Please note! This essay has been submitted by a student.
In my study, I will examine whether female directors advances the performance of a firm. Recently, directors on board (female) have being the major interest in corporate governance. Directors on boards play essential role in governance application, overseeing of risk, making decisions and therefore attract a tough body of individuals with diverse pool of knowledge. Gender diversity powers corporate governance, improves monitoring roles of the board, specifically in countries that lack solid legal enforcement.
Several researches still considered a diversified kind of board, diverse kind of board brings about new insight and perspective by way of improving performance and organizational value. According to Cater et al. (2003), some merits of board diversity include increased creativity and innovation, effective problem solving by members, promotion of improved understanding of market place, exchange of ideas and group performance. Female directors also demand more audit efforts than male directors and are diligent monitors, which can affect the performance of a firm positively. Furthermore, female directors bring different experience and perspectives into the boardroom which help to improve the quality of board decisions and enhance the legitimacy of firm practices. Many European countries are encouraged or mandated by public companies to add more women to their boards. For example as a result of the under representation of females on board, some European Union (EU) countries like Finland, Norway, Italy, France, Spain have imposed quota on the number of female directors that should be on large corporate boards. Furthermore, other countries like UK, Ghana, and many others do not have this kind of quotas imposed on the number of females that should be on board, any number of females can therefore be presented on board. Quota or no quota imposed, their individual effectiveness or performance rate will still be the same.
According to Gul et al. (2011), gender diversity boards could also to some extent offset fragile corporate governance. The activities of female directors may also result in over monitoring, fewer takeover defense. Notwithstanding the drive for gender diversity on board by a group like Women Corporate Directors (WCD), female directors on board in Asian countries have remained low relative to Western countries. An important question has been considered as to whether things would be different if more females were running corporations in US and the world. This topic is essential because female directors are considered an important factor to help stimulate and enhance firm performance. The study will examine whether female directors on board improve the performance of a firm in Ghana. This study will be based on the agency theory. According to Guest (2012), this theory explains the relationship that exist between a company’s principals (shareholders) and their agents (such as the management executives and company’s board) who are employed and tasked with the duty of ensuring operational and financial efficiency while preserving a company’s relationship with its stakeholders (customers, management, creditors, employees, government and community). This mostly happen because many companies have a lot of shareholders that may or may not be available to participate in the running of company business, but maybe willing to contribute equity to help increase its capital base.
As a result of the self interest of shareholders and agents, it may lead to agency loss which may affect the firm’s performance. This theory will be of much help to support my research findings.