The pre- and post-IPOs gender composition of board of directors in Malaysia

Purpose - The purpose of this paper is to investigate the gender composition of the board of directors of Malaysian initial public offering (IPO) companies. This study also examines the business case for having women on boards. Design/methodology/approach - Using a sample of 228 IPO companies that went public during the period 1999-2006, this study tracks the changes in the gender composition of these companies prior to the IPO year, IPO year and three-year post-IPOs. This study also tracks the changes in the gender composition between the pre-IPO period and some 5 to 12 years later after the IPOs for a subsample of 89 companies that appear as top 500-companies on the Malaysian Stock Exchange (Bursa Malaysia) in 2011. The compounded buy-and-hold returns method is used to measure the post-IPO company performance. Findings - This study finds that female representation as board of directors in 228 Malaysian companies prior to the IPO is only about 8 percent. This percentage is almost similar for the subsequent four years (IPO year and three-year post-IPOs). By using a subsample of 89 companies that appear as top 500-companies in 2011, the percentage of female directors increases only 2.5 percent from the pre-IPO year. However, the increment is not statistically significant. An extended analysis on the business case for women on boards reveals that greater percentage of female representation leads to lower long run underperformance. This underperformance is much lower for companies having more foreign ethnic female representation. Research limitations/implications - The results of this study suggest that there is still a long way to realize the benefits of having female directors in Malaysian companies. Malaysia needs to create an environment that realizes the benefits of having women in the top management levels. Originality/value - This research contributes to the existing literature on gender especially in the context of IPO companies. This is the first comprehensive study on gender composition using Malaysian IPOs data. Prior studies on gender mainly focus on established listed companies.