Do women in top management affect firm performance? Evidence from Indonesia

The purpose of this paper is to examine the relationship between gender diversity on the management board and the financial performance of Indonesian listed companies.

Cross‐sectional regression analysis was conducted based on a sample comprising 92.4 percent of public firms listed on the Indonesia Stock Exchange (IDX). The dependent variable was firm performance, measured by return on assets (ROA) and Tobin's q. The explanatory variable was gender diversity, proxied by the proportion of women, the presence of women, and a gender heterogeneity index.

It was found that the representation of female top executives is negatively related to both ROA and Tobin's q, suggesting that female representation is not associated with an improved level of performance. From correlation analysis, the results also reveal that smaller firms, which tend to be family‐controlled, are more likely to have a higher proportion of female members on management boards. This implies that large firms are “tougher” for women in terms of opportunities to hold seats on the board.

The data only cover one single financial year (2007); hence, the results may lack generalizability.

Studies on the relationship between board gender diversity and financial performance have been conducted in the context of a few developed economies. This study contributes to the literature by examining such an issue in a developing economy that has a different environment from that of developed economies.