Female Directors, CEO Turnover And Firm Performance

As we all knows, the board of directors is the company’s most important decision-making institution. The Board is responsible for making important strategic and financial decisions, including mergers and acquisitions, changes in the capital structure, the decision to manager’s appoint and salary, etc. Therefore, governance efficiency of the Board plays an important role in the corporate governance. Over the years, companies around the world are trying to strengthen board governance by changing political, cultural, or other society factors. Scholars also show a keen interest in board governance. With the deepening of the board governance research, gender diversity in the boards increasingly become an important topic of corporate governance. The situation that women have few seats in the boardroom may be altered because boards of directors in many countries are under increasingly pressure to hire women directors. Many suggestions for governance reform clearly emphasize the significance of gender diversity in the boards. However, the results of changing the gender structure of the boards are not understood fully. Listed Company may hire female directors to improve corporate governance, take advantage of women’s special social attributes, abilities and social network resources to enhance the company’s image, or take advantage of women’s special social attributes, abilities and social network resources to enhance the company’s image.While a lot of theoretical studies indicate that women behave differently in a variety of settings with men, whether the impact of female directors on the board governance efficiency differs from the male directors? Female directors are to act as "vases" or participate in corporate governance really, improve corporate governance, and ultimately achieve the purpose of improving the company’s performance? What on earth is the role of women in the board of directors of listed companies? With 12665 sets of unbalance panel data of A-shares in Shanghai and Shenzhen stock marketsfrom2005to 2013, this research tests the effect of female directors on CEO turnover and the company’s performance. Firstly I generalize the relevant researches from both internal and external two perspectives and give the commentary of the achievements. And then elaborating the theories of female directors participating in board governance, mainly related to agency theory, resource dependence theory, human capital theory and power management theory. Based on the theoretical analysis, I give the two hypotheses of this paper in the third chapter. In the fourth chapter, I describe the data source, sample selected procedure and variable selection, and then establish the regression model. In the fifth chapter, I get the empirical results from the regression equation. Through the empirical analysis, this paper comes to the main conclusions as follows:(l)From 2005 to 2013, there are 66.40% of the China’s listed companies hired at least one female directors on average and showing increasing trend year by year. But compared with Western countries, the proportion of female directors of listed companies in China is still relatively low. This may be related with the male-dominated traditional culture in China and the lack of mandatory regulations. In addition, private holding listed companies are more likely to hire female directors than state-controlled listed companies. In private holding companies, from 2012 the average proportion of female directors started to break 15 percent, which indicates that female directors of listed companies moving away from "Vase Director" role.(2)Women participation in the board does help to increase the effectiveness of supervision of the Board of Directors. In the female directors and CEO turnover regression analysis, we find explicit evidence that if the boards are more gender diverse, CEOs would more likely to be responsible for poor firm performance:If listed companies hired female directors, there will be a significant increase in the frequency of CEO turnover; the higher the proportion of female directors, the CEOs are easier to be replaced; CEO turnover is sensitive to firm performance in companies which has female directors in the boardroom.(3) The promotion of women directors on firm performance is indirect. It is not the firm performance could be enhanced if the board has female directors. When the companies with female directors on boards change the unqualified CEOs, the firm performance could be improved. This reflects female directors contribute to enhance the firm performance by strengthen the supervision of CEOs.Research contribution and innovativeness of this paper are mainly the following aspects:Firstly, through literature review I found that scholars mainly take empirical researches for the sample of listed companies in the United States, Europe and other Western countries. Compared with the foreign scholars’studies, domestic scholars started late in the studying of women directors and corporate governance efficiency. Also the scope of the domestic studies is narrow. In China, women had very different behavioral characteristics with European women, and female directors take part in corporate governance under the unique market environment and culture background, so this empirical research about the supervisory role of female directors can not only make up the domestic gap but also draw some reliable and interesting conclusions that adapt to China’s situations, because the sample was based on listed companies in our country.Secondly, this paper discussed not only limited to the relationship between female directors and the CEO turnover but also further investigated whether the supervision of the CEO of female directors can bring change on the performance of the company. So this research on the impact of female directors’ supervisory role is relatively complete and adequate.The inadequacies of this paper are as followings:Firstly, due to inadequate disclosure of annual reports of listed company bounds, this paper carried only a simple classification about the reasons for the change of CEO: getting rid of the data which the CEOs were replaced due to promotion, retirement, involved, for health reasons, and for the rest of the part, this paper did not do further finer classification. For example, this article did not subdivide the data that the CEOs were changed because of resigns or dismissed. This will reduce the credibility of the conclusions of the study, which is exactly what I think of the future research directions.Secondly, in the measure of female directors participation in the board governance, this paper only selected two indicators that if there are women on the board of directors as well as the proportion of female directors. This paper did not consider other factors would have an effect on the supervisory efficiency of female directors like the position of women on the boards or whether female directors entered board committees. Also these factors may further have an impact on the CEO turnover and firm performance. If I can take these factors into account and further add these variables in the regression, this research will be more comprehensive and the conclusions may be more reliable.