Effects of Board Diversity on Financial Performance of Firms in Malaysia: A Moderating Role of Corporate Sustainability Practices

The volatile financial performance (FP) of listed firms in Bursa Malaysia has been observed since 2008. The total earnings by companies in FTSE Bursa Malaysia KLCI index in 2016 dropped by 30 percent showing unusual performance pattern among the listed firms. Both FTSE Bursa Malaysia KLCI and EMAS index year on year capital return performance also found negative from 2014 to 2016. The declining FP of firms often associated with weak corporate governance (CG) practices. The board diversity (BD) under CG mechanisms induces the improvement of FP and long-term success of a firm. Since BD impacts on FP, this study proposes a conceptual framework by introducing corporate sustainability practices (CSP) to see how it intervene as a moderator between BD and FP. The conceptual framework offers useful information which may help for further investigating in BD and FP. The future studies should validate empirically the proposed research framework. Keywords: Corporate Sustainability Practices, Board Diversity, Financial Performance, Stakeholder Theory, Bursa Malaysia. DOI: 10.7176/JESD/10-9-05 Publication date:May 31st 201

The moderating role of corporate sustainability practices on the relationship between board diversity and financial performance of firms in Malaysia

Financial scandals and crises as well as the collapse of giant corporations globally have raised questions regarding the effectiveness of corporate governance mechanisms. Policymakers worldwide have attempted to tackle this issue by encouraging firms to diversify their board of directors. Previous studies showed that board diversity influenced financial performance. However, the relationship between board diversity and financial performance remains inconclusive due to firms‘ corporate sustainability practices. Thus, this study examined the relationship between board diversity and financial performance, corporate sustainability practices and financial performance, and the moderating role of corporate sustainability practices on the relationship between board diversity and financial performance. A sample of 104 firms listed on Bursa Malaysia from year 2015-17 was analyzed. Five types of board diversity were examined, namely, gender, ethnicity, age, education and outside directors which were measured by Blau‘s index while Tobin‘s Q was used as a proxy for financial performance. Content analysis was adopted to measure corporate sustainability practices considering the firm‘s economic, environmental and social activities. The study also employed three control variables, namely, board size, firm size, and leverage. Using panel corrected standard errors estimator model, this study showed that board diversity, as well as corporate sustainability practices significantly and positively affected financial performance. Furthermore, results from the hierarchical moderated multiple regression model revealed that corporate sustainability practices significantly moderated the relationship between board diversity and financial performance. The main contribution of this study is that corporate sustainability practices, as a moderator, has a strong effect on the relationship between board diversity and financial performance. Thus, the government and regulatory bodies should ensure that firms diversify their board of directors. Also make corporate sustainability practices mandatory to enhance financial performance for their long-term survival and to reduce the risk of collapse

Effect of Board Diversity on Financial Performance of Firms in Malaysia: A Moderating Role of Corporate Sustainability Practices

The volatile financial performance (FP) of listed firms in Bursa Malaysia has been observed since 2008. The total earnings by companies in FTSE Bursa Malaysia KLCI index in 2016 dropped by 30 percent showing unusual performance pattern among the listed firms. Both FTSE Bursa Malaysia KLCI and EMAS index year on year capital return performance are also found negative from 2014 to 2016. The declining FP of firms is often associated with weak corporate governance (CG) practices. The board diversity (BD) under CG mechanisms induces the improvement of FP and long-term success of a firm. Since BD impacts on FP, this study proposes a conceptual framework by introducing corporate sustainability practices (CSP) to see how it moderates the relationship between BD and FP. The conceptual framework offers useful information which may help for further investigating in BD and FP. The future studies should validate empirically the proposed research framework. Keywords: Corporate Sustainability Practices, Board Diversity, Financial Performance, Stakeholder Theory, Bursa Malaysia. DOI: 10.7176/JESD/10-10-12 Publication date:May 31st 201

Corporate sustainability practices: A review on the measurements, relevant problems and a proposition

In recent years, corporate sustainability practices (CSP) or triple bottom line (TBL) is considered more important than just financial performance to the future success of business firms. Organizations are achieving significant benefits from incorporating sustainability in business. In addition to profit maximization, CSP is also considered to be a vital vehicle to reduce the corporate scandals. It is a common practice to engage in CSP by large companies in developed countries, but still, it is a controversial issue in developing countries. Moreover, given the critical role of CSP, government regulators are attaching more emphasis on such practices in business firms all over the world. Defining and measuring CSP is more than just an academic apprehension. In spite of nearly 50 years of previous research on sustainability, still, there is no certain standard for measuring CSP of an organization. The objectives of this article are to define CSP more clearly, discuss different techniques of measuring CSP and propose a new method for determining the CSP of firms following Bursa Malaysia Berhad reporting guideline-2015 which have been prepared according to Global Reporting Initiative (GRI) reporting framework

Effect of Gender Diversity on the Association between Corporate Sustainability Practices and Financial Performance of Firms: Evidence from Malaysia

Purpose: The objective of this research is to examine the effect of corporate sustainability practices (CSP) on financial performance (FP) as well as the moderating effect of gender diversity (GENDIV) in the board on the relationship between CSP and FP of firms in Malaysia. Methods: The sample of the study is 312 firm-year observations from 2015 to 2017 of 104 firms listed in Bursa Malaysia. The theoretical framework of the study is underpinned by the Stakeholder theory and the Agency theory. To test the hypotheses, with the help of STATA software, the panel corrected standard errors (PCSE) estimator model and the hierarchical moderated multiple regression model have been used. Results: The findings of the study reveal that CSP significantly and positively affects the FP of firms. The empirical results also show that gender diversity in boards significantly moderates the relationship between CSP and FP of Firms in Malaysia. Implications: Based on the empirical findings, the study recommends that the policymakers and regulatory bodies should follow up the mandatory corporate sustainability practices of the firms as well as revise the codes of corporate governance regarding gender diversity of the boards to ensure their long-term sustainability as well as to reduce the risk of financial distress, or bankruptcies in the future.&nbsp

Effect of Board and Audit Committee Characteristics on Profitability: Evidence from Pharmaceutical and Chemical Industries in Bangladesh

Purpose: The objective of this study is to investigate the relationship between corporate governance (CG) elements, namely board characteristics (board size, independence, expertise) and audit committee characteristics (audit committee size, independence, expertise) with profitability, present by two proxy ROA and ROE. Method: This study includes all listed firms of DSE in Bangladesh under the category of pharmaceutical and chemical industry, i.e. total 31 firms for 3 years from 2015/16 to 2017/18 means 93 firm year observations. Theoretical model of the study is framed under agency theory. This study applied panel data set in regression model Using Fixed-Effects with Driscoll and Kraay’s Standard Errors to test the hypothesis by STATA 13 software. The study model also consider two control variables: firm size and leverage according to literature. Results: Empirical result of the study presents that board size, board expertise and audit committee size have significant positive relationship with both proxy of profitability i.e. ROA and ROE. Moreover, audit committee expertise has significant negative relationship with ROA but insignificant relationship with ROE. However, all other variables does not have significant influence on profitability.  Implications: This study will extend the literature of CG and profitability in an emerging economy like Bangladesh. Agency problem can be solved with more vigilant practice of CG. This study could be extended further by considering all listed firm of DSE which will give us more insight of CG practice in Bangladesh

Relationship Between Board Diversity, Corporate Sustainability Practices and Financial Performance of Firms

Research on board diversity (BD) has grown in the last two decades, but it is observed that the association between BD and financial performance (FP) of a firm is inconclusive to date. As the findings of the link between BD and FP are mixed, researchers suggest that the concerned parties might benefit from examining the critical effects of any third intervening variable on that relationship. Corporate sustainability practices (CSP) are an extensive management idea that assures long-term financial success and survival of a firm. However, the success of CSP is likely to increase when the board of directors (BOD) consists of diversified people who represent multiple stakeholders interests. Therefore, BD is likely to influence CSP, which, in turn, affects the FP of the firms. Accordingly, this paper proposes CSP as a mediator in the relationship between BD and FP of firms based on Stakeholder Theory. The key purposes of this article are to review the previous literature on BD, CSP, and FP, propose a research framework, and offers suggestions for future empirical research

Impact of Organizational and Family Support on Work-Life Balance: An Empirical Research

Purpose: Aim of this study is to examine the impact of organization and family support on an individual’s work-life balance (WLB in the context of higher educational institutes (HEIs) in Bangladesh. The theoretical basis of the study is grounded on the work/family border theory of Clark (2000). Methods: The study was conducted with a sample of 198 academicians of the (HEIs) in Bangladesh. A self-administered questionnaire was used for data collection. SPSS version 21 and SmartPLS 3.0 software were used for data analysis. A measurement model was analyzed for assessing the reliability and validity of the research instrument. The partial least squares structural equation model (PLS-SEM) was applied for testing the hypothesized model of the study. Results: The results reveal that organizational support (β = 0.404) and family support (β = 0.269) significantly (p<0.05) influence work-life balance with a variance (R2) of 32.1%. Implications: This study exposed the organizational roles in managing the conflicts of people’s personal life and professional life. Findings would inspire the authorities to formulate employee-friendly organizational strategies and design WLB programs in assisting employees to manage their overall life both in the work and family domains. Limitations: The research was limited to HEIs in Bangladesh which restricts the generalizability of its results