Analyzing the relationships between female leader proportion and market value added of listed companies in Vietnam seafood industry

TRADE SCIENCE REVIEW 1 Trade Science Review ISSN 1859-3666 Volum 4, Number 1 June 2016 Editor in chief Nguyen Bach Khoa Vietnam University of Commerce Deputy Editor in Chief Editorial Boad Le Xuan Ba Central Institude for Economic Managerment Nguyen Dinh Huong Union of Science and Technology Associations Nguyen Hoang Long Vietnam University of Commerce Nguyen Mai Vietnam Economist Association Luong Xuan Quy Vietnam Economist Association Do Minh Thanh Vietnam University of Commerce Tran Dinh Thien Vietnam Institute of Economics Nguyen Thi Doan The Office of State President Nguyen Thi Bich Loan Vietnam University of Commerce Pham Vu Luan Ministry of Education and Training Bui Xuan Nhan Vietnam University of Commerce Dinh Van Son Vietnam University of Commerce Dinh Van Thanh Trade Research Institute Nguyen Quang Thuan Vietnam Social - Humanity Academia Contributors in abroad H. Eric Boutin Toulon Var University - France Nguyen The Tam California State University - USA ZHANG Yujie Tsinghua University - China WASHIO Tomoharu Kwansei Gakuin University - Japan HAASIS Hans Dietrich - Institute of Shipping Economics and Logistics (ISL) Bremen - Germany 1. Rationale In recent years there have been arguments that gender diversity in management boards may have positive effects on company per- formance. With the trend of highly appreciat- ing the roles of women in the modern society, many researchers and policy-makers have shown their supports to the tendency of increasing the proportion of female members in the management boards of enterprises. Some governments even have issued regula- tions on gender structure in boards of direc- tors in private companies so as to promote gender equality in the field of business administration. In 2003, Norway passed a quota act requiring that the management board have at least 40% of members in two genders, this act came into effect in 2006. In January 2011, French Parliament approved a law stipulating that at least 40% of manage- ment board members in top 40 companies listed on Paris Bourse be women by 2017. In 2007, Spain also issued requirements that each gender account for at least 40% in the 38 Trade Science Review 4:1 (2016) 38 - 47 TRADE SCIENCE REVIEW ’S TSR Pham Tuan Anh Vietnam University of Commerce Email: phamtuananhvuc@gmail.com Received: 28th August 2015 Revised: 30 th December 2015 The article looks into the relationships between the proportion of women in managementboards, the proportion of women in control boards or holding positions of chief account- ant, the proportion of female leaders with qualifications of at least associate college degrees and the market value added (MVA) of seafood companies listed in Vietnam stock market. Research findings reveal that there exist significant relationships, in which the proportion of female leaders with associate college qualifications has positive effects on the MVA of joint- stock companies in the sample. The research findings can be a foundation for seafood joint-stock companies to pay more attention to the recruitment and training of female leaders. They also provide initial empirical evidence in support of increasing the proportion of female members in management positions in joint stock companies in Vietnam. Key word: Female leadership proportion, market value added (MVA), TPP agreement management boards by 2015. In the mean- time, in 2011 Italia requested that listed com- panies and state-owned enterprises have at least 33% of management board members as women by 2015. In Germany, the authority union of Chancellor Angela Merkel came to an agreement in 2014 requiring the country's big companies to guarantee that at least 30% of management boards are female, this law is to be passed in December 2016. Meanwhile, in the middle of March 2011, Australian administration agreed to implement a quota on female proportion in the control board of state-owned enterprises with the suggested quota of 25% in 2013 and 35% by 2018. In Malaysia, since 2016, all public enterprises and limited companies with over 250 employ- ees must have at least 30% of management or director board members as women. However, except in the United States and some European nations where the proportion of female leaders has increased, in most other countries, the proportion remains modest. Upon the 12 member countries completing their negotiations for Trans-Pacific Strategic Economic Partnership Agreement, or TPP for short, many experts believe that TPP will have intensive strategic impacts on the region as well as the entire world. As a TPP member, Vietnam can enjoy lots of economic and strategic benefits but at the same time face not a few challenges. In this context, the way our government and business community rec- ognize and exploit opportunities as well as deal with challenges will determine whether the country can gain success or commit fail- ure in the process of TPP integration in the coming time. Regarding women and economic growth, Article 23.4 in TPP stipulates that the Parties recognise that enhancing opportunities in their territories for women, including workers and business owners, to participate in the domestic and global economy contributes to economic development. Accordingly, the Parties shall consider undertaking coopera- tive activities aimed at enhancing the ability of women, including workers and business owners, to fully access and benefit from the opportunities created by this Agreement. These activities may include providing advice or training, such as through the exchange of officials, and exchanging information and experience on programmes aimed at helping women build their skills and capacity, and enhance their access to markets, technology and financing; developing women's leader- ship networks; and identifying best practices related to workplace flexibility. In this context, this research is conducted to seek empirical evidence on the positive effects of increasing women leader propor- tion and highly-educated women in manage- ment positions on the financial performance of joint-stock seafood companies listed in Vietnam stock market. 2. Literature Review There are a number of arguments in favor of gender diversity in senior management positions in companies. Bantel and Jackson (1989), Murray (1989), Carter et. all (2003) believe that in most of the cases, a more diverse manage- ment board (in terms of gender and represen- tatives of the minority groups) can make deci- sions based on the evaluation of more alter- natives than a management board consisting of men only. A diverse board can also have better knowledge of the company's market, and moreover the diversity will promote cre- ativeness and innovation. Besides, a diverse management board can improve the compa- ny's image, thereby having positive effects on the company's performance, shareholder val- ues as well as customer behavior. 39 Trade Science Review TRADE SCIENCE REVIEW ’S TSR Upon generalizing research on business administration and positive effects of man- agement diversity, Nina Smith et. all (2005) carried out an empirical study with Denmark companies and came to conclusion that the proportion of women in senior management positions affects the company's performance positively, and the positive effects of women in management positions depend on their qualifications. Tu, T.T.T, Loi, H.H., Yen, T.H., (2015), via a study on the relations between gender diver- sity and profitability of public companies list- ed in Vietnam stock market in case of com- mercial banks, also concluded that the partic- ipation of women in management boards can positively affect the returns on equity (ROE) and returns on assets (ROA) of these banks. However, there also exist some arguments against the positive effects of women propor- tion in senior management positions on busi- ness performance. Shrader et. all (1997) analyzed 200 biggest American companies and could not find any significant positive relations between the per- centage of women in management positions and the company's performance measured by ROA and ROE. They could even find the negative rela- tions in some cases. Kochan et. all (2003) also found no positive relations between gen- der diversity in management and sustainble capacity of American companies. Far from finding out the positive effects of women leader proportion on business per- formance, some researchers even believe that gender diversity may not work well because of gender conflicts in management. And even when gender diversity can help to make bet- ter-quality management decisions, these advantages cannot justify the negative impacts caused by the delays in decision- making process amid the volatile market con- ditions, especially in case of market shocks. 3. Research models It can be seen that the relations between women leader proportion and business per- formance is an interesting research topic. Although there still exist controversies in finding empirical evidence and conclusion on the positive effects of the proportion of female leaders on financial results of the enterprises, it can be seen that researchers can reach agreement in choosing the ways to approach and study the relations between the proportion of women in management posi- tions (quantity) and professional qualifica- tions of female leaders (quality) and indica- tors measuring the company's financial results, of which ROA and ROE are the most commonly used. To comprehensively reflect the company's management results towards the aims of maximizing values for sharehold- ers, this study employs the company's market value added (MVA) as dependent variable. Independent variables are described in the following table: The research successively tests 2 models: 4. Research data and methodology Research sample included 19 enterprises in seafood industry, a spear-head sector in Vietnam's economy. All these enteprises got listed in the stock market. Data were collect- ed from enterprises' annual reports, market database, macro-economic reports, financial analysis reports in the 2010 - 2015 period. To increase the value of research findings, data from research sample were designed in the forms of panel data with 2 directions of time series as the time over the years and space 40 Trade Science Review TRADE SCIENCE REVIEW ’S TSR (1) MVAit = â1GPM+â 2ROA+â 3F_MAN+â4F_CTR+â5F_EDU+â6FS+åit (2) MVAit = â1GPM+â 2ROE+â 3F_MAN+â4F_CTR+â5F_EDU+â6FS+åit series as cross section of securities codes selected for research sample. Panal data are structured as balanced panel. The use of panel data enabled more information, more varia- tions, fewer multi-collinearities among vari- ables, higher degree of freedom and higher effectiveness because cross sections are researched repeatedly, which is suitable with constant changes and enables the control of unobservable differences between entities (joint-stock companies in research sample, enables the control of unobservable but changing variables. Research process included the following steps: (1) Setting up research model and coding variables in the model (2) Collecting and refining data (3) Caculating the values of dependent and independent variables (4) Checking data before analysis (5) Identifying part-correlations between dependent and independent variables (6) Choosing between fixed effects model (FEM) and random effects model (REM) (7) Testing research hypotheses and run- ning regresion analysis 5. Findings and Implications 5.1. Descriptive statistics analysis (table 2) In the research sample, these companies have average MVA of -68.1 billion VND. Average ROA is 1.56% while average ROE is 8.5%, showing that they have managed to use financial leverage effectively to create higher ROE than ROA to bring more profits to shareholders. The highest proportion of women in man- agement boards in surveyed companies reaches 87.5%, the highest proportion in con- trol boards or working as chief accountant totals 100%, the highest proportion of women with at least associate college degrees gets 77.8%. By contrast, in the lowest cases, these proportions are all 0%, which means no women participate in the companies' manage- ment boards. The average F_MAN of 25.59% and F_CTR of 36.7% are higher than the results of another survey conducted on 200 enterprises with the highest capitalization value in Vietnam stock market by December 31, 2014 when the proportion of women in director board was 15.225%. The average F_CTR is higher than Malaysian require- ments while F_MAN is slightly lower than the minimum requirements of this country (Malaysia is one of 12 members of TPP). 5.2. Correlations of variable pairs Three variables have negative correlation coefficients including ROA, GPM and FS, variables representing the participation of women in management boards as F_MAN, F_CTR and F_EDU all show positive rela- 41 Trade Science Review TRADE SCIENCE REVIEW ’S TSR Table 1: List of independent variables Variables Content Expected correlation GPM Gross Profit Margin + ROA Ratio of after-tax profits divided by total assets + ROE Ratio of after-tax profits divided by owner’s equity + F_MAN Proportion of women in management board +/- F_CTR Proportion of women in control board and chief accountants +/- F_EDU Proportion of female leaders with high educational qualification + FS Company’s fund scale +/- tionships with MVA, of which F_EDU has the highest correlation (above 0.3). These results imply that there exist positive relation- ships between the proportion of women in director board, the proportion of women in control board or working as chief account- ants, the proportion of female leaders with high qualifications and the market value added of companies in the research sample. 5.3. Simple linear regression analysis: For MVA measurement, the simple linear regression analysis between each indenpen- dent variable and dependent variable indi- cates that although 3 variables have signifi- cant relation- ships with MVA, R2 is very low, which implies that the simple linear regression model is not appropriate to explain the vari- ations in the companies' MVA according to each independ- ent variable. 42 Trade Science Review TRADE SCIENCE REVIEW ’S TSR Table 2. Results of descriptive statistics analysis of variables in research model Source: researcher's caculation from research data Variable Mean Maximum Minimum Std. Dev. Skewness Kurtosis MVA -68.1050 1615.3510 -1107.6360 327.1372 0.4899 9.7224 F_CTR 0.3670 1.0000 0.0000 0.3209 0.4628 2.0759 F_EDU 0.2829 0.7778 0.0000 0.2301 0.4477 2.0513 F_MAN 0.2559 0.8750 0.0000 0.2631 0.5896 2.1302 FS 1404.0470 15754.7900 69.1900 2123.6660 4.0415 23.2458 GPM 0.0992 0.3039 -1.9138 0.2301 -6.5900 54.5259 ROA 0.0156 0.2087 -0.9944 0.1429 -4.8752 31.4789 ROE 0.0850 2.4280 -3.6740 0.4756 -3.0875 41.8927 Table 3. Correlation coefficient of variable pairs Source: researcher's caculation from research data MVA ROA -0.058037 GPM -0.060453 F_MAN 0.132648 F_CTR 0.213491 F_EDU 0.311487 FS -0.236610 ROE 0.138776 Table 4. Results of simple linear regression between MVA and independent variables Source: researcher's caculation from research data R Square P-value between MVA and ROA 0.003368266 0.539644 between MVA and GPM 0.003655 0.522867 between MVA and ROE 0.019258767 0.140878 between MVA and F_MAN 0.017596 0.159453 between MVA and F_CTR 0.045579 0.022566 between MVA and F_EDU 0.097024 0.000742 between MVA and FS 0.055984 0.011259 5.4. Results of Pooled Regression When inserting all 114 observations to the pooled regression accord- ing to least square method, the processing results show that only 1 variable has statistic sig- nificance which is F_EDU, indicating the positive relationships between the proportion of female leaders with high education and VMA with explanation level of 16.38% for the fluctua- tions in the average MVA The analysis results of MVA when using ROE to replace ROA show the similar result, F_EDU has the significant positive relationships with expla- nation of 17.33% of fluc- tuations in average MVA. However, that all 114 obervations are inserted into the pooled regres- sion model means that we have to face the like- lihood of mistakes as we assume that there is no obvious difference beween each company pair in the total sample of 19 companies while in fact 19 companies in the research sample may not be homogenous at all time. 43 Trade Science Review TRADE SCIENCE REVIEW ’S TSR Table 5: Results of Pooled Regression for model (1) Dependent Variable: MVA Method: Panel Least Squares Date: 03/11/16 Time: 02:31 Sample: 2010 2015 Cross-sections included: 19 Total panel (balanced) observations: 114 Variable Coefficient Std. Error t-Statistic Prob. C -135.4557 56.59623 -2.393370 0.0184 GPM 3.478837 162.5234 0.021405 0.9830 ROA -216.5974 261.6928 -0.827678 0.4097 F_MAN -257.1577 205.7937 -1.249590 0.2142 F_CTR -407.0479 213.7855 -1.904001 0.0596 F_EDU 1103.875 399.1253 2.765735 0.0067 FS -0.019069 0.016331 -1.167707 0.2455 R-squared 0.163804 Mean dependent var -68.10497 Adjusted R-squared 0.116915 S.D. dependent var 327.1372 S.E. of regression 307.4193 Akaike info criterion 14.35374 Sum squared resid 10112212 Schwarz criterion 14.52175 Log likelihood -811.1632 F-statistic 3.493417 Durbin-Watson stat 1.044945 Prob(F-statistic) 0.003409 Table 6: Results of Pooled Regression for model (2) Dependent Variable: MVA Method: Panel Least Squares Date: 03/11/16 Time: 02:42 Sample: 2010 2015 Cross-sections included: 19 Total panel (balanced) observations: 114 Variable Coefficient Std. Error t-Statistic Prob. C -127.6933 54.95635 -2.323540 0.0220 GPM -101.3495 128.5434 -0.788446 0.4322 ROE 85.88787 61.91174 1.387263 0.1682 F_MAN -193.7924 207.5712 -0.933619 0.3526 F_CTR -349.0538 213.3110 -1.636361 0.1047 F_EDU 961.0493 398.7875 2.409928 0.0177 FS -0.022720 0.016266 -1.396824 0.1654 R-squared 0.173320 Mean dependent var -68.10497 Adjusted R-squared 0.126964 S.D. dependent var 327.1372 S.E. of regression 305.6653 Akaike info criterion 14.34230 Sum squared resid 9997145. Schwarz criterion 14.51031 Log likelihood -810.5109 F-statistic 3.738886 Durbin-Watson stat 1.069971 Prob(F-statistic) 0.002044 5.5. Choosing REM or FEM or OSL: To choose the more suitable model between Fixed effect Model (FEM), Random effect Model (REM), this research uses Hausman Test. Hypothesis H0: REM is more suitable Hypothesis H1: FEM is more suitable The results of Hausman Test by running REM reveal that P-value is higher than 0.05, so there is no ground to reject H0, which means that the ramdon effects model is suit- able for model (1). Analysis results uncover that the propor- tion of female leaders with qualifications of at least associate col- lege degrees has positive effect on MVA of the compa- nies in research sample. Results of Hausman Test by running REM show that P-value is high- 44 Trade Science Review TRADE SCIENCE REVIEW ’S TSR Table 7: Results of Hausman Test for model (1) Correlated Random Effects - Hausman Test Equation: Untitled Test cross-section random effects Test Summary Chi-Sq. Statistic Chi-Sq. d.f. Prob. Cross-section random 6.136463 6 0.4081 Table 8: Results of random effect analysis for model (1) Dependent Variable: MVA Method: Panel EGLS (Cross-section random effects) Date: 03/11/16 Time: 03:28 Sample: 2010 2015 Cross-sections included: 19 Total panel (balanced) observations: 114 Swamy and Arora estimator of component variances Variable Coefficient Std. Error t-Statistic Prob. C -161.0915 87.89614 -1.832748 0.0696 GPM 32.85862 147.0609 0.223435 0.8236 ROA -330.5289 234.5954 -1.408932 0.1618 F_MAN -146.7418 227.0628 -0.646261 0.5195 F_CTR -299.5520 253.7094 -1.180689 0.2403 F_EDU 814.7467 438.9875 1.855968 0.0662 FS 0.008422 0.020339 0.414084 0.6796 Effects Specification S.D. Rho Cross-section random 223.7580 0.4652 Idiosyncratic random 239.8933 0.5348 Weighted Statistics R-squared 0.062497 Mean dependent var -27.30755 Adjusted R-squared 0.009927 S.D. dependent var 241.2465 S.E. of regression 240.0462 Sum squared resid 6165572. F-statistic 1.188825 Durbin-Watson stat 1.770921 Prob(F-statistic) 0.317820 Unweighted Statistics R-squared 0.111829 Mean dependent var -68.10497 Sum squared resid 10740762 Durbin-Watson stat 1.016570 er than 0.05, so there is no ground to reject H0, which means that random effects model is suitable for model (2) Analysis results with independent variables of ROE to replace ROA do not show empirical evi- dence for the significant 45 Trade Science Review TRADE SCIENCE REVIEW ’S TSR Table 9: Results of Hausman Test for model (2) Correlated Random Effects - Hausman Test Equation: Untitled Test cross-section random effects Test Summary Chi-Sq. Statistic Chi-Sq. d.f. Prob. Cross-section random 7.675208 6 0.2629 Table 10: Results of random effect analysis for model (2) Dependent Variable: MVA Method: Panel EGLS (Cross-section random effects) Date: 03/11/16 Time: 03:40 Sample: 2010 2015 Cross-sections included: 19 Total panel (balanced) observations: 114 Swamy and Arora estimator of component variances Variable Coefficient Std. Error t-Statistic Prob. C -152.1777 84.04527 -1.810663 0.0730 GPM -106.6989 115.1571 -0.926551 0.3562 ROE 54.36565 52.27820 1.039930 0.3007 F_MAN -104.8312 226.8472 -0.462122 0.6449 F_CTR -236.7201 252.5472 -0.937330 0.3507 F_EDU 698.3459 439.3546 1.589481 0.1149 FS 0.004370 0.019964 0.218907 0.8271 Effects Specification S.D. Rho Cross-section random 207.6251 0.4249 Idiosyncratic random 241.5441 0.5751 Weighted Statistics R-squared 0.057824 Mean dependent var -29.21802 Adjusted R-squared 0.004991 S.D. dependent var 244.0374 S.E. of regression 243.4276 Sum squared resid 6340499. F-statistic 1.094474 Durbin-Watson stat 1.714666 Prob(F-statistic) 0.370487 Unweighted Statistics R-squared 0.126557 Mean dependent var -68.10497 Sum squared resid 10562651 Durbin-Watson stat 1.029272 relationships between independent variables in model (2) and MVA of companies in the research sample. Compared with the initially-established hypotheses, the multiple linear regression analysis results via REM model show the fol- lowing conclusions: Firstly, ROA proves to be more effective than ROE as reflected through the fact that model (1) can explain the effects of the pro- portion of female leaders with qualifications of at least associate college degree on the MVA of listed companies. Based on this find- ing, a recommendation can be made to joint- stock enterprises that they should prioritize the use of ROA and MVA to set up perform- ance-evaluating criteria for managers. Secondly, there exist significant relation- ships showing that the proportion of female leaders with high qualifications has positive effects on the MVA of joint-stock companies in the research sample. However, the research model explains for the effects of F_EDU on MVA at a not very high level. Thirdly, the research does not show signif- icant results on the relationships between the proportion of women in director and control boards or working as chief accountants and the MVA of joint-stock companies in the research sample. With these research findings, it can be seen that although there has not yet been empirical evidence in favor of the positive effects of increasing the proportion of women in direc- tor and control boards or working as chief accountants, the research does illustrate the positive effects of proportion of female lead- ers with qualifications of at least associate college degrees. Therefore, joint-stock com- panies seeking positive effects on their MVA should pay more attention to recruitment as well as training so as to enhance the profes- sional knowledge of women in management positions. 6. Research limitations Regarding the space, the research sample is merely limited to 19 listed joint-stock companies rather than extending to those who have not been listed or other kinds of enterprises in the seafood industry. This lim- itation results from the difficulties in access- ing financial data of seafood companies which are neither listed nor joint-stock ones. Besides, this research has not made compar- ison between different industries with differ- ent gender appropriateness. As to research objects, the article does not cover such issues as working environment, management psychology, key performance indicator (KPI). These can be interesting research ori- entations for future studies to look into the effects of female leaders on business per- formance, especially in the context of imple- menting TPP entry commitments when pro- moting gender equality in economic activi- ties in general and increasing the proportion of female business leaders become an inevitable trend. Summary Baøi baùo naøy böôùc ñaàu tìm hieåu moái quan heä giöõa tyû leä nöõ tham gia ban giaùm ñoác coâng ty coå phaàn, tyû leä nöõ tham gia ban kieåm soaùt hoaëc naém giöõ vò trí keá toaùn tröôûng coâng ty coå phaàn, tyû leä nöõ laõnh ñaïo coâng ty coå phaàn coù trình ñoä chuyeân moân nghieäp vuï töø cao ñaúng trôû leân vaø giaù trò thò tröôøng gia taêng cuûa coâng ty coå phaàn ngaønh thuûy saûn hieän nieâm yeát coå phieáu treân thò tröôøng 46 Trade Science Review TRADE SCIENCE REVIEW ’S TSR chöùng khoaùn taäp trung taïi Vieät Nam. Keát quaû nghieân cöùu cho thaáy toàn taïi moái quan heä coù yù nghóa thoáng keâ, trong ñoù tyû leä nöõ laõnh ñaïo coù trình ñoä töø cao ñaúng trôû leân coù taùc ñoäng tích cöïc tôùi giaù trò thò tröôøng gia taêng cuûa caùc coâng ty coå phaàn trong maãu nghieân cöùu. Caùc phaùt hieän qua nghieân cöùu laø cô sôû ñeå caùc coâng ty coå phaàn ngaønh thuûy saûn quan taâm hôn tôùi tuyeån duïng vaø ñaøo taïo nöõ caùn boä laõnh ñaïo coâng ty, böôùc ñaàu cung caáp baèng chöùng thöïc nghieäm uûng hoä vieäc taêng cöôøng tyû leä nöõ tham gia quaûn trò caùc coâng ty coå phaàn taïi Vieät Nam. References 1. Ekadah, John Wachudi et. all, (2009) Effect of board gender diversity on the per- formance of commercial banks in Kenya, European Scientific Journal, April edition vol. 8, No.7 2. Nuria Reguera Alvarado et. all, (2011) Gender diversity on Boards of Directors and business success, Investment Management and Financial Innovations, Volume 8, Issue 1 3. Tu, T.T.T, Loi, H.H., Yen, T.H., (2015) Relationship between Gender diversity on Boards and firm's performance - Case study about ASEAN banking sector, International Journal of Financial Research, Vol.6, No. 2 47 Trade Science Review TRADE SCIENCE REVIEW ’S TSR PHAM TUAN ANH 1. Personal Profile: - Name: Pham Tuan Anh - Date of birth: June 10, 1975 - Workplace: Vietnam University of Commerce - Position: Head of Department of Financial Management 2. Major research directions: - Models and empirical work about financial management - Business ethics research in corporate governance and finance - Corporate social responsibility and development of supporting industries. 3. Publications the author has published his works: - Trade Science Review - Vietnam Trade and Industry Review