The role of women in corporate financial performance in vietnam

UNIVERSITY OF ECONOMICS
HO CHI MINH CITY
VIETNAM

INSTITUTE OF SOCIAL STUDIES
THE HAGUE
THE NETHERLANDS

VIETNAM - NETHERLANDS
PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

THE ROLE OF WOMEN IN CORPORATE
FINANCIAL PERFORMANCE IN VIETNAM

BY

NGUYEN THI HONG THU

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

HO CHI MINH CITY, May 2014


UNIVERSITY OF ECONOMICS
HO CHI MINH CITY
VIETNAM

INSTITUTE OF SOCIAL STUDIES
THE HAGUE
THE NETHERLANDS

VIETNAM - NETHERLANDS
PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

THE ROLE OF WOMEN IN CORPORATE
FINANCIAL PERFORMANCE IN VIETNAM
A thesis submitted in partial fulfilment of the requirements for the degree of
MASTER OF ARTS IN DEVELOPMENT ECONOMICS

By

NGUYEN THI HONG THU

Academic Supervisor:
Dr. PHAM KHANH NAM

HO CHI MINH CITY, May 2014


Certification
“I certificate that the substance of the thesis has not already been submitted for any
degree and is not currently submitted for any other degree.
I certify that to the best of my knowledge and help received in preparing the thesis and all
sources used have been acknowledged in the thesis.”
Signature

Nguyen Thi Hong Thu
Date: May 28th, 2014


Acknowledgements

First and foremost, I would like to send my dearest thank to my supervisor, Dr. Pham
Khanh Nam for his guidance and support.
In addition, I would also like to express my gratitude to all persons and organizations for
their support, provision of assistance and information that made this thesis possible. I am
grateful to the lecturers and staff of the project who helped improve my knowledge and
fulfill the programme.
Finally, I am greatly indebted to my family for their love for and support of me, keeping
me in good condition for learning. I am also grateful to my close friends for their warm
encouragement. Thank you very much to all of you.


TABLE OF CONTENTS

Chapter 1: INTRODUCTION ......................................................................... 1
1.1. Problem Statement ................................................................................................. 1
1.2. Research Objectives .............................................................................................. 3
1.3. Research Questions................................................................................................ 3
1.4. Research Methodology .......................................................................................... 3
1.5. Structure of the thesis ............................................................................................ 3

Chapter 2: LITERATURE REVIEWS........................................................... 5
2.1. Theoretical relationship between women on board committees and corporate
financial performance ................................................................................................... 5
2.1.1. Resource Dependence Theory ...................................................................... 5
2.1.2. The Integrative Theory ................................................................................. 6
2.2. Empirical studies ................................................................................................... 8
2.2.1. Determinants of corporate financial performance ........................................ 8
2.2.2. The role of women on board committees in corporate financial performance9
2.3. Conceptual framework ........................................................................................ 13

2.4. Chapter remarks ................................................................................................... 14

Chapter 3: RESEARCH METHODOLOGY .............................................. 15
3.1. Overview the role of women on board committees and corporate financial
performance in Vietnam ............................................................................................. 15
3.2. Sample description .............................................................................................. 17
3.3. Variables .............................................................................................................. 17


3.4. Hypothesis ........................................................................................................... 19
3.5. Model specification ............................................................................................. 21
3.6. Analytical framework .......................................................................................... 24
3.7. Chapter remarks ................................................................................................... 24

Chapter 4: EMPIRICAL RESULTS ............................................................ 27
4.1. Descriptive Statistics ........................................................................................... 27
4.2. Analysis of the correlation between all variables ................................................ 34
4.3. Result of the regression analysis ......................................................................... 35
4.3.1. Pooled OLS Regression .............................................................................. 35
4.3.2. Random Effect Models ............................................................................... 37
4.3.3. Moderated Multiple Regression .................................................................. 39
4.4. Chapter remarks ................................................................................................... 44

Chapter 5: CONCLUSIONS AND RECOMMENDATIONS .................... 45
5.1. Conclusions ......................................................................................................... 45
5.2. Policy recommendation ....................................................................................... 46
5.3. Limitations ........................................................................................................... 47


Chapter 1: INTRODUCTION

This chapter explains reasons for choosing the research topic, its objectives and research
questions. In addition, this chapter also presents a brief of methodology and the thesis
structure.

1.1.

Problem Statement

Corporate financial performance implies the organization’s health and survival (Keller
and Price, 2011). It shows the financial strengths and weaknesses of the company through
by financial statements and annual report analysis. Meanwhile, it provides better
understanding of the firm’s position and success. In fact, at least 50 percent of companies
with good financial health are more successful in the long term than their competitors in
sustaining the firm performance over time.
Financial performance of individual corporations varies markedly over time (Frei, 1999;
Shei, 2007; Krestensen, 2008). Corporate financial performance could increase, decrease,
or follow fluctuating patterns. Data from 100 listed companies in Ho Chi Minh Stock
Exchange (HOSE) for the period 2008-2012 confirms this variation: the average of
returns on assets was 8.32% while the highest level was 59.9% and the lowest was 15.5%; returns on equity was around 16.2% while its maximum level was 158.8% and
the minimum level was -34.3%. Some firms have losses that lead to negative results. In
addition, Tobin’s Q of these companies had the average level at 1.088, the highest level
was 5.19 and the lowest was 0.17. Thus, the role of the financial management is very
important in the company.
Studies on the effect of the management on corporate financial performance bring
inconsistent results. In individual corporate, high financial performance is likely to reflect
management effectiveness and efficiency in making use of company’s resources and this
in turn contributes to the country’s economy at large (Naser and Mokhtar, 2004). The role
of management in company would be very important. For example, one of the most
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well-known bankruptcies opened with the spectacular collapse of Enron Corporation in
the U.S. in 2001 (Enron is the seventh largest listed company) related to the company’s
management. The role of the Board in Enron’s collapse and bankruptcy is concluded such
as: (i) fiduciary failure, (ii) lack of independence between the company and certain Board
members, (iii) conflicts of interests, (iv) excessive compensation, (v) high-risk
accounting (IFC, 2004). From the bankruptcy in Enron, the result shows that the role of
board committees in company is very significant (Zahra and Pearce, 1989).
Several studies have produced estimates of the women’s role in corporate financial
performance in developed countries, especially in the United State, Canada, and UK, but
there is still insufficient data for developing countries (Rosa et al., 1996; Lerner, 1997).
However, research results on the role of women on board committees in corporate
financial performance are mixed. Specifically, it has been found that women on board
and financial performance has a positive relationship (Carter, et al., 2003; Adams and
Ferreira, 2004; Lang and Stulz, 1993; Campbell and Minguez-Vera, 2008; Smith N., et
al., 2006; Dezsö and Ross, 2012), a negative relationship (Frink et al., 2003; Bohren and
Strom, 2006), and no-relationship (Rose, 2007; Smith and Verner, 2008).
Studies on the role of women in corporate financial performance in Vietnam as well as in
developing countries are still limited. Nowadays, the role of women is an important part
of family life and society, and their strong representative in the economy. Moreover, they
are significant contributors in agriculture, trade, education, social service, and
entrepreneurship (Nguyen, 2011). Thus, Vietnamese companies employ proportionally
more women top managers compared to similarly populated countries in the same income
group (Enterprise survey, 2011). The objectives of this research are to determine whether
the role of women on board committees in corporate financial performance in Vietnam
through the period from 2008 to 2012.

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1.2.

Research Objectives

The aims of this paper are to examine whether the role of women on board committees in
corporate financial performance in Vietnam through the period from 2008 to 2012. In
particular:
(1) To investigate the role of women on board committees in corporate financial
performance.
(2) To identify the determinants of women’s participation in board committees.

1.3.

Research Questions

This study attempts to answer the following research question:
(1) Do women on board committees influence corporate financial performance?
(2) What are the determinants of women’s participation in the board?

1.4.

Research Methodology

Base on the Resource Dependence Theory and Integrative Theory, this study uses annual
panel data of 100 listed companies on HOSE in Vietnam during the period 2008-2012.
To estimate the role of women on board committees in corporate financial performance,
these regression methods are used such as Pooled Ordination Least Square (pooled OLS),
Fixed Effects (FE) or Random Effects (RE), and Moderated Multiple Regression (MMR).

1.5.

Structure of the thesis

This thesis organized in five chapters as follows:
 Chapter 1 explains the reason for choosing the research topic, its objectives and
research questions. This chapter also explains briefly about methodology to test
the hypotheses.

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 Chapter 2 reviews the literature. It starts with the concept of women on board
committees and corporate financial performance. Following is theories relative
women on boards and firm performance. Empirical studies also presented in this
part.
 Chapter 3 explains data and variables which be used in the model. This chapter
also presents econometric techniques to test hypotheses.
 Chapter 4 presents empirical results corresponding to each estimation technique.
 Chapter 5 gives conclusion, policy implications, and limitations of the study.

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Chapter 2: LITERATURE REVIEW

This chapter presents some theories relative to the role of women on board committees in
corporate financial performance including the Integrative theory and Resource
dependence theory. In addition, empirical studies concerning the role of women on board
committees also mentioned.

2.1.

Theoretical relationship between women on board committees and
corporate financial performance

2.1.1. Resource Dependence theory
Resource dependence theory (RDT) grounded in sociology and organizational theory and
it studied of how external environment affect the behavior on the organization (i.e.
financial performance). Pfeffer and Salancik (1978) stated that the board committees
attend the relationship between the company and other external competitors so that
appeal environmental dependencies. The authors proved that four advantages of external
connections: (1) supply resources; (2) creation communication channel with important
boards on the firm; (3) supply committees of support from main organizations in
industries; and (4) creation authenticity for the firm.
According to the resource dependence perspective, the board committee members help
companies interface with its general and competitive environments (Zahra and Pearce,
1989). Many empirical studies supported the central argument of this perspective on
board committee role (Pfeffer and Salancik, 1978; Pearce and Zahra, 1991). Furthermore,
boards not only provide increase coordination between organizations and vital resources
but also absorb external environment by providing information, thus enhancing firm
performance.
Recently, to expand the RDT, Hillman, et al. (2009) suggests that different types of
directors will provide more different valuable resources to the firm, then, should produce
better firm performance. The presentation of women on board committees increased
ability access to resources (Zahra and Pearce, 1989; Hillman et al., 2007), receive and
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feedback information (Boyd, 1990), as well as enhance skills and knowledge of boards

(Provan, 1980).
Resource Dependence Theory put a fundamental basic for the most convincing
theoretical argument on women leader in a business case. Women hold the qualified
characteristics in improving the information providing by unique information held by
diverse directors. Generating unique information sets for better decision making makes
women different from men.

2.1.2. Corporate financial performance - The Integrative theory
It is necessary to study on corporate financial performance in various synthetic; however,
most approaches on this had been separate concepts. White and Hamermesh (1981) focus
attention on several underlying concepts including industrial organization, organization
theory and strategic choice to understand corporate financial performance.
Industrial organization theory is a branch of economics that focuses on the industrylevel and corporate-level. According to the industrial organization perspective, market
structure affects the financial performance. Research in the industrial organization
tradition typically seeks direct relationships between market structure factors and
financial performance, measured at the aggregate level. This perspective tends to ignore
issues of strategy and organization.
Strategic choice theory derives from the study of corporate management and focuses
primarily at the individual corporate level. Proponents of this perspective believe that
managers, by proactive making decision, can develop strategies that better align the firm
with its environment and so improve financial performance. Empirical research in the
strategic choice tradition typically seeks relationships between strategy factors and
corporate financial performance, and tends to place less emphasis on environment and
organization variables. Such factors as market share, firm growth, firm size,
diversification, new product development, quality, advertising, sales force expense,
research and development, investment intensity and price have been extensively studied
and mostly found relate to financial performance.
6

Contingency theory is a branch of organization theory. In contingency theory,
combinations of unit causal factors (derived from the industrial organization, strategic
choice or organization theory literatures), may interact and affect financial performance.
A classic example of contingency is the positive relationship between increased
environmental uncertainty and decreased organizational formalization identified by
Lawrence and Lorsch (1967). An example is the role top management teams play in
moderating the relationship between firm environment and strategy (Hambrick, 1981).
The authors note that the industrial organization field is largely concerned with
relationships among industry environment, business position and firm performance; key
concepts in organization theory are environment and organization structure, typically
focused at the business level but rarely concerned with financial performance. The
integrative model (White and Hamennesh, 1981) based on sub-models from industrial
organization and contingency theory. From industrial organization theory, industry
environment (market structure) and business position (relative market share, product
quality) related to corporate financial performance. From contingency theory,
environment, organization structure, and administration related to corporate financial
performance (See conceptual framework below).

To summarize, the theoretical framework does not give a clear perspective to the role of
women on board committees and corporate financial performance. When this paper
mentioned the role of women on board committees and corporate financial performance,
it is the integrative theory. In the next part, this paper discusses relevant empirical studies
of women on board committees and corporate financial performance that leading to
development of the research methodology.

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2.2.

Empirical studies

2.2.1. Determinants of corporate financial performance
Many previous studies analyzed corporate financial performance in various views, in
some particular environments or in different economic sectors.
Tarawneh (2006) showed that the factors such as bank size, asset management, and
operational efficiency have positive effect on corporate financial performance (returns on
assets and interest income) between five commercial banks in the Sultanate of Oman,
during period from 1999 to 2003. Thus, the bank with higher assets, deposits, credits and
shareholder equity does not always mean that has better profitability. Another research is
to identify the factors (such as leverage, liquidity, capitalization, investment, size, age,
location, export and management efficiency) affect the financial performance (returns on
sales-ROS, returns on assets-ROA, returns on equity-ROE) of industrial firms in Greece
during the period from 1997 to 2004. The result is efficiency significantly, and implies
that profitable of industrial firms in Greece are large, and exporting firms with a
competitive management team have an optimal leverage (Liargovas and Skandalis,
2008).
The recent findings show that leverage, liquidity, firm age, firm size, and management
significantly affect corporate financial performance (returns on assets-ROA) of Jordanian
insurance companies listed at Amman stock exchange during the period from 2002 to
2007 (Almajali, et al., 2012).
The role of women participate in leadership positions is instrumental for listed companies
(Huhman, 2012). As the percentage of women on board committees steadily increases,
the women play a main role in determining profitability, return on assets, return on
equity, and price of stock of companies (Terjesen, 2009). For example, the women on
board committees account for 36 percents better stock price growth, 46 percents better
return on equity, and lead more profit (Sheridan, 2001). However, it is difficult to
undertake research on the role of women on board committees in corporate financial
performance (Nielsen & Huse, 2010). Thus, the next of this paper discusses the role of
women on board committees in corporate financial performance in relevant studies.

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2.2.2. The role of women on board committees in corporate financial performance
Lerner et al. (1997) represents individual characteristics that have effects on corporate
performance of 200 Israeli women-owned companies. This study gives five theoretical
perspectives relation to firm performance such as social learning; individual motivations
and goals; network affiliation; human capital (education background and business skills);
and environmental factors (location, industrial sectors). The results show that network,
motivation, human capital and environmental factors influenced different aspects of firm
performance, while social learning had insignificant effect on firm performance. To
analyze human capital variables (education background, experience business), this paper
presents mixed results. The education background of Israeli women do not related to firm
performance, and conversely, the experience in the industry is highly correlated with firm
performance. On the other hand, industrial sectors (manufacturing and services) are
different, for example, manufacturing is better firm performance while services are
negative.
Another study shows that the positive relationship with the corporate performance of
Thai governances through by four elements including the experience of management
team, number of previous starts, age and scanning intensity (Box et al., 1995). Moreover,
Hisrich et al. (1997) presents the human capital (level of education, experience and
business skill), personal motivations, and strategy of women on board of director effect
on corporate performance.
Subsequently, Siong-Choy (2007) studies whether women entrepreneurship influences
firm performance in Malaysia. This author provides significant results between factors of
women (goals and motives, networking and entrepreneurial orientation) effect on their
business performance.

The role of women on board committees are importance, however, few disputation
academic studies address the relationship between women on board committees and

9


corporate financial performance. There are three perspectives about this debate such as
the positive, the negative, and non-relationship.
The positive relationship
Carter et al., (2003) stipulated that women on board committees enhance the
effectiveness of corporate financial performance, by their better understanding of
complicated environment and their more astute decisions. Additional, the role of the
women on boards in a stakeholder framework is to resolve agency problem among
managers and shareholders through setting compensation and changing leadership that do
not create value for the shareholders. The authors find that significant positive
relationship between the women (the percentage of women) on the board and firm value
(measured by TobinQ) by studying Fortune 1000 firms. This result holds after controlling
for size, industry sectors, and other corporate governance measures. Accordingly, Adams
and Ferreira (2004) research on the effect of women as chief executive officer on
sensitive stock performance. The authors based on the sample of an unbalanced panel of
1,500 director-level firms data from an IRRC annual publication. Derived from annual
company reports, the dataset contains characteristics of directors such as the gender of
director (male and female), their number of directorships each director holds, the tenure
of director as director type, age, and director compensation. The lower rate of women the
company has, the more strongly its stock price tends to fluctuate stock price is (Klein A.,
1998).
One argument stated that firms with at least one woman on its top management board
generates one percent more economic value than ones without any woman on top
management board, given other factor unchanged. By panel data, many studies analyzed
the relationship between gender and firm performance with different dependent variables.
In instance, Lang and Stulz (1993) used Tobin’s Q, and Campbell and Minguez-Vera
92008) used Tobin’s Q, return on asset (ROA), return on equity (ROE) (accountingbased). Most of studies used independent variable as gender and other control variables
including firm size, firm age, leverage, capital expenditure intensity, marketing intensity,

10


age of capital stock (depreciation expense); and the number of managers on the top
management team.
Smith et al., (2006) also examined the relationship between management diversity and
firm performance in the case of women in top executive jobs and on boards of directors.
This author used a panel data of 2,500 Danish firms to analyze and to explore positive
relationship between the proportion of women in top management (depending on the
qualifications of female) and firm performance. Moreover, the study indicated that the
impact of gender diversity on firm performance depend on the organizational context.
These findings suggest the gender in board of directors that diversified to enhance the
company performance.
Dezsö and Ross (2012) found that top female management has impact on business
performance. However, this study only mentioned the innovation strategy of firm in the
context that informational and social advantages of women in management. This research
uses a large sample with 21,790 firm-times in the period 1992-2006 with its source for
financial information, the size, and gender composition of top management teams from
S&P’s ExecuComp Database, and find that female representation in top management
leads to better firm performance.
In another research, Kalleberg and Leicht (1991) proved that the business that women
leader was less successful than these owned men business. The authors test hypotheses
consistent with each theoretical position using longitudinal data of 411 companies with
three independent variables: industries, company, and owner to estimate survival and
success of company (dependent variables). Rosa et al. (1996) suggests that the
relationship between gender and small business performance is complex. However,
gender is still an important factor that effect on business performance after other key
factors are controlled. The value of assets in male firms is significantly higher than in
female businesses. In other words, the empirical results suggest that a positive
relationship between management group demography (gender diversity) and growth

orientation interaction and performance (Dwyeret. al., 2003).
11


Interestingly, the women has succeed do bring capital to the social networks by their
board positions. The successful women directors have strong backgrounds and significant
corporate experience, and the contribution of women on board committees is appreciated
better men through their different experiences, styles, responsibilities and voice on the
board (Singh and Vinnicombe, 2004).
The negative relationship
Using 409 individuals from forty-five new product teams in five high-technology
companies, this study investigates the impact of group demography on group
performance and a result is that the negative of gender diversity on corporate
performance outweighed the positive through group process. As the board committees
have different opinions on making decisions, it is very difficult to create the cooperation
among members of the Boards. Furthermore, any increasingly feasible firm performance
is not large enough to offset (or cover) this costs (Ancona and Caldwell, 1992)
Considerable theoretical study has published to date concerning the relationship between
demographic composition of organizations and the performance. As power shared among
increasingly women on boards, thus lead to lost opportunities to organizational
performance (decreased). This result demonstrates support for an inverted U-shaped
relationship between women on board committees and firm performance in relative
industrial sectors (Frink et al., 2003). Especially, Bohren and Strom (2006) studied all
non-financial firms listed on the Oslo Stock Exchange over the period 1989-2002 and
found that higher the proportion of women on boards is negatively affect on corporate
performance.
The non-relationship
Rose (2007) uses a sample of Danish firms listed on Copenhagen Stock Exchange during
the period of 1998-2001 in a cross sectional analysis. Contrary to a number of other
studies, this article does not find any significant link between firm performance as

measured by TobinQ and female board representation. The author has only focused on
12


the link between firm performance and board diversity under the presumption that gender
is vital for the financial success of firms.
In order to get reliable information, Smith and Verner (2008) collected 10,000 largest
Danish firms observed during from 1994 to 2003. This study shows that the proportion of
women in top management jobs tend to have not affect on firm performance.

2.3.

Conceptual framework

From above theory reviews, I construct a conceptual framework to position the concept
“women on board committees” in a general framework for financial performance. This
framework helps to theoretical see the channels that women on board committees could
influence financial performance.

Business
Position

Strategy
(4)

Industry
Environment
Organization
structure

(3)

Financial
performance

(2)
Women on boards

(1)

Management

Note: Resource Dependence Theory (1);
The Integrative Theory: Contingency Theory (2); Industrial Organization Theory (3);
Strategic Choice Theory (4)

Source: Author’s reviews

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2.4.

Chapter remarks

This chapter presents three main points. Firstly, some main concepts concerning content
of the thesis have explained as determinants of women’s participate in board committees
and corporate financial performance. Secondly, two main theories that the thesis based on
included the integrative theory and resource dependence theory. Lastly, this section also
gives some empirical evidences on the role of women in corporate financial performance

in developed countries as well as Vietnam context. Results of these papers are not
consistent. Specially, it proved that the relationship between women on board committees
and financial performance has a positive, a negative or even more no-relationship. From
the empirical results, in this thesis I argue that a positive relationship between women on
board committees and corporate financial performance.

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Chapter 3: RESEARCH METHODOLOGY

This chapter includes four sections. The first is the overview of the role of women in
corporate financial performance in Vietnam through the period from 2008 to 2012. The
second explains data and variables which be used in the model. Next, the description of
difference estimation models will be introduced including Pooled Ordination Least
Square (Pooled OLS), Fixed or Random Effects, and Moderated Multiple Regression
(MMR). Finally, this study gives some hypotheses relative to the role women on board
committees in corporate financial performance.

3.1.

Overview the role of women on board committees and corporate

financial performance in Vietnam
By the development of the society, women play a very important role in families as well
as in the economic development of Vietnam. This part mentions some issues of women in
the past and their changing at the present in Vietnam.
In the past, the role of Vietnamese women have affected by Chinese culture for a long
time (Nguyen, 2011). In family, women almost stayed at home and had to do all
housework, take-care children, their fathers and husbands. Moreover, they only finished

secondary school and some studied high school. People though that women should not
study high, what they should learn was how to cook well and how to became a good wife,
mother.
With the developing of economy, the role of women is become balanced in families as
well as in societies. They appear in most fields and participate in many social positions of
the communities. Mrs. Nguyen Thi Doan, for example, is the vice president of Vietnam.
The percentage of women, who can read and write, is over 90% including 36.24%
graduated university, 33.95% graduated master course and 25.96% graduated doctor

15


course (Nguyen, 2008). They get the calmness to face with difficult and urgent problems
rather than being impatient like men. Moreover, they also achieve high positions in their
companies.
According IFC (2013), the presence of women on board committees is one strategy to
enhance corporate financial performance. Some listed companies are starting to promote
women participate in board of committees in Asia as Japan, Indonesia, and Thailand. The
percentage of women members on board committees account for slightly less than two
percent at top companies in Japan (The Japan Times, 2012). Furthermore, the compies
have the presentation of women on board committees accounted for 30 percent of the
market capitalization of stock market in Vietnam (Le, 2013). Following the data sample
in Vietnam, some companies have appointed several women members on board
committees, including Hau Giang Pharmacy (DHG Pharma) – the country largest local
pharmaceutical producer, Phu Nhuan Jewelry (PNJ), Vingroup (VIC) stock companies
which each have more than three. In specially, Mai Kieu Lien is well-known Chairman in
Viet Nam Dairy stock company (Vinamilk) and holding leadership positions during from
2003 to present. During her period leadership, she played a key role in transforming
Vinamilk not only to become most profitable brands in Vietnam but also a respected
name across Asia. Moreover, she is the 60th wealthiest individual in Vietnam in terms of

stock wealth in late 2012, holding stocks worth almost 200 billion VND. According to
Forbes (2014), Vinamilk is continuing to increase share prices on the stock market, and
rise revenue and profits, for example, in 2013, revenue increased 17 percent, respectively
1.5 billion USD. In addition, Mai Kieu Lien said that the revenue increase twofold in
2017 and put the company out of international markets. Besides, there are the mirror
typical women on board committees affect financial performance in listed companies in
Vietnam , for example, Nguyen Thi Mai Thanh – Chairman of the Board and General
Director of Refrigeration Electrical Engineering Corporation (REE), and Pham Thi Viet
Nga – Chairman of the Board of DHG Pharma.

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3.2.

Sample description

Data set is a balanced panel of the 100 listed companies and 500 firm-years
(observations) in Ho Chi Minh Stock Exchange (HOSE) observed during five years
period 2008-2012. Data includes extensive information on the companies and the
characteristics of board committee members and thus this study use panel estimators and
control for causality. This study obtains data on the percentage of women on board
committees and other corporate governance mechanism variables from company annual
reports. The primary source of data from financial statement firms to compute the return
on assets, the return on equity, TobinQ, and the natural logarithm of total assets.
Furthermore, the industrial sectors base on category of HOSE, and the data set in this
topic chooses analysis nine sectors. Finance, banks, and insurance companies are
excluded due to the difficult calculate TobinQ and the huge leverage for these firms.
Thus, the empirical result may not exactly if includes firms in this part. A minority of
firms does not report information about board members’ education and experience, and

the amount of stockholders (owning more than 5 percent), so the actual number of
stockholders underestimated in the data. The remuneration of board committees stated for
whole group of firms and not only for the parent company.

3.3.

Variables

3.3.1.

Dependent variable

Corporate financial performance is how a firm can use resources efficiently and achieve
target or generate profit (Draft, 2008). There are many ratios to measure corporate
financial performance that related accounting-based measures includes return on assets
(ROA), return on equity (ROE) (Dwyer et. al., 2003; Campbell and Minguez-Vera, 2008;
Adam et. al., 2009; Carter et. al., 2010; Dezsö and Ross, 2012). ROA ratio shows how
profitable assets of company generate revenue or gain a net profit, and measured by a
company’s net income that divided by its total assets. ROE is the ratio of net income of a
17


company during a year to its stockholders’ equity during that year, and the formula is a
company’s net income divided by its shareholder’s equity. These ratios usually use in
empirical research to measure corporate financial performance. In addition, the other
criteria review financial performance such as net profit, earning per share, gross earnings,
sales turnover, productivity and growth in sales (Dess and Robinson, 1984; Capon et. al.,
1990; Kalleberg and Leicht, 1991; Rosa et al., 1996; Dwyer et. al., 2003; Dezsö and
Ross, 2012). However, ROA and ROE ratios calculate corporate financial performance
not exactly (Tully, 1993) and these measures are very sensitive to management’s choice

of asset valuation principles (Rose, 2007).
One other financial performance measure, market-based measure is Tobin’s Q (TobinQ),
defined as the market value of equity plus book value of debt all divided by the book
value of total assets (Rose, C., 2007; Campbell and Minguez-Vera, 2008; Adam et. al.,
2009; Carter et. al., 2010; Dezsö and Ross, 2012). The author of this ratio is Tobin (1969)
and it used widely by the vast of researchers to measures firm performance. TobinQ
applied widely to measure within the corporate governance literature serving as a proxy
for a firm’s ability to generate shareholder wealth. The value of the TobinQ ratio gives a
clear yardstick for the calculation of corporate financial performance. If the ratio greater
than 1, this reflect the investors to be able to create more value by using available
resources effectively. If on the contrary, a firm’s TobinQ less than 1, it is cheaper to buy
capacity in the financial markets than in the real asset markets.
In conclusion, there are two methods to measure corporate financial performance
including accounting-based and market-based method. Accounting results based on
events that have already occurred, and thus offer a view of past performance, while
TobinQ focuses on expectations of future performance (Demsetz and Villalonga, 2001).
Shan and McIver (2011) said that TobinQ ratio not only the good yardstick firm
performance but also give positive feedback from financial market through by the
characteristics of Board Committees in company. Then, the ratio measures approximately

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corporate financial performance including ROA, ROE, and TobinQ. The empirical result
will prove to convince this effect.
3.3.2.

Explanatory variables

In this study, the percentage of women on board committees (PWOMEN) and women as

Chairman (WCHAIRMAN) are key explanatory variable. Carter, et al. (2003) said that the
women member on board committees defined as the number of the women member that
participated in board committees. In addition, this paper also uses other independent
variables including board size (BSIZE), type of board (DUAL) – the member has in
charge of Chair and Director in the company, education background (EDU), experience
(EXP), individual members (IND), remuneration (PAYMENT) (Rose, 2007; Adam et. al.,
2009), ownership (OWN), and shareholder (SHARE) (Rose, 2007).
The control variables kept fixed to clarify the influence of the women members on board
committees and corporate governance mechanism on corporate financial performance.
Thus, the control variables in the model give better empirical result.
This study analyzes control variables firm size (FSIZE) (Cabon, 1990; Dezsö and Ross,
2012; Dwyer et. al, 2003; Smith et al., 2006; Campbell and Minguez-Vera, 2008; etc), the
established years of company (FAGE) (Smith et al., 2006; Dezsö and Ross, 2012), the
state ownership (STATE), leverage (LEV) (Campbell and Minguez-Vera, 2008; Dezsö
and Ross, 2012), industrial sectors (SECTOR).

3.4.

Hypotheses

The hypotheses tested were developed from two theories: Resource Dependence Theory
and The Integrative Theory. These theory offer the most support for a positive link
between women and corporate financial performance.
 Hypothesis 1a: The percentage of women on board committees (PWOMEN) has
positive effect on corporate financial performance (ROA, ROE, TobinQ).

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