Academic journal article International Journal of Management

Stock Market Reaction When Listed Companies in Singapore Appoint Female Directors

Academic journal article International Journal of Management

Stock Market Reaction When Listed Companies in Singapore Appoint Female Directors

Article excerpt

This paper examines the stock market reaction to the appointment of female directors in Singapore-listed companies and investigates what determines the reaction. We study a sample of 30 companies that has met several selection criteria and use the event study methodology applied to data collected before and after the announcement of the appointment of female directors to the boards of these companies. As a proxy for investor reactions, we examine changes in stock market prices of these companies at different points in time. We find a positive announcement effect and, over a two-day announcement period, an average value of 2.31% is generated for shareholders. This enhanced value is positively impacted by non-duality (separation of the offices of CEO and chairperson), and the appointment of women directors as CEO. However, the proportion of women directors, as a variable, did not have a significant effect on share prices. The study suggests that investors in Singapore value the diversity and potential contribution of women on the board of directors.

(ProQuest: ... denotes formulae omitted.)


The existing diversity literature reveals a slow but steady rise in female presence on the board of directors of companies around the world (e.g., Germaine and Siegel, 1999; Hughes 2000; Koss-Feder, 2002; and MacKendrick, 2002). While it is clear that in most countries female presence on boards of directors is limited, this paper examines whether the cries for equality are justified by what really matters to the firm's owners - shareholder value. Does gender diversity in the boardroom contribute to higher firm value? Several European countries (including France, Germany, Italy, the Netherlands, Spain, Switzerland, and the United Kingdom) have put regulations in place requiring a minimum proportion of female directors to be appointed. Singapore does not have such a requirement. This study therefore investigates the stock market reaction of investors to the voluntary appointment of female directors and evaluates the extent that investors recognize the potential contribution of women directors. Besides adding to the diversity of corporate boards, the appointment of female directors may be viewed as a means of improving corporate governance of firms whose boards may be dominated by old-boys networks.

The current literature largely focuses on the board of directors, in general, as opposed to women in top management or executive positions. Carter, Simkins, and Simpson (2003) examine the relationship between board diversity and firm value for the Fortune 1000 firms. They present empirical evidence of a significant positive relation between the proportion of women on the board of directors and firm value. In contrast, Shrader, Blackburn, and lies (1997) report a negative relation between the percentage of female board members and firm value. One could argue for greater female representation that, since women represent a significant proportion of the customer base in many corporations, the presence of female directors would bring the female perspective to the boardroom and positively impact the bottom-line of companies. Burke (1994) provides evidence that male CEOs found the viewpoints of female directors beneficial in understanding female clients.

With such intriguing and contrasting findings, given the emphasis on greater female representation in the boardroom, it is a challenge to show that investors recognize the intangible qualities women bring to the company in a tangible manner with quantifiable evidence. A study conducted by The Leader's Edge Research(TM) (2000) reveals that corporate culture is the most significant barrier to women moving up into top executive positions. Two-thirds of the women surveyed say they desire top-level executive positions, and more than half of them say they will move to another company if they are passed over for promotion. This is further substantiated in a survey by The Leader's Edge Research(TM) (2002), which finds that 39 percent of executive women ranked corporate culture as the number one reason why they left their most recent position. …

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