Breaking Barriers and Boosting Bottom Lines: An Analysis of The Mediating Impact of CSR in The Relationship Between Board Gender Composition and Firm Financial Performance in Malaysia

Heriot-Watt University School of Social Sciences
"Breaking Barriers and Boosting Bottom Lines: An

Analysis of the Mediating Impact of CSR in the
Relationship Between Board Gender Composition and
Firm Financial Performance in Malaysia”
By Sugeetha Sattiyan
A dissertation submitted in partial fulfilment of the degree of
Masters of Arts (Honours) Accounting and Business Finance
at
School of Social Sciences, Heriot-Watt University
Malaysia Campus
April 2023
Dissertation Supervisor: Dr. Nor Irdawati Mahyuddin
Word count: 15166 words
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Acknowledgements
First and foremost, I would like to express my heartfelt gratitude to my dissertation supervisor,
Dr. Nor Irdawati, for all of the insightful feedback and guidance she has provided throughout the
dissertation. I would also like to express my gratitude to everyone who has encouraged and
inspired me throughout this process. To conclude , I cannot forget to thank my parents for their
unwavering love, encouragement and for providing me with the means to pursue an education.
Originality
By submitting, I confirm that the work presented is entirely my own and is written in my own
words. All existing sources, as well as any writings or publications by other authors used, have
been duly acknowledged and cited. An appropriate list of references is appended.. Both the
SOSS handbook and the university website's policies on plagiarism have been read and adhered
to.
- Sugeetha Sattiyan
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Abstract
With the growing demand on Malaysian firms to advocate boardroom gender diversity, this
dissertation set out to determine whether the gender composition of a board of directors
influences corporate performance. Women's presence on corporate boards has been associated
with enhanced firm financial performance, however the evidence is inconsistent. Given the
significance of the issue at hand, academics must determine if and how gender diversity relates
to financial performance and this study hypothesis is that the connection is indirect. As per
reference to stakeholder theory, it claims that the presence of women on boards encourages
corporate social responsibility (CSR) CSR due to their sensitivity to stakeholder interests, which
in turn influences the manner in which companies engage in CSR and in turn affect the firm
financial performance positively,
The results, which are based on empirical evidence from 50 publicly traded non-financial entities
in Malaysia between 2016-2019, indicates no association between the presence of women on
boards and firm financial performance. The study adopted a mediation analysis using corporate
social responsibility (CSR) and it found that it doesn’t serve as a mediating factor in the
relationship between women board members and financial performance in the context of
Malaysia. The results, together with their caveats and suggestions for further study, are reviewed.
This research has important ramifications since it adds to the body of knowledge on CSR, draws
attention to the value of gender diversity on boards, and stresses the need for more CSR
reporting and its influence on decision-making.
Keywords: Board composition, Board of Directors, Gender diversity, Firm financial

performance, Corporate Social Responsibility (CSR), Mediation, Bursa Malaysia
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Table of Content
Chapter 1: Introduction................................................................................................................ 6
1.2 Research Aims and Objectives............................................................................................ 8
1.2.1 Research Objectives....................................................................................................8
1. To determine if there is a positive correlation between the female participation on a
firm's board of directors and its financial performance....................................................... 8
1.2.2 Research Structure...................................................................................................... 9
Chapter 2: Literature Review.....................................................................................................10
2.1 Theoretical background.................................................................................................... 10
2.1.1 Critical Mass Theory..............................................................................................11
2.1.2 Resource Dependency Theory.................................................................................. 12
2.1.3 Stakeholder Theory................................................................................................13
2.2 Prior Empirical Findings and Hypotheses Development...................................................15
2.2.1 Board Gender Diversity and Firm Financial Performance....................................... 15
2.2.1.1 Why does gender matter?.................................................................................15
2.2.1.2 Western context on board gender diversity......................................................16
2.2.1.3 Asian context on board gender diversity........................................................ 17
2.2.1.3 Malaysian Code on Corporate Governance policy on board gender diversity...
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2.2.2 CSR and Firm Performance...................................................................................... 20
2.2.3 The mediating role of CSR.................................................................................... 21
Chapter 3: Methodology..............................................................................................................24
3.1 Introduction..................................................................................................................24
3.2 Research Strategy...............................................................................................................25
3.2.1 Research Design.....................................................................................................25
3.2.2 Philosophical Stance.............................................................................................. 26
3.2.3 Research Approach................................................................................................ 27
3.4 Data collection................................................................................................................... 28
3.5 Variables definition............................................................................................................ 30
3.5.1 Dependent Variable................................................................................................30
3.5.2 Independent Variable............................................................................................. 30
3.5.3 Mediating Variable..................................................................................................30
3.5.4 Control Variable...................................................................................................... 32
3.6 Framework for data analysis..............................................................................................33
3.7 Conclusion......................................................................................................................... 35
Chapter 4: Results and Analysis.................................................................................................36
4.1 Preamble................................................................................................................................. 36
4.2 Findings............................................................................................................................. 37
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4.2.1 Descriptive Analysis................................................................................................. 37

4.2.2 Parametric Regression Assumptions.........................................................................39
4.2.3 Multivariate Analysis................................................................................................40
4.3 Endogeneity and robustness checks...................................................................................49
4.3.1 Alternative measure to boardroom gender diversity.................................................49
Chapter 5: Further Discussion................................................................................................... 52
5.1 Interpretation of Findings.................................................................................................. 53
5.1.1 Boardroom gender diversity does not show a positive effect on firm financial
performance....................................................................................................................... 53
5.1.2 CSR does not show a positive effect on firm financial performance....................... 56
5.1.2 CSR does not mediate the relationship between boardroom gender diversity and
firm financial performance................................................................................................ 57
5.2 Practical and theoretical implication..................................................................................58
Chapter 6: Conclusion.................................................................................................................59
6.1 Preamble............................................................................................................................ 59
6.2 Research Objectives...........................................................................................................60
6.3 Limitations and potential problems................................................................................... 61
References................................................................................................................................. 63
List of Tables and Figures

Figure 1: Research Structure
Figure 2: Conceptual Model
Figure 3: Mediation Model
Figure 4: Total Effect Diagram
Figure 5: Direct Effect between X and M
Figure 6: Mean number of women on board
Figure 7: Mean number of women on board based on specific industries
Table 1: Corporate Social Reporting Index Table

Table 2: Definitions and computations of variables
Table 3: Descriptive Statistics
Table 4: Pearson Correlation
Table 5: Analysis of Mediation (Step 1)
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Chapter 1: Introduction
The board of directors (BOD) is one of the most important internal governance systems used to
oversee management within an organisation and protect the interests of its stakeholders. Its
objective is to ensure that the top management is making advancements that are beneficial
towards the organisation's goals and to monitor the effectiveness of its business strategies. The
board of directors (BOD) is widely recognised as the primary institution entrusted with ensuring
that companies practise sound corporate governance (CG) in countries where such regulations
exist.
Government regulators in developed countries have been placing greater emphasis on increasing
gender diversity in corporate boardrooms in recent years. Malaysia, as a rapidly developing
nation, has been proactive in adopting established corporate governance practices by engaging
with policy makers and business practitioners to enhance its standards. In this regard, the 2017
edition of the Malaysian Corporate Governance Code (MCCG) suggested that boards of larger
companies to include at least 30% women directors, and the Security Commission's objective
was to have at least 30% women directors in listed entities by the year 2020. ‘Focusing
specifically on the top 100 PLCs listed on Bursa, the statistics become even more promising.
Within the 851 available board seats, 252, or 26.9%, are currently held by women directors,
indicating a significant improvement from the 19.2% recorded in 2017. In terms of numbers,
Malaysia is only lacking 25 more women directors to achieve a 30% gender diversity
representation within this upper echelon of companies, (The Edge Markets, 2020).’ Although
Malaysian firms are still working towards having more women directors participate on boards,
its efforts reflect the highest ratio of women board members in Asia at 26%, ahead of the global
average of 19.7%, (New Strait Times, 2022). Given the potential impact of the composition of
BOD on the performance of the company, it's crucial to investigate further in particular in the
context of Malaysia as this sort of studies are more in developed nations in comparison to its
Asian counterparts.
In spite of the fact of past studies on these variables, it has produced conflicting findings or
demonstrated a negative correlation between board gender and firm financial performance,
(Adnan et al., 2013); )Marimuthu and Kolandaisamy, 2009); (Kweh et al., 2019), and similarly,
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on the contrary a few are able to show a positive relationship between the two variables,
(Lee-Kuen et al., 2017; Low et al, 2015). Hence, this study seeks to address a gap in the
literature by examining gender diversity of board of directors and its effect on firm performance
in the context of Malaysia with the inclusion of a mediating variable.
The need for this was highlighted by research such as that of (Galbreath, 2018), which suggested
that variations in study design and setting could account for the contradictory results. Such
contradictory results have prompted the claim that the direct link may be oversimplified,
however amidst this proposition, there is still a dearth of research into the viability of
alternatives, such as the likelihood of a mediating variable. To fill in the discrepancies in the
research, (Galbreath, 2018) suggested that female representation on boards may have a knock-on
effect on financial results. So, it is necessary to incorporate a mediating variable in order to
fortify the connection between the principal variables.
Therefore, in light of the important role of a mediating variable, this study has selected CSR to
examine its mediating effect in the relationship between board gender composition and firm
financial performance. CSR is frequently regarded as a component or subset of corporate
governance, as it entails a company's ethical, social, and environmental duties to its stakeholders,
such as its employees, customers, suppliers, the community, and the environment. Corporate
governance on the other hand, as defined by (Gillan and Starks, 1998), encompasses the broader
laws, rules, and conditions that govern a business's operations to ensure accountability,
transparency, and ethical behaviour towards all stakeholders.
Given the recent corporate governance failures and accounting scandals (such as the 2002
WorldCom scandal, the 2001 Enron scandal, the 2011 Unilever and Henkel scandal, and the
2015 Volkswagen scandal), there is an urgent need to investigate the impact of corporate
governance on firm performance. The aim of this study is to provide a comprehensive
understanding of the potential impact of CSR initiatives on the association between board gender
diversity and financial outcomes, shedding light on the importance of promoting gender diversity
on corporate boards and the role of CSR in enhancing overall organisational performance. By
examining the mediating role of CSR, the study aims to contribute to the existing literature on
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corporate governance and performance by offering insights into the potential mechanisms
through which gender diversity and CSR can jointly influence firm financial outcomes.
According to the study by (Harjoto et al., 2015), a more gender diverse board has indicated a
positive impact on the company's CSR initiatives (CSR). Similar arguments were made by
(Hermalin and Weisbach, 2001) whereby the findings of their study stated that the CSR might
have an influence to improve the firm's performance, and the attributes of the board are likely to
have a bearing on that influence's effects. According to (Ouni et al., 2020), the board of directors
bears primary responsibility for good governance with regards to decision-making that has an
impact on the firm ’s survival, significant strategic aspirations, the identification of potential
risks facing the company, the disclosure of data, and accountability.
1.2 Research Aims and Objectives
The aim of this study is to investigate through empirical means whether there is a correlation
between the gender diversity of corporate boards and the financial performance of non-financial
companies that are listed on the Bursa Malaysia Stock Exchange. At the same time, this study
will use CSR as a mediating variable in the relationship between board gender diversity and firm
performance.
1.2.1 Research Objectives
1. To determine if there is a positive correlation between the female participation on a firm's

board of directors and its financial performance.
● Data was collected using secondary resources, using annual reports and financial
databases.
● Period used for the study range from 2016-2019, which includes a year before the
2017 MCCG edition was released so a comparison can be made pre and post
MCCG guidelines on female directors were released and implemented.
2. To investigate whether the relationship between female board representation and firm
financial performance is indirect and presumably mediated by corporate social
responsibility.
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1.2.2 Research Structure
The following approach shown below will be used to investigate the objectives and aims of the
study. Introduction to the study is provided in Chapter 1 and includes explanation of the rationale
for the investigation and its aims and objectives. In Chapter 2 of the study, a literature review
will be outlined, the purpose of which is to construct a conceptual framework illustrating how
the presence of women on corporate boards in Malaysia affects the financial performance of
those companies'. The study's research hypothesis will be built upon the conceptual framework.
The relevant literature on the area of study will also be reviewed in Chapter 2. In Chapter 3, a
research methodology will be crafted that will serve as a foundation for achieving the study's
aims. Research results and their discussion will be presented in Chapter 4. This chapter will also
include analysis of the datasets. Additionally, this chapter will also address two research
questions, which are as follows:
1. Do female representation on boards of Malaysian listed firms impact the financial

performance positively?
2. Does CSR play a mediation role between the female board members and financial
performance of the firms?
Chapter 5 will provide further discussion based on the results that were obtained from the
analysis in the previous chapter. Finally, Chapter 6 concludes the research paper by summarising
the findings and discussing the paper's shortcomings.
Figure 1: Research Structure
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Chapter 2: Literature Review
This chapter provides a thorough analysis of research literatures’ in relation to this study. The
magnitude of attention in recent years in boardroom gender equality begs further need to assess
the dynamics of the relationship between an organisation’s board gender diversity and its
financial performance. This chapter will initially discuss theoretical background, then move on to
providing review of existing literature, which is then followed by the proposition of the
hypotheses.
This dissertation adds to the scant literature that already exists on Malaysian firms in comparison
to developed nations namely the UK and the USA. Prior studies on the above stated variables in
the context of Malaysia were conducted by (Marimuthu and Kolandaisamy, 2009); (Lee-Kuen et
al., 2017); (Julizaerma and Sori, 2012) and a few others, albeit their findings indicated
ambiguity. This dissertation will conduct an examination on the relationship between gender
diversity of corporate boards and the corporate financial performance. In addition, to further add
value to the research findings, this study will discuss the role of CSR as a mediator in this
relationship between board gender diversity and firm financial performance.
2.1 Theoretical background
The theoretical frameworks that links’ the concept of board gender diversity to the outcomes of a
firm can be explained using the Critical Mass Theory, Resource Dependency Theory and
Stakeholder Theory. In the following sections, board gender diversity and financial performance
variables alongside the mediating role of CSR, will be discussed in depth based on the above
mentioned theories.
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2.1.1 Critical Mass Theory
In order to assure that women are not ostracised and can make a paramount contribution based
on their own viewpoints, expertise, and traits, a critical mass must be reached, according to
(Kanter, 1997), who developed the critical mass theory on gender diversity in organisations. A
research done by (Konrad et al., 2008) as well as (Konrad and Kramer, 2006) with 50 women
directors insinuate that three women in the boardroom would represent the critical mass. They
also mentioned that although a single woman can and frequently does make a significant
contribution, and two women are typically more influential than one, having three or more
women increases the possibility that women's views and ideas will be heard and that boardroom
dynamics will alter significantly. They claim that in order to avert tokenism, which is the
treatment of women as symbols of their gender rather than as individuals, three or more women
are required.
The study conducted by (Jocks et al., 2003) offers additional evidence to support the notion of a
"magic number" of three or more women on corporate boards, as it was among the earliest
empirical investigations to apply the critical mass theory to a corporate context, focusing on
German listed companies. Given their board size in their sample averaging, the critical mass of
30% female board members translates into an absolute number of roughly three women, which
validates recent research on a comparable "magic number" of female board members. They
verified their findings using a multivariate regression analysis and identifying gender diversity in
boards of directors endogenously rather than exogenously, as has been done in the prior
literature. Their findings suggest that there is a non-linear relationship between the representation
of women in corporate boardrooms and firm performance, with a U-shaped curve. The study
concludes that non-financial corporations with a boardroom gender diversity exceeding 30%
outperform those that have all-male dominated boards. (Torchia et al., 2011) further built on this
theory with their recent study on the relationship between female board representation and
corporate innovativeness finds that an organisations’ innovativeness increases in the event there
are more than three females on the board.
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2.1.2 Resource Dependency Theory
According to the resource dependence theory, boardrooms serve as a crucial conduit between a
firms' internal resources and its external environment. For an organisation to perform well, this
linkage is essential. The body of prior research on boards of directors points to resource
dependence theory as a useful conceptual framework for understanding and evaluating boards. In
line with this, Pfeffer and Salancik (1978, quoted in Reddy & Jadhav, 2019) insinuated that firms
gain four advantages from using the board of directors as a linking tool with stakeholders.
(i) Provide the organisation with useful data and knowledge
(ii) Development of communication channels with significant stakeholders of the firm
(iii) Obtaining guaranteed support from significant organisations or groups
(iv) Establishing the credibility of the firms’ credibility in the outside world
In order to ascertain which organisational traits influence the likelihood of women being
appointed, (Hillman et al., 2007) looked into these factors. The researchers employed the
resource dependence theory as a framework to investigate how boards of directors operate as a
means of linkage and to determine the organisational traits that make gender diversity most
advantageous. Firms can offer these opportunities from connecting with their stakeholders by
appointing female directors. The research on gender diversity in the boardroom, however,
specifically mentions the importance of giving legitimacy. Women directors also represent career
opportunities to potential applicants and can serve as a vital source of credibility in the minds of
current and future employees (Hillman et al., 2007); (Singh and Vinnicombe 2004).
‘This theory discusses the board's function in facilitating the acquisition and utilisation of assets
for the purpose of enhancing firm performance. By obtaining the resources the organisation
needs, the board serves as the corporation's conduit to outside forces. These resources could
consist of the expertise and knowledge gained from the directors' involvement and experience,
data and information acquired from various networks, as well as support from other
organisations the board is affiliated with. Furthermore, these companies indicate their
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compliance with the call for increased diversity to enhance governance and leverage the
available pool of talent, (Singh, 2007).’ Hence, they might become more renowned as a result,
which would in turn boost their performance.
2.1.3 Stakeholder Theory
Gender diversity on firm boards becomes relevant from the perspective of the stakeholder theory
as well. (Cornell and Shapiro, 1987) stakeholder theory interpretation implies that firms have
commitments towards the stakeholders and that company value is contingent on their capacity to
fulfil these obligations. Failure to align management's interests with those of stakeholders could
potentially lead in both pecuniary and reputational losses for an entity. Hence, boards of
directors, as representatives of shareholders, play a pivotal role in reviewing the formulation and
execution of management's plans to accommodate the interests of various stakeholders and
safeguard the performance of the organisation. The concept is intended to undermine the
preconceived notion that only stockholders require management's attention, (Parmar et al., 2010).
According to the stakeholder theory, a higher utilisation of corporate social responsibility (CSR)
could lead to the accumulation of substantial and continuing equity from stakeholders. This
could, in turn, result in increased production of economic resources that have a significant impact
on the financial performance of the company, (Harjoto et al., 2015). Hence, an evaluation of the
initiatives that female directors take may reveal if their presence will lead to more favourable
financial performance. Women on the board contribute distinct qualities, views, and principles
that may affect the level of stakeholder discussion, resulting in a broader and more in-depth
discussion and increased emphasis on CSR. Such a logic is supported by (Cook & Glass, 2016)
who imply that men may approach corporate strategy with a greater focus on shareholders and a
shorter time horizon, whereas women may be more prepared to absorb the higher expenses and
have a broader focus on a variety of stakeholders with a longer horizon. Hence , the influence of
stakeholder discussion on corporate social responsibility may intensify if there are more women
on the board because they may pay even more attention to the views and perspectives of various
stakeholders.
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Using the stakeholder theory as a framework, the current study explores the connections among
CSR, board gender diversity, and financial performance. According to Harjoto et al. (2015),
companies that demonstrate stronger commitments to CSR are more likely to obtain recurring
funding from stakeholders and generate critical resources that can lead to favourable financial
results. Therefore, by exploring the areas where women on boards can exert influence, it is
possible to gain a better understanding of the factors that connect them to financial performance.
Corporate social responsibility (CSR) may be a viable option, as women on boards are especially
sensitive to stakeholder concerns related to a company's dedication to social responsibility (Cook
& Glass, 2016).
After the discussion of the three underlying theories, this dissertation focuses on how gender
diversity impacts business financial performance and how corporate social responsibility (CSR)
mediates this relationship, which is leaning heavily on the stakeholder theory. The Stakeholder
Theory argues that corporations have a duty to improve society and that their actions should take
into account the interests of a variety of different groups. Everyone who has an interest in
something, including as stockholders, financiers, staff, creditors, society, official authorities, and
the environment, is considered a stakeholder. According to this notion, businesses cannot thrive
without the support of its multiple constituents, who supply the essential resources that drive
growth and profitability. If firms aim to succeed and retain the backing of their stakeholders, they
must exhibit corporate social responsibility (CSR) by committing to undertake further prosocial
initiatives that align with stakeholder interests and adhere to their standards of acceptable
conduct.
To what extent social duties are met depends, in large part, on how well boards of directors
respond to the interests of various stakeholders. Boards of directors, according to stakeholder
theory, should act in the best interests of the company as a whole as opposed to simply the
shareholders. Research questions explored in this study include whether or not the presence or
absence of women on boards of directors has an impact on the board's interactions with
stakeholders and, by extension, on the degree to which corporations participate in CSR
initiatives. The relationship between these behaviours and financial results is also investigated.
Stakeholder theory, corporate social responsibility, and financial performance all interact in
unconventional ways, and this study helps shed light on those aspects.
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2.2 Prior Empirical Findings and Hypotheses Development
2.2.1 Board Gender Diversity and Firm Financial Performance
2.2.1.1 Why does gender matter?
Whether in the realm of public discourse, international news coverage, or academic study, the
topic of gender parity on corporate boards has recently emerged as a hot button issue (Terjesen et
al., 2009; Yang et al., 2019). Women's representation on corporate boards is becoming
increasingly mandated by law, which has piqued the public's interest in this area. Organisations
with a higher proportion of women in leadership positions are seen as more desirable and
credible as shareholders start to think of them highly, as indicated by (Adams and Ferreira,
2009). Yet, this is not sufficient rationale for women's advancement to corporate boards. The
presence of diversity can enhance creativity, innovation, and problem-solving abilities.
Therefore, women's different academic backgrounds are seen as the reason for their distinctness
from men, rather than solely based on their feminine qualities, (Terjesen et al., 2009).
An increase in the number of women on the board has been regarded as a potential strategic
advantage for the company. According to (Burke, 2000), male CEOs who believed that
including women on their boards would help them communicate effectively with key
stakeholders recognised a greater number of benefits and a greater influence of the women
already serving on their boards, as well as a wider range of topics for which they sought the
perspectives of female directors. (Robinson & Dechant, 1997) suggested women's distinctive
perspective and insight offer fresh insights and seven different points of view, increasing
problem-solving abilities, decision-making potency, and business effectiveness. The benefits of
having a socially and professionally diverse board cannot be fully realised without an egalitarian
board culture. To maximise their effectiveness, boards must implement additional measures to
ensure that diverse perspectives are regularly sought and integrated into their endeavors., (Creary
et al., 2019).
Increasing the number of female directors can broaden the talent pool available to firms,
especially since women constitute a majority of graduates in Malaysia (The Malaysian Reserve,
2022). According to (Robinson and Dechant, 1997), the inclusion of women in leadership
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positions improves a company's ability to solve problems, make sound decisions, and operate
effectively as a whole. (Nowell and Tinkler, 1994) suggest that women exhibit a greater
inclination towards cooperation compared to men. In addition, studies indicate that diverse teams
generally outperform those that lack diversity. However, high levels of diversity can lead to
conflicts and communication challenges among board members (Lau & Murnighan, 1998).
In addition, having a diverse workforce mirrors the makeup of the company's customers and
clients, which helps businesses make more educated business decisions (Cox, 1994). This can
boost both the company's credibility and the loyalty of its clientele, leading to increased profits
(Robinson & Dechant, 1997). According to (Adams and Ferreira, 2009), female directors exhibit
higher rates of attendance and engagement in compliance committees, and display a greater
willingness to hold CEOs responsible for poor share price performance. This indicates that a
higher representation of women on corporate boards may reduce the risk of legal, ethical, and
reputational issues. Yet, as pointed out by (Carter et al., 2003), excluding women from board
leadership positions can reduce the effectiveness of board oversight .
2.2.1.2 Western context on board gender diversity
Many countries in Western Europe continue to have the highest levels of gender diversity on
corporate boards, with women occupying over 20 percent of board seats, and in countries such as
Norway, Sweden, and Finland, the percentage of women on boards is significantly higher at 44.0
percent, 38.0 percent, and 34.0 percent, respectively, (SpencerStuart, n.d.). This advancement
may be a reflection of governments exercising a more proactive role within their country, as well
as optimistic cultural attitudes toward diversity in the eyes of the media, the corporate sector, and
other influential groups like shareholders. For instance, in 2003 Norwegian firms were mandated
by legislation to have at least 40 percent of its board members be women, (Smith et al., 2006). In
Germany, a law that took effect in 2016 stipulates that major corporations to at least have 30
percent female board members, (Dauer, 2014). Instead of passing legally enforceable legislation,
the UK government, unlike its counterparts in the European region, has produced guidelines
addressing gender diversity for board level posts. By 2015, (The Davies report, 2012) urges
FTSE 100 company boards to have 25% more women on boards. As of 2022, women now hold
almost 40% of roles on FTSE 100 boards in the UK, a significant increase from 12.5% a decade
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ago, positioning the country as the second highest globally in terms of the proportion of women
on these boards, (Department for Business, Energy & Industrial Strategy, 2022).
2.2.1.3 Asian context on board gender diversity
One of the most dynamic regions right now is ASEAN which is encompassed by 10 Southeast
Asian countries. Increasing numbers of women are graduating from college and joining the
workforce, which is indicative that women's economic engagement in these countries has
climbed. However, there is still a paucity of gender diversity in the top positions of corporations.
They found significant variances in board gender diversity among the six ASEAN nations
studied by the (International Finance Corporation, n.d.). Their data shows that Thailand has the
highest level of gender diversity, with women holding 20.4% of board seats in publicly traded
corporations, subsequently Vietnam (15.4%) and Indonesia (14.9 percent). Despite the fact that
ASEAN countries are among the most progressive localities of the globe and that women's
participation in the economy has progressed, there is still a dearth of gender diversity in positions
of seniority. ‘Given the patriarchal structure of Asian countries, this interpretation is not
astonishing, but it does pose the following issues: 1. Are women's representation on Asian
corporate boards as desirable as applauded in Western countries? 2. Were women selected as
directors solely as showpieces to placate investors and regulators? (Low et al., 2015).
The selection process for board members plays a role in the glass ceiling that still exists when it
comes to appointing female board members in Asian countries. The glass ceiling is a common
and effective metaphor for the obstacles women face in the workplace. Social stereotypes of both
men and women, as well as social networks promotion systems 'old boy's network's' proclivity
towards favouring men, (Pajo, 1997). These misconceptions can be seen as impediments to
women entering certain positions in the firm. Despite the fact that they are frequently more
qualified than their male colleagues, women are underrepresented in management roles.
Barriers to Women's Advancement in a Multinational Oil Company in Malaysia was a research

undertaken by (Ismail and Ibrahim, 2007) to examine this issue. Their research confirms what
many working women already know: that family responsibilities and gender norms are the
biggest obstacles they face in the corporate world. This study shows that women's opinions of
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the obstacles they face in the workplace are consistent across industries and job functions.
According to the results of their research, the various institutional constraints placed on women
impede them from achieving professional success. The societal perception that women are more
suitable for fulfilling family responsibilities than men is further strengthened by instances where
maternity leave is prioritised over paternity leave or when women are encouraged to work
part-time after having a child, whereas men are not provided with similar opportunities,
(Schwanke, 2013).
2.2.1.3 Malaysian Code on Corporate Governance policy on board gender diversity
The Malaysian Code on Corporate Governance (MCCG), which was first published in 2000, has
been an important element of corporate governance reform and has had a beneficial impact on
firms' corporate governance practices. In MCCG 2012 and MCCG 2017, board diversity was
heavily addressed. In regards to board diversity, there are some changes between these two
codes. The comparisons are outlined below:
MCCG 2012, page 91:
The board should define its approach to boardroom diversity by establishing a policy. The board
should take action to make sure that female prospects are sought out as part of its hiring process
through the Nominating Committee. The board's gender diversity policy, goals, and the steps
taken to achieve them should all be made apparent in the annual report.
MCCG 2017, page 22-29:
The company's gender diversity policy, goals, and strategies for achieving them should all be
disclosed in the board's annual report. A minimum of 30 percent of women must be on the board
of directors for large corporations. While large corporations must have 30% female directors,
boards of smaller firms should strive to meet this goal as well. Given the benefits, women should
be included in all decision-making roles, not just board positions; this includes senior
management positions as well.
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MCCG 2021, page 30-39:
The Malaysian Code on Corporate Governance was most recently amended on April 28, 2021,
following its revision in 2017, (Securities Commision Malaysia, 2021). At least 30% of the
directors on the boards of publicly listed firms in the 2021 edition are women, and senior
management is now covered under these organisations' policies on gender diversity. The SC's
goal was to achieve a minimum of 30% women directors in listed firms by 2020. The MCCG's
2017 edition had suggested having 30% women directors on boards of large corporations.
However, just 25.8% of the top 100 publicly traded corporations now have women on their
boards, (New Strait Times, 2021). The MCCG 2021 suggests 30% female directors on all boards
in order to hasten the progress of women serving on boards.
It is intended that more independent women directors would be selected to contribute to the
numbers rather than the current directors or large shareholders' spouses and daughters, as gender
diversity and inclusiveness progressively become the cornerstone of sound corporate practices.
In terms of senior management, listed businesses must declare in their annual reports their senior
management's gender diversity policy. This is additional information to be provided regarding
the board's gender diversity policy.
The MCCG revisions for 2021 are relevant and pertinent with the expectation of raising firms'
governance scores, but in the end, it all comes down to how much these practices are adopted
and internalised. Therefore, it is essential to conduct empirical research to examine whether there
exists a favourable correlation between the presence of women on corporate boards and the
financial performance of firms. In light of this, Hypothesis 1 is proposed,
Hypothesis 1 (H1): Boardroom gender diversity has a positive effect on firm financial
performance.
2.2.2 CSR and Firm Performance
For a substantial period of time, the idea of corporate social responsibility (CSR) has dominated
both corporate attention, international academic and professional literature. Corporate social
responsibility (CSR) has evolved into an important part of business strategy. Interestingly, there
20
is consensus that having women represented on boards conveys a positive signal about
encapsulating the CSR, which is vindicated by different nations' federally mandated women's
inclusion quotas on board of directors. Corporate Social Responsibility, in its broadest sense,
refers to a company's involvement in and effects on the social, economic, and environmental
contexts in which it operates (Crane et al., 2004). CSR is evolving into a strategic problem that
top management have to address.
According to the stakeholder theory, entities have a responsibility to take into account not only
the interests of their shareholders but also those of all other stakeholders whenever they make a
decision. This includes employees, customers, suppliers, local communities, and any other
organisations that are impacted in some way by the activities of the company. In regards to the
connection between corporate social responsibility and the financial performance of
organisations, stakeholder theory posits that businesses that give CSR initiatives a higher priority
may reap benefits such as an improved reputation, enhanced stakeholder relationships, and
increased customer loyalty. The realisation of these benefits may, in turn, result in enhanced
financial performance. (Brown and Forster, 2013) suggest that the performance of a company
over the long term is impacted by the connections it maintains with its stakeholders, and that
effective stakeholder management is one of the most important factors determining the success
or decline of an institution.
(Ahamed et al., 2014) who studies the relationship between CSR and firm financial performance
found that that firm exhibits greater concern to improve financial performance and corporate
reputation via increasing their CSR or sustainability report in their annual report. Similar results
were also established by (Chan and Ong, 2022) utilised a sample of 300 Malaysian publicly
listed firms within a period of 3 years and found that to a certain extent CSR does have a positive
relation to firm performance. This implies that firms that engage in transparent and ethical
business practices tend to perform better in the market than those that do not.
Hence, based of prior literatures, the following hypothesis is developed:
Hypothesis 2 (H2): There is a positive relationship between CSR (proxy representation being
CSR reporting) and firm performance.
21
2.2.3 The mediating role of CSR
According to academic theory, gender diversified boards would produce profitable financial
outcomes for a firm. These defences are predicated on the notion that favour the advantages
associated with the presence of gender diverse boards which are predicted promote more and
better creativity, amplify business innovation as well as producing higher quality decisions being
a heterogeneous group, consequently leading to better company performance, mainly due to the
existence of different views, (Robinson and Dechant, 1997). Conversely, some earlier studies on
the subject of the association between board gender diversity and firm performance produced
contradictory or conflicting findings. (Boubaker et al., 2014; Gordini et al., 2017; Simionescu
and Ghergina, 2021). This suggests that there is a nuanced relationship between gender diversity
and business performance that lacks a clear perspective. Consequently, the necessity to include a
mediating variable was felt in order to clarify the conflicting and unclear findings presented in
earlier work.
A latent moderation effect may be the cause of an unexpectedly weak nexus or the lack of
closely resembling causation, according to an empirical perspective (Wu and Zumbo, 2008). In
this light, a case may be made for the notion that gender diversity and CSR performance are
interconnected processes. In other words, organisations with a substantial percentage of women
directors are more likely to adhere to social and environmental norms fully, which has an implicit
impact on the performance of the business.
For decades, studies in philosophy, psychology, and economics have shown that men are morally
superior to women. Several studies back up the theory from (Gilligan, 1982), which proposes
that women and men have different moral orientations. More intriguingly, a body of literature
has emerged with the explicit goal of studying how males and females behave in relation to
unethical conduct. To add, (Whitley et al., 1999) use a meta-analysis to demonstrate that females
are less likely to have positive views of cheating than males. On the other hand, according to
(Doty et al., 2005), men demonstrate a higher likelihood to engage in unethical behaviour
compared to women. Likewise, (Kennedy and Kray, 2014) found that women are less likely to
prioritise personal ambition and social status over ethical considerations, which is not the case
for men. The research by (Kennedy et al., 2017) demonstrates that women fare worse than men
22
in negotiations because they are less likely to resort to the same unethical strategies. This
demonstrates that, compared to men, females are more likely to feel offended by unethical
behaviour.
An empirical study conducted by (Setó-Pamies, 2013) sought to examine whether companies

with a greater proportion of women on their board of directors demonstrate higher levels of
social responsibility. The study revealed that gender diversity has a beneficial effect on CSR.
Hence, when it pertains to assisting firms identify their social responsibility and practice
sustainability effectively, female talents often play a crucial role. According to (Eagly, 2016),
women who sit on boards tend to be more interested in pursuing both business and philanthropic
objectives at the same time. Entities that adopt this strategy will persevere and attain their
long-term financial goals.
Figure 2: Conceptual Model
This conceptual model is an adaptation of the paradigm founded by (Galbreath, 2018), who
pioneered in a research study that was very similar to this one. While drawing on the research of
(Harjoto et al., 2015; Jain and Jamali, 2016, and Chen et al., 2016), this study goes further by
incorporating a mediated relationship, allowing for an empirical examination of whether the
relationship between women on boards and financial performance is indirect, as depicted in
Figure 2.
23
In reality, CSR initiatives that address stakeholder demands and interests may constitute as the
mechanism via which women on boards have an impact on financial success. The mitigating
effect of CSR on the association between women on boards and financial performance must thus
be experimentally investigated. In line with the aforementioned reasoning, the following
hypotheses is developed:
Hypothesis 3 (H3): The connection between the presence of women on boards and financial
performance is not direct but rather mediated by the presence of CSR
24
Chapter 3: Methodology
3.1 Introduction
In the previous chapter, the literature on the correlation of board gender composition and
financial performance with the interference of CSR was discussed, it was found that more
research on the role of CSR as a mediator between the effect of gender diversity of women board
of directors on the financial performance of business entities was needed. To inform the research,
this study sought to build a theory in answer to the following research question:
RQ1: Is there a positive relationship between the representation of women in the

boardroom and firm performance?
RQ2: Does CSR have a significant effect on firm financial performance?
RQ3: Does CSR play a mediating role in board gender diversity and firm performance?
The purpose of this chapter is to design a research methodology around the research questions. It
has mainly relied on the philosophical stance and the research problem to guide on the
methodological choice. This chapter clarifies the process of researching this topic adopted in this
study. In order to do this, the sequence of sections in Chapter 3 are as follows; it identifies the
research strategy, data collection, limitations and potential problems with using the particular
methodology and information in regards to the fieldwork. The applicability of a deductive theory
and a positivist paradigm for this study are further touched upon in this chapter. The research
action plan has been discussed in the research strategy section where the overall strategy has
been introduced and how the research will be conducted based on the aims of the study. Under
the data collection section, further analysis on how to go about the collection of necessary data
for the research. The chapter concluded by defining procedural aspects of the research, such as
timing, generalizability, and key decisions made throughout the study, while also addressing
ethical considerations. This chapter is crucial as it provides a pathway to data collection and
information to proceed with the research.
25
3.2 Research Strategy
3.2.1 Research Design
A research design is defined as 'the techniques for gathering, evaluating, analysing, and
presenting data in research undertakings', (Creswell & Clark 2017). The general approach for
bridging the gap between the applicable and viable empirical research and the conceptual
research complexities. (Robson, 2002) classifies three potential types of research design as
exploratory, descriptive, and explanatory. His classification system is based on the research field,
taking into account that each concept has a distinct ultimate goal. The aim of descriptive research
is to describe the characteristics of entities such as things, people, groups, organisations, and
surroundings. (Chong, 2019) The issues of who, what, when, and how are addressed. An
exploratory investigation, on the contrary, aims to provide an explanation and justification for the
descriptive information. When there is not enough information on a phenomena or an issue that
has not been formally characterised, it is explored, (Saunders et al., 2007). Explanatory studies
aim to justify and make sense of the descriptive data. It builds upon exploratory and descriptive
research by identifying the underlying causes of a phenomenon.
The primary goal of the study, as stated in the preceding section, is to look into the relationship
between gender diversity and performance of firms and to determine whether CSR has any
bearing on this relationship. To achieve this, the research utilises statistical and quantitative
analysis to establish correlations and subsequently reinforces the relationship with qualitative
research findings. Therefore, the appropriate research design is unequivocally explanatory,
addressing both primary and secondary research questions. In light of this, an explanatory
research strategy that addresses both the primary and secondary research topics is certainly the
most appropriate. Given that a research design is the most effective approach for testing a
hypothesis or explanation, opting for an explanatory design is the most suitable choice. More
information on the selection of the explanatory research design in this study is provided in the
section below.
26
3.2.2 Philosophical Stance
"The research paradigm of a study is influenced by the researcher's convictions regarding the
appropriate manner of conducting research, both in general and pertaining to the study's specific
objectives. It acts as a framework for determining research methodologies, executing the
research itself, and the relevance and applicability of the eventual findings, (Gannon et al.,
2022). Therefore, a researcher's methodological choice is influenced by their philosophical
assumptions about ontology, human nature, and epistemology, (Collis and Hussey, 2003).
Ontology refers to the study of the nature of reality and the assumptions made by researchers
about how the world operates based on their particular perspective, (Saunders et al., 2007).
Ontology appears to be divided into two polarised perspectives: objectivism and subjectivism or
constructionism. Qualitative research is most commonly tied to the notion or assumption that
society is the result of social interactions and the beliefs of social actors. This is referred to as
subjectivism (Bahari, 2010). In contrast, objectivism holds that reality exists independently and
can be observed through tangible behaviours. This perspective stresses the significance of
examining the nature of relationships between various components, (Bahari, 2010). For instance,
in their attempt to characterise reality, (Collis and Hussey, 2003) have categorised different
ontological assumptions along the following spectrum: the domain of symbolic discourse; a
social creation; a projection of human structure; a concrete structure; a concrete process; a
contextual field of information.
Contrarily, epistemology pertains to the study of knowledge, and concerns what is considered
valid or acceptable knowledge within a given field of study, as per (Bryman, 2004). Related to
this, (Saunders et al., 2007) pointed out that epistemology is a subfield of philosophy that
examines the nature of knowledge and what qualifies as reasonable knowledge in a particular
field. An epistemological assumption can be viewed as a discussion of what constitutes
acceptable knowledge. Positive (realist) epistemology and phenomenological (or normative,
interpretative) epistemology represent two fundamentally distinct but competing epistemological
endeavours (Bryman, 2004). Interpretivism, according to (Saunders et al., 2007), is a
"epistemology that is required for the researcher to comprehend the distinctions among humans
in their role as social actors." Furthermore, interpretivists believe that facts are not
27
distinguishable, and that findings are impacted by the study's beliefs and points of view. In
contrast, positivism is widely accepted and recognised in extensive research strategies.
Positivism holds that social facts with objective reality exist besides from personal views. The
positivist method of study holds that studies ought to be carried out as objectively as possible.
This concept recognizes the use of statistical analysis and indicators of connection, as well as the
advancement of measured variables (Bahari, 2010).
This study employs a positivist reality perspective. In quantitative research, positivism is

typically the underlying research philosophy, as will be addressed further in the following
section. With the notion that a researcher can study reality objectively and that there is a single,
independent reality. Determining the influence of gender diversity on the financial performance
of businesses is therefore based on the logic of experimental methods developed from the
scientific method. In addition, the study acknowledged the role of CSR in this connection. Thus,
the study sample derived through statistical analysis of a representative sample will be applicable
to this method. This contribution to CSR's role as a mediator in this relationship can only be
identified through objective approaches.
3.2.3 Research Approach
There are three ways or strategies to conducting research in general: qualitative methods,
quantitative methods, and mixed methods. If the aim of research is to comprehend a phenomenon
by relying on an individual's perspective and experiences in a specific context, then a qualitative
study is appropriate, (Stake, 2010). (Creswell, 2003) mentioned , when a researcher attempts to
explore correlations between variables, a quantitative method is acceptable. Since this research
study requires the collection and analysis of quantitative data, a quantitative technique is used to
address the study's objectives. The following is a justification for the selected method:
To assess the influence of gender diversity on firms' financial performance with CSR as a
variable, a quantitative technique leveraging secondary data gathered from annual reports, as
explained later in the chapter, will be adopted for the scoping of this research. Quantitative
research prioritises objectivity and is well-suited for collecting numerical data and making
28
inferences based on samples that accurately represent a larger population, (Queirós, 2017).
According to (Queirós, 2017), qualitative approaches are incapable of illuminating major trends
and patterns or exploring the links between variables, whereas quantitative approaches would do
so. According to Blommaert (2013, as cited in Savela, 2018), a quantitative approach can
provide a comprehensive picture and safeguard research against inaccurate assumptions. (Aliaga
and Gunderson, 2000) define quantitative research as a methodology that employs statistical
analysis of numerical data to depict a phenomenon. This approach involves the use of inquiry
techniques such as experiments and surveys, and data is collected through specific tools that
produce statistical information (Creswell, 2003). According to (Marshall, 1996), the most
notable strength of quantitative research is that its methods generate reliable and measurable data
that can be generalised to a broader population. Additionally, it is suitable for testing and
validating preconceived theories on how and why certain situations occur through the evaluation
of hypotheses developed before data collection.
The quantitative technique is used in the research to confirm or deny the core research issue and
several related research concerns. As from the characteristics of the study and existing literature,
it is evident that the primary research issue requires a quantitative resolution.
3.4 Data collection
The collected data may have a significant impact on the investigation's accuracy and
effectiveness, making data collection an essential aspect. Sources of information include both
primary and secondary sources. Primary data is information obtained directly by the researcher,
whereas secondary data is information gathered from already-existing sources. This study utilises
secondary information in which annual reports are compiled and analysed during the research
procedure.
The sample consists of firms listed on BURSA Malaysia previously known as the Kuala Lumpur
Stock Exchange. Bursa Malaysia has the distinction of being among the biggest bourses in
ASEAN with well over 900 listed companies. Companies’ annual reports can be easily accessed
and downloaded from the website of Bursa Malaysia or the respective companies’ website.
According to (Dayana, 2019), BoardEx is not accessible in Malaysia, hence studies depend
29
significantly on the Annual Reports issued by the Public Listed Companies (PLCs) of Bursa
Malaysia on the Main, ACE, and LEAP markets. These reports feature a Corporate Governance
segment that includes comprehensive information on the Board of Directors, enabling
researchers to assess their independence, diversity, CEO duality, Chairman's responsibilities, as
well as the age, gender, experience, and education level of executive and non-executive directors.
This information is openly published, allowing us to conduct our investigation. The study
gathered data from all listed firms comprising 50 organisations listed on BURSA Malaysia,
which were distributed among these sectors: the energy,oil, gas and utilities sector (7 firms), the
technological sector (2 firms), the FMCG and tobacco sector (5 firms), the leisure and hospitality
industry (2 firms), the retail sector (3 firms), the engineering and heavy industries (5 firms), the
telecommunications industry (6 firms), the healthcare industry (2 firms), the plantations sector (6
firms), automotive sector (3 firms), the property developers sector (3 firms) and the investment
sector (6 firms). The sample of data will range from the year 2016-2019 which was chosen for
this study as to determine whether there is an effect after MCCG 2012 and MCCG 2017 have
been introduced in which board diversity has been emphasised in these codes. The longitudinal
time horizon was chosen so that the COVID-19 pandemic would not have much influence on the
data which would have a direct impact on the financial performance of firms.
Besides, data such as ROA are extracted from the annual report as well. In addition, journals and
articles are studied through the Internet, Heriot Watt University's e-databases such as OSIRIS as
well as Google Scholar.
Prior to initiating data collection, the university granted full ethics approval. The study
recognizes all individuals who contributed to the research and duly acknowledges the scholars
involved. Additionally, a reference list is appended to the study. Great care has been taken to
prevent bias, abuse, misconduct, and fraudulent activities from tainting the research.
3.5 Variables definition
30
3.5.1 Dependent Variable

In this research, Return on Equity (ROE) is used as a proxy for financial performance. ROE is a
commonly used financial ratio that measures a company's profitability by calculating the amount
of net income returned as a percentage of shareholders' equity. It is a useful metric to evaluate a
firm's financial performance as it provides insight into how effectively a company is utilising its
equity to generate profits. As such, ROE is often used as a proxy for financial performance in
academic research as it is a reliable and widely accepted measure of a firm's profitability.Return
on equity (ROE) is the ratio of net income to total equity and is the dependent variable. ROE has
already been extensively employed in prior research to examine the relationship between BOD
characteristics, financial performance and CSR, (Galant and Cadez, 2017; Galbreath,2018). ROE
is considered to be a reliable indicator for senior management to evaluate profitability of an
entity. Consequently, ROE has been utilised as a proxy for the dependent variable in this
research.
3.5.2 Independent Variable

This study focuses on one of the most prevalent and influential aspects of boardroom diversity.
Specifically, board gender is the independent variable in this study (BGEN). The proportion of
women's representation in the boardroom is calculated by dividing the number of female
directors by the total number of directors. One of the most widely discussed and misled aspects
of boardroom diversity was chosen for this research. To be more specific, the gender of the board
serves as the explanatory variable in this investigation (BGEN).
3.5.3 Mediating Variable
A self-designed measure was created to accurately assess the mediating factor of Corporate
Social Responsibility (CSR), which incorporates practices related to philanthropy towards the
community. According to (Lu and Castka, 2009), the majority of professionals concurred that
Malaysian organisations often prioritise philanthropy. “'Corporate giving' can be viewed as the
extension of philanthropy at the visceral level. These donations made by businesses are often
31
known as philanthropy. The term "corporate giving" is commonly used to describe the practice of
a business allocating a portion of its resources and income to charitable organisations and other
charitable causes. Most corporate donations made by large businesses are channelled through
charitable foundations. Donations from smaller businesses frequently come through direct
contacts with the charity. While monetary donations have traditionally been the primary
emphasis of corporate giving, in recent years, in-kind donations of time and talent from
employees have also been increasingly common. Other forms of corporate charity include
helping economically disadvantaged communities become self-sufficient, making charitable
contributions overseas, providing aid for housing and education, and building relationships with
local indigenous communities in regions where the company operates or plans to expand,
(Kabongo, 2013).” For the purpose of the study, the availability of philanthropic deeds data as
well as corporate responsibility towards the community will be accounted for.
CSR data is gathered from secondary sources such as annual reports and stand-alone
sustainability reports acquired from the Bursa Malaysia. The Corporate Social Responsibility
Directive (CSRD) is frequently used as a proxy for CSR activities. Several types of
implementation Of CSR measures have been used in previous research studies, including public
image indices, content analysis, questionnaire-based surveys, and one-dimensional measures,
(Chan and Ong, 2022). To glean data on CSR efforts, a content analysis method has been
employed. According to (Krippendorff, 1989), content analysis is an approach used by
researchers to simulate and draw credible conclusions based on information in their framework.
It incorporates qualitative and quantitative methods and scores data from annual reports
(Djajadikerta and Trireksani, 2012).
A review of CSR reporting studies indicates that multiple units of analysis are employed to
evaluate CSR disclosure. A scoring method adapted based on the CSR checklist developed by
(Ahmad, Rashid and Gow, 2017) was used. The community section from this checklist was
modified and utilised to score the sample, checklist is shown in Appendix section. The checklist
used has been shown below. In this study, a dichotomous approach (unweighted scoring method)
was utilised to evaluate CSR disclosure.
32
Under this approach, a firm is scored 1 if the item encompassed in the checklist had both. The
disclosure can either be in the form of quantitative CSR disclosure or qualitative CSR
disclosures. It can also be a combination of both qualitative and quantitative CSR data. This
category also encompassed extended descriptions (comprising more than one sentence) and
visual aids such as graphs and photos that conveyed specific messages or events. On the other
hand, a firm will be allotted a score of 0 if an entity has no information being disclosed in
relation to their CSR practices specifically in regards to their specific philanthropic activities.
The overall CSR reporting score was determined using the following formula: ∑ X/n × 100. In this formula, x is equivalent to 1 if the item is
reported, and 0 if it is not, while n represents the total number of items.
CSR index: (n / N) x 100 %
3.5.4 Control Variable

One of the most commonly used control variables used in previous CSR studies is board size.
The firm size (FSIZE) is considered to be the natural logarithm of total assets. A control variable
that is theoretically linked to firm performance in this econometric model is board size (BSIZE),
as larger boards tend to have more diverse experiences, skills, and ideas than smaller ones (Van
den Berghe and Levrau, 2004). Therefore, firms with larger (BSIZE) are more likely to have
positive performance. Board size is measured by the total number of directors on the board.
33
3.6 Framework for data analysis
The primary method for gathering data for this study was document analysis. In addition, a
variety of papers, including journals, theses, books, annual reports, and websites, were gathered
to get an overview and information on the research.
Data analysis is the process by which researchers look for and organise data in order to improve
their understanding of the data and disseminate their findings to others. The quantitative
methodology aimed to answer the research questions posed in the aforementioned sections. Data
on gender diversity and financial performance of the firms will be gathered from the annual
reports of the respective firms. The SPSS statistical package was used to analyse the data for this
investigation. SPSS is a software tool for statistical analysis. It can handle vast volumes of data
and do all of the analysis outlined in the text, as well as many more. Microsoft Excel was utilised
to help with data administration and analysis. Software was useful as a data storage and for data
sorting, (Bryant & Charmaz, 2010).
Within the SPSS several types of tests will be conducted. Firstly, a descriptive analysis will be
conducted. The analysis will describe the variables’s central tendency (the ‘middle’ or expected
value) and dispersion (the distribution of the collected data). Then a regression will be conducted
to identify if there is a direct relationship between board gender diversity and firm financial
performance Lastly, the mediation hypothesis of CSR on the relationship between boardroom
34
gender diversity and firm performance will be tested. The following pooled regression research
model is in use, as stated by Baron and Kenny:
The first model assumes that boardroom gender diversity has an effect on TQ; the second model
assumes that boardroom gender diversity has an effect on CSR; and the third model assumes that
CSR has an effect on TQ when regressed on both boardroom gender diversity and CSR. If, in the
third model, gender diversity in the boardroom has no effect on total quality, then perfect
mediation holds.
Due to the lack of clarity in the literature regarding the impact of female directors on firm
performance, it is uncertain what the expected coefficient on female presence and proportion
would be. On one hand, boards that have a diverse gender makeup may result in better
decision-making, reduced risk, and stronger client relationships, which could improve firm
performance and lead to a positive coefficient. On the other hand, having a gender-diverse board
may result in more conflict or excessive monitoring, which could harm firm performance and
result in a negative coefficient. Alternatively, if female directors do not have an impact on firm
performance, the result may be insignificant.
35
3.7 Conclusion
The chapter has presented a comprehensive framework for the methodological choices made in
the study. The study is based on a positivist philosophy, which is reflected in the use of an
explanatory research design. Along with the philosophical standpoint, the chapter utilises a
research approach to answer each of the research questions presented in the problem statement.
To achieve the research objective and ensure the validity of the study, the explanatory sequential
quantitative research approach is identified as an appropriate method.The methodology chapter
outlines the research's methodological decisions, including a positivist philosophical stance that
led to an explanatory research design. The chapter addresses each research question from a
research approach perspective and identifies the explanatory sequential quantitative research
approach as a suitable approach to meet the research objective and ensure the study's validity.
The chapter also establishes procedures for data collection, analysis, and reporting, relying on
publicly available secondary data sources that are less susceptible to data aggregation risk. The
study employs a census approach and panel data framework, consisting of observations on 50
publicly traded firms on BURSA over four years. The study's procedural issues for the
quantitative approach are also explicitly defined in this chapter. It also emphasises the initiatives
taken to enhance the study's validity and reliability, as well as the steps taken to obtain ethical
clearance from the university and address ethical concerns. The purpose of Chapter Four is to
showcase the results of the study and confirm that the methodology outlined in Chapter Three
was implemented accurately.
36
Chapter 4: Results and Analysis
4.1 Preamble
In order to analyse data from secondary sources, the prior chapter established a research
methodology to guide the process. The study is based on statistical analysis of information
gleaned from annual reports and the OSIRIS database. The data collection method was
conducted cautiously and meticulously in the pursuit of precise results. The data collected was
analysed using both descriptive and inferential statistical approaches.
This chapter presents and discusses the findings from the data analysis, with the overarching goal
of evaluating the study's research objectives and hypotheses. In this chapter, data's findings and
results are methodically described with the help of descriptive and inferential statistics.
37
4.2 Findings
4.2.1 Descriptive Analysis
Table 3: Descriptive Statistics
Note. ROE = return on equity; CSR = corporate social responsibility; BGEN = board gender diversity
Table 3 presents an overview of the statistical nature of the variables tested. It is evident that
financial performance (ROE as a proxy) has a mean of 16.9%, displaying a stronger financial
performance in comparison to the values obtained by an earlier study by (Lee-Kuen, Sok-Gee
and Zainudin, 2017) for the period between 2009-2013 at 9.14%.
The mean value for BGEN, which represents the percentage of females on the board of directors,
is 33%. This is higher than the value of 19% disclosed by the Institute of Corporate Directors
Malaysia who examined the performance of 312 top publicly listed firms on Bursa Malaysia
from 2017-2019, according to a report by (Bernama, 2021). In comparison, amongst the French
listed firms, (Boubaker, Dang and Nguyen, 2014) reported a value of 13%. Also, women make
up a significantly larger share of the board of directors at publicly traded companies in Malaysia
than in Spain. It was estimated that the Spanish market was only 3.28% (Campbell and
Minguez-Vera, 2008). However, it was observed that the Dutch and Danish boardrooms
consisted of a significantly higher percentage of females on their boards at a value of 54% as
analysed by (Marinova, Plantenga and Remery, 2010). (PR Newswire, 2011) found that among
Asia-Pacific countries, Malaysia had the highest proportion of female non-independent
non-executive directors. It's likely that these women serving as directors on Malaysian company
boards are family members. Similarly, (Chen et al., 2016) argued that some women's
38
representation on corporate boards may be a ploy to silence critics, with the result that these
women are merely treated as tokens rather than actual decision-makers as supported by the
‘critical mass theory’.
Continuing with the analysis of control variables, the mean value obtained for board size
(BSIZE) is 9.24, with a minimum of 6.00, a maximum of 13.00, and a standard deviation of 1.80.
These figures suggest that the top 50 non-financial firms listed on BURSA have an average of
nine members on their boards.For the firm size variable (FSIZE), natural logarithm of assets is
used as a proxy, which has an average value of 14.5 and a standard deviation of 1.47.
The mean value of CSR from community activity is 0.57, with a minimum of 0.14 and a
maximum of 1.00. The standard deviation is 0.19841, suggesting that there is relatively low
variability in the extent to which BURSA-listed companies prioritise community involvement
and philanthropy and publicly disclose their efforts. This indicates that more than half of the
firm's value these activities highly enough to disclose them fully.
According to (George and Mallory, 2010), in order to demonstrate a standard univariate

distribution, asymmetry and kurtosis values between -2 and +2 are accepted as valid. Likewise
(Hair et al., 2010) and (Bryne, 2010) indicated that a skewness of 2 to +2 and a kurtosis of 7 to
+7 would classify as "normal" values. In terms of skewness and kurtosis, it is clear that the
analysed variable data falls within the range of values proposed by prior scholars.
Identifying and addressing outliers is a crucial aspect of data preprocessing, as their presence can
have adverse impacts on statistical analysis, leading to decreased accuracy.
Outlier treatment aims to ensure that the estimates for the population are consistent with the true
parameters of the population. To achieve this, there are several methods available for treating
outliers. As described by (Ghost and Vogt, 2012), outliers can be treated in a few ways, such as
retaining the outlier and treating it like any other data point, applying winsorization (i.e., giving
it less weight or adjusting its value to make it closer to the other sample values), or removing it
from the analysis altogether. To increase the robustness of the study and reduce the potential
39
distortions caused by outliers, all financial variables have been winsorized at the 1% and 99%
levels.
4.2.2 Parametric Regression Assumptions
Table 4: Pearson Correlation
Note. ROE = return on equity; CSR = corporate social responsibility; BGEN = board gender diversity
Table 4 presents the Pearson Correlation Matrix showing the correlation coefficients among the
study variables. The results indicate a positive but insignificant correlation coefficient of 0.002
between the dependent variable (ROE) and BGEN, suggesting that board gender diversity does
not have a direct impact on firm financial performance when using ROE as a proxy dependent
variable. All of the other variables have produced negative results which signifies a negative
nexus with the dependent variable (ROE).
The aim of this analysis is to determine whether there is a relationship between the variables and
to identify the presence of multicollinearity. Multicollinearity refers to a situation where two or
more variables are strongly correlated. A high level of multicollinearity suggests a biassed
relationship between two variables and may impact the accuracy of the results from multiple
regression tests. Previous studies have considered a correlation coefficient of 0.7 as an acceptable
40
threshold for independent variables, (Hair et al., 2017). The magnitude of the correlation
coefficient among independent variables is under 0.7; consequently, multicollinearity may not be
an issue in the multivariate analysis. However, all the variables have a correlation coefficient of
less than 0.1. The variable with the highest correlation coefficient is BGEN and firm
performance (ROE), which has a coefficient of 0.002. These findings indicate that there is no
significant multicollinearity issue that could compromise the accuracy of the regression analysis.
4.2.3 Multivariate Analysis
Although several methods exist for testing hypotheses of intervening variable effects, the causal
steps approach proposed by (Baron and Kenny, 1986) is widely used. This method involves
estimating each of the paths in the model and checking whether a variable functions as a
mediator by examining whether certain statistical criteria are met. For instance, if both paths a
and b in a model are statistically significant and c' is closer to zero, then M is considered a
mediator of the relationship between X and Y. However, some researchers only examine whether
their data meet these criteria if there is evidence of a total effect of X (i.e., if c' is statistically
significant), which is one of the requirements of mediation outlined by Baron and Kenny (Hayes,
2009).To conduct this analysis, the three main variables in this study: Board Gender (X), ROE
(Y) and CSR (M) were fitted in (Kenny and Baron, 1986) step analysis model.
Figure 3: Mediation Model
The mediation steps are outlined as followed:
41
Step 1: Estimate the total effect between X and Y
● Bivariate Regression
Step 2: Estimate direct effect between X and M
● Bivariate Regression
Step 3(a): Estimate direct effect between X and Y
● Multiple regression with X and M as predictors and Y as dependent variable
Step 3(b): Estimate direct effect between M and Y
● Multiple regression with X and M as predictors and Y as dependent variable
Step 4: Estimate and test indirect effect for statistical significance
● Using either Sobel test or bootstrapping (syntax needed)
Step 1: Total Effect between X and Y
Figure 4: Total Effect Diagram
To begin the analysis, the first step involved examining the potential impact of BGEN and CSR
on firm performance (direct relationship), while controlling for the influence of BSIZE and
FSIZE as control variables. A basic bivariate regression model was used to conduct a bivariate
regression between boardroom gender diversity (BGEN) which is denoted as (X) and ROE (Y).
42
In the context of mediation analyses, a bivariate regression coefficient between X and Y is often
referred to as a total effect.
Note. ROE = return on equity; CSR = corporate social responsibility.

†p < .10. *p < .05. **p < .01. ***p < .001.
The results of the multiple regression analysis examining the direct correlation between board
gender diversity and firm performance (measured by ROE) are presented in Table 5. The
outcomes reveal that BGEN has no statistically significant impact on ROE, with a significance
level of .268.
This suggests that the sample of companies included in the analysis may not have had enough
representation of women on their boards to meaningfully investigate the relationship between
women directors and firm performance. It could also suggest that the impact of having women
directors on boards may be stronger or more apparent in companies with a more substantial
representation of women on their boards in comparison to the data used for this study.
The summary statistics reveal that the average representation of women across these 50 studied
firms is only 33, with some boards having no women at all. This suggests a significant dearth of
diversity among board members in the Malaysian listed companies.
In addition, Table 5 shows the results of the control variables. The FSIZE is insignificant to
performance at a significance level of .004. This indicates that greater FSIZE does not result in
43
improved firm performance. Similarly, it can also be observed that the BSIZE is not significantly
related to the firm performance at a significance value of .175. This finding is contrary to the
resource dependence theory, which suggests that having a larger number of directors on a board
is preferable to having a smaller number, as a greater BSIZE would result in a wider range of
expertise among the board members.
Step 2: Direct Effect between X and M
Figure 5: Direct Effect between X and M
The next stage involves constructing a second regression model to investigate how CSR
moderates the association between board gender diversity and firm performance. The
hypothesised mediator (CSR) is regressed into the BGEN variable in order to estimate the
coefficient ‘a’ as depicted in the diagram above.
44
Regarding the moderating effect, the outcomes of the moderated regression analysis are
presented in Table 6. Specifically, the study includes CSR as a moderator on the link between
board gender diversity and firm performance. When CSR is regressed on boardroom gender
diversity proxy, the coefficient of BGEN in step 2 shows statistical insignificance at a value of
.258 and the beta weight is also proven to be negative.
Step 3(a & b): Direct Effects X and M and Y
Step 3 involves testing whether the mediator variable significantly predicts the outcome variable
while controlling for the independent variable.
To perform step 3, a regression analysis is conducted where the mediator variable is the
independent variable, the outcome variable is the dependent variable, and the independent
variable is also included in the model as a covariate or predictor. If the mediator variable
significantly predicts the outcome variable when the independent variable is controlled, this
suggests that the mediator partially or fully explains the relationship between the independent
variable and the outcome variable.
B is a direct effect not of interest, it's not really of particular interest because it is just needed in
order to estimate the indirect effect whereas C is the direct effect of primary interest, so if this is
statistically significant it will support the notion that there's a direct effect of BGEN onto ROE.
The relationship between X and M is conducted through a multiple regression and in multiple
regression the predictive variables are only correlated with each other. There's no direct effect
between these 2 variables . The direct effect of X and M is tested using multiple regression in
this step.
45
Post regression, the result has shown that the mediator variable (CSR) does not have any
significant relationship with the dependent variable (ROE). CSR has a significance level of .272
against the dependent variable, ultimately proving insignificance. This means that the mediator
variable cannot be considered fully or partially as an explanatory mechanism for the relationship
between the independent variable and the dependent variable.
46
Step 4: Estimate and test indirect effect for statistical significance
In Step 4, the extent to which the indirect effect of the independent variable on the outcome
variable through the mediator variable is significant and meaningful is examined. To perform
step 4, the indirect effect of the independent variable on the outcome variable through the
mediator variable was calculated. The indirect effect represents the extent to which the
relationship between the independent and dependent variables is explained by the mediator
variable.
There are several methods to calculate the indirect effect, including the Sobel test, the
bootstrapping method, or causal mediation analysis. These methods will provide a statistical
estimate of the size and significance of the indirect effect. For the purpose of this study, the Sobel
Test by Preacher was utilised. A sobel test calculator was used to generate the results using the
unstandardised beta weight and coefficient standard error from the previous regressions.
Mediation result
47
From the results of Sobel testing, it can be concluded that the indirect effect between BGEN and
ROE via the intermediary variable of CSR is statistically insignificant.
-.136 x 1.265 = -0.172 (estimate of indirect effect) between BGEN and ROE through CSR. The
Sobel test is suggesting that the estimate of -0.172 is also statistically insignificant.
A non-significant indirect effect suggests that the mediator variable does not explain the
relationship between the independent and dependent variables, but it does not necessarily mean
that there is no relationship between the variables or that there is no direct effect of the
independent variable on the dependent variable.
48
4.3 Endogeneity and robustness checks
4.3.1 Alternative measure to boardroom gender diversity
To ensure the robustness of the findings, the Blau index was used as an alternative measure of
boardroom gender diversity. The Blau index is a comprehensive measure of boardroom gender
diversity according to (Campbell and Minguez-Vera, 2008). The index measures the degree of
concentration of a particular group in a population, and is calculated using the following
formula:
Step 1:
Step 2:
49
Step 3:
Step 4:
It can be observed from all the regression conducted using Blau Index as an independent variable
that board gender diversity does not have a positive effect on firm financial performance and
CSR does not play a role as a mediator between this relationship. These results were also
consistent with the main findings.
50
However, it is important to acknowledge that there are several limitations that may have
influenced the findings of this study. Firstly, there is a potential for endogeneity due to reverse
causality or the exclusion of important variables, as discussed by Wiley (2018). Although efforts
were made to address these concerns, a more robust approach would be to use an appropriate
instrumental variable to estimate the model. However, this was not possible due to the limited
availability of data. Future research could explore other factors that may impact the relationship
between female directors and firm performance, such as corporate culture or the level of female
consumers in the industry, as suggested by Terjesen et al. (2009). Furthermore, using a one-year
lagged measure of boardroom gender diversity may be beneficial as it may take some time for
female directors to influence board decision-making.
Moreover, even though there has been notable advancement in boardroom gender diversity
during the period under observation, it is possible that the number of female directors in
Malaysia is still inadequate to generate reliable or statistically significant outcomes regarding the
broader correlation between female board representation and firm performance.
51
Chapter 5: Further Discussion
Preamble
The focus of this chapter is to offer a critical analysis and discussion of the results and
preliminary examination, in relation to the literature reviewed in Chapter Two. The aim of this
quantitative grounded research was to determine whether gender diversity in the boardroom has
a favourable influence on a firm's financial performance through the intermediary function of
CSR. As noted in the Literature Review, there were three hypotheses that had to be addressed
through this study:
H1: Boardroom gender diversity has a positive effect on firm financial performance.
H2: There is a positive relationship between CSR (proxy representation being CSR reporting)
and firm performance.
H3: CSR mediates the relationship between firm performance and gender diversity.
Contrary to the initial hypothesis, the results of this study have shown that none of the
formulated hypotheses were supported by the findings. Despite analysing the data using various
statistical methods and techniques, no significant relationships or effects were found between the
variables studied. These findings indicate that the original hypotheses were not supported by the
data and suggest that further research may be needed to fully understand the complexities of the
topic. Further justification on the findings will be discussed in the following sections of this
chapter.
52
5.1 Interpretation of Findings
In the subsequent sections, a comprehensive analysis and discussion of the interpretations of the
results obtained from the previous chapter will be presented. Each hypothesis and result is
described in detail to provide a more thorough understanding.
5.1.1 Boardroom gender diversity does not show a positive effect on firm financial
performance
According to the study's results, having women on corporate boards has no discernible effect on
a firm financial performance. This finding runs counter to the hypothesis that having more
women on the board will enhance decision-making and firm financial performance. There are
various reasons given to explain why both indicators which are proportions of women directors
and the BLAU Index of the number of women on company boards have no significant influence
on the firm's performance. One possible explanation is that, based on the critical mass theory, the
current level of female board representation in Malaysian firms is not sufficient for women
directors to make a noteworthy impact on the company's performance. According to (Konrad and
Kramer, 2006), a minimum of three female directors is needed to reach critical mass. However,
as shown in Figure 8, the average number of female directors on Malaysian company boards is
between 1.5 and 2.32, with an average of two female directors. When there is only one female
director, she may face many limitations due to her token status, including how she is perceived
and treated by her male colleagues, and her ability to make an impact and advance within the
company (Kanter, 1977). Therefore, the lack of significant results regarding the influence of
female directors on firm performance does not suggest that women are inferior directors; rather,
it may be that firms are merely using female directors for symbolic purposes, known as "window
dressing" (Carter et al., 2003).
53
Figure 6: Mean number of women on board
Figure 7: Mean number of women on board based on specific industries
54
Secondly, the appointment of female directors to the board may not be solely based on their
qualifications, but could also serve as a means of compensating or replacing their male relatives.
Hence, they have little value to add to the profitability of the business. According to the study
conducted by Amran et al. (2014), 40% of female board members in Malaysia have familial
connections with other directors. These women are often appointed as non-independent and
executive directors. Additionally, only a third of them serve on audit committees, and a very
small proportion (7.5%) hold the positions of CEOs or chairpersons. According to (Hashim,
2021), family-owned publicly listed companies are more likely to have female board members in
Malaysia. The effectiveness of family-related female board directors in contributing to the
financial performance of a firm may be hindered by several factors. Firstly, they may lack the
necessary skills, experience, and expertise to make valuable contributions to the company.
Additionally, personal or family interests may have conflict with the interests of the firm,
resulting in decisions that do not benefit the company financially. In some cases, family-related
female board directors may be appointed to meet diversity quotas or to improve the company's
image without having their contributions taken seriously, resulting in tokenism. It is important to
note that these issues are not exclusive to female board directors with family relationships, as
male board directors with similar backgrounds may also face similar challenges. Ultimately, the
effectiveness of any board director, regardless of gender or personal background, is dependent on
their skills, experience, and expertise that are relevant to the company's operations.
Another possible explanation to this finding is that female directors are likely to be more risk
averse as compared to their male counterparts. This can be attributed to various factors such as
societal expectations, personal beliefs, and biases. As a result, female board directors may be
more cautious in decision-making processes, which could lead to missed opportunities for
growth or increased profitability. For instance, female board directors may be less likely to take
risks in pursuit of short-term gains, and instead prioritise long-term stability and sustainability. If
female board directors are more risk-averse on average, this could potentially limit their ability
to make decisions that positively impact the financial performance of a firm. In this context of
shareholder theory, female board directors who exhibit risk-averse behaviour may be perceived
as being more attuned to the needs and interests of stakeholders, particularly those who value
stability and sustainability over short-term gains. (Carlsson-Kanyama et al., 2010) found that
55
firms with a higher proportion of women on their boards tend to have lower levels of risk-taking
behaviour. For example, female board directors who prioritise long-term sustainability may be
more likely to consider the impact of business decisions on the environment, the welfare of
employees, and the reputation of the firm. This aligns with the principles of stakeholder theory,
which encourages businesses to take into account the interests of all stakeholders when making
decisions. However, it is also important to note that stakeholder theory does not suggest that
financial performance is unimportant. Rather, it suggests that firms should strive to balance the
interests of all stakeholders in a way that maximises long-term value creation.
5.1.2 CSR does not show a positive effect on firm financial performance
The study findings indicate a negative correlation between CSR and firm performance.
Specifically, as CSR performance increases, firm performance tends to decrease. These results
suggest that there may be trade-offs between CSR initiatives and financial performance, and that
firms may need to carefully consider the costs and benefits of such initiatives. It is possible that
CSR activities in Malaysia are often done for 'box ticking' purposes, where firms engage in CSR
activities to meet regulatory requirements or to project a positive image, rather than out of a
genuine commitment to social responsibility. For example, an article by (Mamunand and
Easmin, 2017) found that many Malaysian companies had not fully integrated CSR into their
business strategies and operations, and that CSR was often viewed as a separate activity rather
than being integrated into core business practices. Similarly, a study by (Abdullah and Aziz,
2013) found that many Malaysian firms engaged in CSR activities primarily for branding and
reputation purposes, rather than out of a genuine commitment to social responsibility. If this is
the case, then the lack of significant positive effect on firm financial performance due to CSR
activities may be attributed to the insincerity or lack of depth in the CSR initiatives.
In order for CSR activities to have a positive impact on financial performance, they need to be
integrated into the core business strategy and operations of the firm, rather than being viewed as
a separate add-on activity. This requires a genuine commitment from the top management and
board of directors, as well as a clear understanding of the potential benefits and risks associated
with CSR initiatives. Furthermore, there may be cultural and institutional factors in Malaysia that
56
affect the implementation and effectiveness of CSR activities. For example, there may be a lack
of awareness or understanding of the importance of social responsibility among certain
stakeholders, or a lack of regulatory and institutional support for CSR initiatives, (Zulkifli and
Amran, 2006).
5.1.2 CSR does not mediate the relationship between boardroom gender diversity
and firm financial performance
The lack of mediation effect of CSR between boardroom gender diversity and firm financial
performance in Malaysia could be attributed to several factors. It is possible that CSR activities
in Malaysia are not directly linked to financial performance, and therefore, the presence of
gender-diverse boards does not translate into better CSR performance or financial outcomes.
Additionally, this result may be caused by the limited scope of CSR. The CSR measures used in
the study may not have fully captured the range of activities that contribute to the firm's social
responsibility. For instance, this study may have focused only on environmental sustainability or
community involvement, while ignoring other areas such as employee welfare, ethical sourcing
practices or environmental sustainability.
The result obtained in this study whereby CSR does not mediate the relationship between
boardroom gender diversity and firm performance does not replicate previous findings by
(Galbreath, 2018 and Sial et al., 2018) who found that CSR fully mediates the relationship
between board gender diversity and firm performance. Another possible reason mentioned in the
article is that the relationship between board gender diversity and financial performance may be
influenced by other factors, such as firm size or industry competition, which were not included in
the study. There may be other variables that intervene between boardroom gender diversity and
financial performance, such as CEO characteristics, firm size, or industry-specific factors. These
variables may have a stronger effect on financial performance than CSR. Overall, the lack of
mediation by CSR suggests that the relationship between these variables may be more complex
and may involve other intervening factors that are not captured in the analysis, (Maignan and
Ferrell, 2004).
57
5.2 Practical and theoretical implication
The composition of a board of directors plays a crucial role in the success of a firm. A board of
directors that is diverse, independent, and well-qualified can help a firm to make better decisions,
manage risks effectively, and enhance its reputation. While most Corporate Governance and
Corporate Social Responsibility research has been conducted in developed regions, there is a
lack of research from places like South East Asia, (Ali et al., 2017). As a result, there is a
possibility that the results of studies conducted in developed regions may not result in similar
findings and apply in the context of organisations in Malaysia.
Furthermore, this study delves deeper into the mediating relationship of CSR in the relationship
between board gender diversity and firm financial performance which proposes that women on
the board positively impact firm performance. It is worth noting that this relationship is not
mediated through the influence of a firm's CSR activities. Instead of confining CSR disclosure to
a narrow scope, this study provides a basis for regulatory agencies to advocate, if not mandate,
corporations to disclose a wider range of CSR activities in their annual reports. Corporate Social
Responsibility (CSR) is not just about making statements or creating programs to address social
and environmental issues, it's also about taking action and implementing these programs
effectively. It is important for firms to not only talk about their CSR initiatives, but to also
demonstrate their commitment to these initiatives through concrete actions.
Additionally, by introducing the notion of CSR as a mediator to affect the relationship between
board gender diversity and firm performance in the context of Malaysian listed businesses, it
contributes to the body of knowledge around critical mass theory and resource dependence
theory. This, in turn, aligns with stakeholder theory, which recognizes the broader base of
stakeholders that impact a firm. Ultimately, this study sheds light on how organisations may
better manage their stakeholder relationships and how increasing the number of women on board
who participate actively in the firm management and decision making, can accelerate efforts in
this direction.
58
Chapter 6: Conclusion
6.1 Preamble
With the growing demand on Malaysian firms to advocate boardroom gender diversity, this
dissertation set out to determine whether the gender composition of a board of directors
influences corporate performance. A fixed effects estimator was used to analyse panel data from
50 listed Malaysian companies between 2016 and 2019. This research adds to the current body of
knowledge by updating the literature on the understudied Malaysian market and using indicators
of female representation on boards (presence and proportion) and organisation financial
performance (ROE). To account for endogeneity, this study uses a natural experiment to study
how recommending more women for board positions affects firms (Davies Report, 2011).
Additionally, this research delves into the relationship between board of directors and firm
performance through a mediating variable, corporate social responsibility (CSR), to investigate
whether there is an indirect relationship between these two variables.
59
6.2 Research Objectives
In line with previous literature including (Shukeri et al, 2012) and (Adnan and Abdullah, 2013),
empirical parametric regression analysis confirms that the presence of women on corporate
boards has no substantial effect on financial performance in the context of the 50 firms being
investigated in Malaysia. (Ahmad et al., 2020) studied the impact of board gender diversity on
firm performance in Malaysia post MCCG policy announcement. They reached similar findings,
namely that female representation on boards is inversely associated with return on assets (ROA),
which in turn suggested that corporate performance might not hinge on gender diversity at the
helm. Significantly, no negative effect of female directors on corporate performance was
identified, lending credence to the ethical argument for more gender diversity in boardrooms.
Thus, the first research objective of this research was achieved:
O1: To determine if there is a positive correlation between the female participation on a firm's
board of directors and its financial performance.
In this study, one of the aims was to investigate whether board gender diversity has an indirect
effect on firm financial performance through the mediating role of corporate social responsibility
(CSR) among Malaysian firms. To achieve this goal, a mediation analysis was conducted to test
whether the relationship between board gender diversity and firm financial performance is
explained by the mediating role of CSR. However, the results of the analysis showed that CSR
did not play a mediating role in the relationship between board gender diversity and firm
financial performance in Malaysia. Specifically, we found that board gender diversity did not
have a significant direct effect on CSR, and CSR did not have a significant direct effect on firm
financial performance. With that, the second research objective of this study was fulfilled:
O2: To investigate whether the relationship between female board representation and firm
financial performance is indirect and presumably mediated by corporate social responsibility.
To conclude, this dissertation provides evidence that although this research indicates that female
board representation does not have a significant impact on overall firm performance, it is still
60
considered crucial to have gender diversity on boards. As of September 2022, just 52 of the top
100 listed businesses had reached the goal of 30% women representation on their boards, while
of the total number of entities on Bursa Malaysia's stock exchange, 350 (or 36.5%) had only one
woman director, (FMT, 2022). Hence, the ongoing voluntary initiatives aimed at promoting
gender diversity in Malaysian boardrooms are not only fitting but also necessary. With more
study on this area with a bigger number of samples has the possibility of providing an opposite
result in future.
6.3 Limitations and potential problems
This study is not without its limitations. For starters, because a specific variable 'gender diversity
of boards' was used, it was not possible to fully investigate other board composition variables
such as CEO duality, their age, gender, experience, and education level, all of which may or may
not have an impact on the firm's financial performance.
Second, the sample is made up of Malaysian companies. Although studying Malaysian firms
expands the scope of the study beyond the typical samples drawn from developed nations, the
results cannot be extrapolated beyond Malaysia. Further research could be conducted to
strengthen the findings by investigating the mediated link depicted in this dissertation in other
countries.
Additionally, due to time constraints, only a 4-year longitudinal panel data analysis on the
acquired data may be undertaken. This would result in a simplification of the dissertation topic,
which may not reflect the current, past, or future condition. Due to the predominance of
quantitative data in this dissertation, a simplistic or erroneous interpretation of complex events
and realities may result from a lack of contextualization.
Finally, the data used in this study include several important caveats. Since CSR disclosure in
Malaysia started to be mandatory only from 2016, the reporting has been weak, or nonexistent
for some companies, a dummy variable was used to measure CSR instead. A more
comprehensive and nuanced measurement index could be used in future studies if and when the
61
requisite data becomes available. Second, some features of the boards themselves are used as
independent variables in this analysis. The performance of Malaysian firms may also be affected
by CG mechanisms not taken into account in this research, such as the number of board
members, the length of service of each board member, the amount of time spent on board
business by the board chairman, the makeup of the audit committee, the leadership style of the
CEO, and the effectiveness of internal controls. Finally, interviewing BOD members to gauge
their awareness of CSR, impediments to having a diverse board, and the benefits of gender parity
are all important considerations for future research in this area.
62
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Breaking Barriers and Boosting Bottom Lines: An Analysis of The Mediating Impact of CSR in The Relationship Between Board Gender Composition and Firm Financial Performance in Malaysia

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Breaking Barriers and Boosting Bottom Lines: An Analysis of The Mediating Impact of CSR in The Relationship Between Board Gender Composition and Firm Financial Performance in Malaysia

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Heriot-Watt University School of Social Sciences

"Breaking Barriers and Boosting Bottom Lines: An

A dissertation submitted in partial fulfilment of the degree of

Masters of Arts (Honours) Accounting and Business Finance

School of Social Sciences, Heriot-Watt University

Dissertation Supervisor: Dr. Nor Irdawati Mahyuddin

Word count: 15166 words

Keywords: Board composition, Board of Directors, Gender diversity, Firm financial

4.2.1 Descriptive Analysis................................................................................................. 37

List of Tables and Figures

Table 1: Corporate Social Reporting Index Table

1.2 Research Aims and Objectives

1.2.1 Research Objectives

1. To determine if there is a positive correlation between the female participation on a firm's

1.2.2 Research Structure

1. Do female representation on boards of Malaysian listed firms impact the financial

Figure 1: Research Structure

Chapter 2: Literature Review

2.1 Theoretical background

2.1.1 Critical Mass Theory

2.1.2 Resource Dependency Theory

(i) Provide the organisation with useful data and knowledge

(ii) Development of communication channels with significant stakeholders of the firm

(iii) Obtaining guaranteed support from significant organisations or groups

2.1.3 Stakeholder Theory

2.2 Prior Empirical Findings and Hypotheses Development

2.2.1 Board Gender Diversity and Firm Financial Performance

2.2.1.1 Why does gender matter?

2.2.1.2 Western context on board gender diversity

2.2.1.3 Asian context on board gender diversity

Barriers to Women's Advancement in a Multinational Oil Company in Malaysia was a research

2.2.1.3 Malaysian Code on Corporate Governance policy on board gender diversity

MCCG 2012, page 91:

MCCG 2017, page 22-29:

MCCG 2021, page 30-39:

2.2.2 CSR and Firm Performance

Hence, based of prior literatures, the following hypothesis is developed:

2.2.3 The mediating role of CSR

An empirical study conducted by (Setó-Pamies, 2013) sought to examine whether companies

Figure 2: Conceptual Model

RQ1: Is there a positive relationship between the representation of women in the

RQ2: Does CSR have a significant effect on firm financial performance?

3.2 Research Strategy

3.2.1 Research Design

3.2.2 Philosophical Stance

This study employs a positivist reality perspective. In quantitative research, positivism is

3.2.3 Research Approach

3.4 Data collection

3.5 Variables definition

3.5.1 Dependent Variable

3.5.2 Independent Variable

3.5.3 Mediating Variable

CSR index: (n / N) x 100 %

3.5.4 Control Variable

3.6 Framework for data analysis

Chapter 4: Results and Analysis

4.2.1 Descriptive Analysis

Table 3: Descriptive Statistics

According to (George and Mallory, 2010), in order to demonstrate a standard univariate

4.2.2 Parametric Regression Assumptions

Table 4: Pearson Correlation

4.2.3 Multivariate Analysis

Figure 3: Mediation Model