Examining the Nexus between Board Gender Diversity and Shareholder’s Value in Pre and Post Mandatory Requirement for Female Directors in Pakistan

Abstract

This study aims to examine the relationship between board gender diversity and shareholder value in Pakistani context. Specifically, the study incorporates the effect of Pakistan’s legislation regarding mandatory requirement for female directors in revised code of corporate governance 2017 on the relationship of board gender diversity and shareholder value. Data from 150 non-financial firms have been used which are listed on KSE-100 index. Besides employing pooled OLS and fixed effect (FE) regression estimator, the study also used the dynamic estimator i.e. generalized method of moments (GMM) for robustness and controlling endogeneity, unobserved heterogeneity and simultaneous problems. The results indicate that board gender diversity enhances the shareholder value in form of enhanced earnings per share, total shareholder’s value and economic value addition. Further, significant differences have been observed among pre and post legislation period. It has important implications for managers and policy makers of Pakistani firms. Managers/ policy makers should ensure the participation of women on corporate boards in Pakistani firms as inclusion of women/ diversity on the corporate boards enhances shareholder’s value. The results also suggest that efforts shall be deliberated towards implementation of law regarding women directors.