not
disclose these information.
• Some companies’ female directors are the
Member of Parliament (MP) and some
others’ have indirect political connection.
27. Regression Analysis
ROA ROE
Coefficients P-value Coefficients P-value
Intercept 0.21233 0.02459 0.00613 0.04605
FD 0.40398 0.03974 0.86839 0.05098
FDOWN -0.44698 0.02636 -0.99189 0.0379
FDAT 0.03513 0.04197 0.03940 0.04855
FDID 0.29510 0.04833 0.67806 0.04057
FDAC -0.52576 0.07046 -1.04581 0.06152
FDRMC -0.01126 0.05821 -0.07173 0.05784
FDNRC -0.09862 0.05566 -0.12151 0.05857
FDAQ -0.09614 0.03953 -0.17461 0.00829
FDYE 0.00654 0.00266 0.00645 0.01034
FDFR -0.00681 0.00764 0.04534 0.00782
FDPR -0.10228 0.04497 -0.21969 0.04683
LNFS 0.00226 0.03737 0.02519 0.04829
LEV -0.16497 0.02088 0.19910 0.03942
OLS Regression Estimates
• Female director as an
independent director affects the
ROA and ROE positively
where their presence in core
board committee negatively
affects the firm performance.
• Female directors’ years of
experience affects the firm
performance positively where
the family and political
relationship affects negatively.
28. Hypothesis Testing
Independent variable Dependent
variable
P value Hypotheses
Conclusion
1. Female Directors ROA & ROE P < 0.05 Accepted
2. FD Ownership ROA & ROE P < 0.05 Rejected
3. FD Attendance ROA & ROE P < 0.05 Accepted
4. FD as Independent Director ROA & ROE P < 0.05 Accepted
5. Female Directors in
Audit Committee
Risk Mgt. Committee
Nomi. & Remu. Committtee
ROA & ROE
ROA & ROE
ROA & ROE
P > 0.05
P > 0.05
P > 0.05
Accepted
Accepted
Accepted
6. FD Academic Qualification ROA & ROE P > 0.05 Accepted
7. FD Years of Experience ROA & ROE P < 0.05 Accepted
8. FD Family Relationship
Political Relationship
ROA & ROE
ROA & ROE
P < 0.05
P < 0.05
Accepted
Accepted
Summary of Hypotheses Results
• There exists a positive association of
female directors with the firm
financial performance. The presence
& proportion of female directors’ in
core board committee are less in
number and their performance are not
positively related.
• Family and political relationship and
ownership also affect the performance
negatively.
• Oppositely, female directors’
attendance, female independent
directors and years of experience
positively influence the firm
performance.
29. Conclusion
The equal opportunity for the women is a subject of frequently discussion.
The impact of female directors’ participation on the boardroom on the firm
performance is less examined particularly in insurance sector of Bangladesh.
This study recommends that some factors should be taken into account on the
eve of appointing female directors.
A better work environment and opportunities should be ensured for female
directors to play a vital role in insurance sector of Bangladesh.
30. Limitation of this Study
The constraints of this empirical research study must be considered on the
eve of reaching any conclusion on the basis of this research.
The major limitation is that the result varies in terms of country, culture and
sectors.
So, these three things along with other factors should be taken into account.
This research uses 150 firm years during the period of 2015 to 2019.
So, all of these things should be considered before generalization.