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Info: 11462 words (46 pages) Dissertation
Published: 10th Dec 2019

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Tagged: FinanceEquality


1.            INTRODUCTION

Setting a minimum target of female directors legally started with Israel in 1999 when they required publicly traded companies to have at least one woman in boardrooms. However, until 2006, Norway became a pioneer in adopting a law that required company to have a quota of women with penalties for non-compliance. Norwegian public companies who do not reach the goal of 40% female directors on boards are liable for fines or delisting. Such effect has spread across the world in the past decade. According to Wiersema and Mors (2016), some countries (see e.g. Germany, France, Belgium, Iceland, Italy) have a compulsory target, whereas others (see e.g Austria, Finland, the Netherlands, Spain, Sweden, the UK) set up the voluntary goal. However, legalization of gender quota has been called in question: whether the appointment of a female board chair or a female CEO improves firm performance potentially or it just serves the purpose of gender equality only. Though many earlier literature have been studied in North American and some European countries to examine the relationship between board gender composition and corporate’s performance or behaviour (Adams & Ferreira, 2009; J. Chen, Leung, & Goergen, 2017; Dezsö & Ross, 2012), such topic has had little attention in emerging countries. This research will survey a sample of Chinese non-financial listed companies to examine the impact of female representation on boards on dividend policy.

Why do dividends matter? Black (1976) wrote, “The harder we look at the dividend picture, the more it seems like a puzzle, with pieces that just don’t fit together.”  There has been a great deal of debate over whether or not dividend policy leads to maximizing the wealth of shareholders. Following Rozeff (1982), Easterbrook (1984) and Jensen (1986), paying dividends may reduce the agency cost arisen from overinvestment and low growth opportunity. By testing the difference in behaviour of all-men and diverse boards when deciding the dividend decisions, J. Chen et al. (2017) find that greater women on boards is positively related to dividend payouts. This research will check whether evidence obtained in China is consistent with key findings of J. Chen et al. (2017) or not.

Why do China matters? The economy of China is the second-largest in the world in term of nominal Gross Domestic Product according to World Economic Outlook Database of International Monetary Fund (April, 2017). Due to its increasing contribution to global growth, it is worth understanding how Chinese market works. Fact remains that 70% of Chinese women participate in labour force in comparison with 84% of men (The Global Gender Gap Report 2016: p. 142) and the number of registered companies in China increases dramatically over time, reaching around 77 million enterprises in 2016, yet only 17.5% of Chinese corporates have female representative on top management team (The Global Gender Gap Report 2016: p. 143). With respect to the social aspect, not similar to Eastern countries, China is influenced deeply by Confucianism philosophy. Du (2014) recognizes the role of Confucianism when running a business. Based on a sample of Chinese listed firms during the period of 2001–2011, he documents that Confucianism has a negative impact on gender diversity of boards. This will impose severe constraint to get more women in boardrooms. Therefore, this research makes an effort to provide convincing evidence for policymakers to facilitate to improve the imbalance gender at the highest ranks of leadership in firms.

Taking above into consideration, this research attempts to address concerns: Whether the presence of women on Chinese boards of directors can create a positive and economic impact on dividend payouts.


  1. The development of board diversity studies

The past decade saw a dramatically growing body of research which focused on the role of board diversity and associated board effectiveness, corporate governance and firm performance. According to Kirsch (2017), there are four major flows of literature. The first stream of mainly empirical papers refers to demographic, human capital and social capital characteristics to examine the difference in behaviour between female directors and male peers. The second stream tries to find out institutional factors driving the continuous underrepresentation of women at the uppermost echelon of corporates. Another stream of paper attempts to look at whether there is a positive relationship between gender diversity in boardrooms and corporate outcomes. The last one surrounds the appointment of women to boards through either legislation or voluntary target. Even though the findings encourage the inclusion of provisions against gender imbalance in boardrooms, however board behaviours remains mystery for scholars, practitioners and policymakers so far.

In a series of study following the first stream, Singh, Terjesen, and Vinnicombe (2008) argue that newly appointed women on UK boards have the same career experience, education, profile as those of male appointees despite age gap between genders. The research of Virtanen (2010) reveals the finding that, female directors are more likely to outperform, adapt their employer brand quickly to the masculine environment, being younger on average compared to male counterparts based on his sample of Finnish listed companies. There is other evidence that women on boards can provide benefit to uninformed stakeholders due to their positive influence to public disclosure in large firms and private information collection in small firms (Gul, Srinidhi, & Ng, 2011), pay more attention on environmental issues than male colleagues (Li et al., 2017), and foster the analysis of customer satisfaction very well (Arfken, Bellar, & Helms, 2004). Nevertheless, having the same experience and qualifications, female CEOs tend to receive less compensation than male peers (Xiao, He, Lin, & Elkins, 2013). Matsa and Miller (2011) proposes that greater women on the board will be associated with the growing demand of women in lower-level managerial positions. A key framework of Dezsö and Ross (2012)’s work is that the presence of female directors brings the diversity of skills, experience and fresh perspective which all improve the board-level decision exhaustively. They accordingly believe that diverse boards can enhance the performance of top management team as well as improve the motivation of female middle managers. Otherwise, Nielsen and Huse (2010) cannot find any significant difference in behaviour between men and female through board process. Instead, they argue that the nature of tasks performed would shape differential actions between genders on boardrooms.

From the perspective at nation level, Terjesen and Singh (2008) introduces three significant factors in term of economy, politic and society which affect the appointment of women on boards from 43 countries surveyed. Their conclusions point out that countries with higher level of female representation on boards are more likely to have a greater involvement of women at senior positions, a lower gender pay gap and a lower presence of women in parliament. Additional factors explaining the board gender diversity is presented in the subsequent paper they authored (Terjesen, Aguilera, & Lorenz, 2014). In this related study, authors posit the importance of welfare provision (e.g. maternity benefits and childcare) to assist women to participate in labour force. Furthermore, they highlight the influence of different left–right political inclinations as well as path dependence on board gender policies.

In a much-cited article representing the third stream, Adams and Ferreira (2009) attempts to explain how gender diversity in the boardrooms might affect corporates in comprehensive manners. Using a sample of 1,939 U.S firms in the period of 1996-2003, they document the existence of gender differences after controlling characteristics at an individual level such as independence status, age, tenure, retirement status and so on. With respect to firm inputs, the presence of female presentative on boards is proven to improve male directors’ behaviour in meetings. Regarding corporate governance, women seem to have a tendency toward performing monitoring tasks duly than men do. However, the association between gender diversity and firm performance is not easily confirmed until using shareholder rights as an instrumental variable. They propose mixed findings depend on the degree of corporate governance. The greater involvement of women on boardroom will decrease the performance of firms having good governance. On the contrary, more women on boards contributes to the market value of companies which is not able to resist external takeover threats. Pathan and Faff (2013) share similar findings to an extent of the level of corporate governance. Their sample of 212 U.S bank holding companies during the period of 2004-2011 reports that the output of banks having weak governance is diminished by gender diversity on boards.

In the related study, Dezsö and Ross (2012) also analyse the influence of female executives on firm performance, yet introduce the data set that is different from studies above. The data contain information on senior managers of 1,500 U.S firms from 1992 to 2006. Their empirical results show that, ceteris paribus, the boards of directors with at least one woman can generate one percent of firm’s economic value (or over $40 million), compared to all-men boards. Nevertheless, such effect is totally confined to the extent of companies which pursuit innovation strategy.

The investigation of Levi, Li, and Zhang (2014) examine the effect of board gender diversity through a lens of mergers and acquisitions (M&A) which is believed to destroy shareholder’s wealth in the acquiring companies. Based on the data of 20,000 U.S firm-year observations and 2,679 deals performed during the period between 1997 and 2009, they assert that a growth in women representation on boards is negatively associated with a decrease of 7.6 and 15.4 percentage in the corporate’s acquisitiveness and the size of bid premium respectively. Such a result is consistent with the research of G. Chen, Crossland, and Huang (2016). G. Chen et al. (2016) test the sample of U.S 14,220 firm-year observations and 2,998 acquisition bids during 13-year period from 1998. They find a robust evidence that women in top management have a negative effect on acquisitions and target acquisition size. Moreover, G. Chen et al. (2016) enrich the social identity theory originated from Turner and Tajfel (1979) to explain the individuals’ interactions and behaviour come from the groups to which that person belongs. They argue that the sex difference in the boards’ behaviour would benefit to the decision making process. Proposals funded for major projects would be evaluated in a thorough manner to avoid the investment in negative NPV projects.

In the case of China, Liu, Wei, and Xie (2014) rely on the resource dependence theory, agency theory and token status theory to shed some light on the role of women directors in firm performance. They find strong relationship if female representatives hold executives positions and weak association if women are independent directors which supports the resource dependence theory. To test the influence of number of women on boards, this research use the set of dummy variables which represents the number of one, two, three female directors. The evidence reveals that greater women strengths the positive association between women on boardrooms and firm’s performance, supporting the token status theory. This literature also check the influence of women in term of legal-personal and state controlled. Their sample provides that sex difference benefits to firm value in case of legal personal controlled rather than state controlled.

On the other hand, Denmark constitutes a special case which surprises researcher with only 4 percent women holding leadership positions while this Scandinavian country is known to put many effort for the equal treatment between genders. For a sample of Danish firms listed on the Copenhagen Stock Exchange during 1998–2001, Rose (2017) propose that Danish firms seems to hesitate to appoint women to the top management team, and the contribution of female representations to firm’s value creation cannot be recognized.

Several studies advocate that women are more risk averse than man during decision making process (Faccio, Marchica, & Mura, 2016; Palvia, Vähämaa, & Vähämaa, 2014; Schubert, Brown, Gysler, & Brachinger, 1999). To extend such argument, Khaw, Liao, Tripe, and Wongchoti (2016) investigate the inter-relationships between corporate risk-taking and state ownership when having additional female representatives on boardrooms. They start their work by solely considering the influence of men directors on risk-taking decisions owing to the gender difference in risk-aversion behaviour.  Analysing the sample of 8,903 firm-year observations from 1,361 firms listed on the Shanghai or Shenzhen stock exchanges during 1999-2010 period, they report that male-only boards lead to riskier decision-making. Notably, the level of risk-taking will be weaken under the control of government.

Is the greater women on boardrooms more likely to establish higher dividend payouts? J. Chen et al. (2017) analyse 1,691 U.S firms covering the 1997 – 2011 period or 12,050 observations to find an answer to this question. Their major finding is that there is an increase of 1.67 percentage of firm’s dividend payouts if the proportion of female independence directors rises by 10 percentage. They also perform a structural analysis to mitigate endogeneity concern which may arise from characteristics of boardrooms, including the propensity core matching, instrumental variable and difference-in-differences approaches. Consequently, the testable hypothesis is favoured by robustness checks. Chen at al propose further investigation to verify such relationship from the viewpoint of corporate governance’s level. Their work documents that the gender diversity in leadership team has a positive influence on dividend policy of firms with weak governance as well as those with high governance needs.

The policy for increasing women on boardrooms varies from different country and cultural contexts. Amongst them, Norway gets a central interest of researchers owing to its highest degree of applying the gender quota for corporate boards. Notwithstanding, their findings are controversial. Ahern and Dittmar (2012) concludes that stock price of firms in which there is an absence of women on boards responds negatively to the announcement of quota law while Nygaard (2011) can find a statistically positive relationship.

  1. The development of dividend payouts studies

The work of J. Chen et al. (2017), though, test the contribution of gender composition to one of the determinants of firms’ sustainable value: dividend policy which is still ongoing debate among economists. Despite Miller and Modigliani (1961) develop the irrelevance theorem stating that, in perfect capital market, firm’s value is not decided by its dividend policy, many researcher have continually supported and explored the role of dividends in corporate governance for recent decades. Lease et al. (p.196) conclude, “Dividend policy can have an impact on shareholder wealth because of various market imperfections”. Of the imperfection, Allen, Bernado, and Welch (2000) introduce the paradigm of a clientele effect to explain why dividend payouts are preferable to repurchasing share; Bhattacharya (1979) relies on imperfect information of outside investor to develop the signalling model to shed the light why firm prefers cash dividends regardless its tax burden. In the related study, Easterbrook (1984) and Jensen (1986) contribute to the explanation of dividend behaviour through free cash flow hypothesis.

Jensen (1986) argues that there is a strong motivation for top executives to expand the business massively since the large scale corporate would lead an increase in resources under their control and higher compensation. This argument is supported by findings of Finkelstein and Hambrick (1989) in which the firm’s size and profit have a positive and significant association with CEO’s cash compensation. More importantly, Jensen finds the effectiveness of debt mechanism rather than dividends or stocks repurchasing for mitigating the assessable cash flow at manager’s discretion. Debt structure would bind managers’ promises legally about certain incomes for bondholders. Furthermore, shareholders are entitled to take the firm to the bankruptcy court if the corporate does not fulfil its debt obligations. Accordingly, the debt is suggested to be a good alternative for dividends to lessen the agency cost which seems to be severe in case manager has more cash than needed to invest in positive NPV projects.

Back to the early work of Easterbrook (1984), his literature initially offers agency-cost explanations for dividend decision. Agency costs are originated from two causes. The first agency cost arises from the shareholder’s demand to monitor the managers’ decisions in business. The second cost comes from the difference in risk tolerance between shareholders and managers. Shareholders request high risk and attractive return projects at the expense of lenders to target their value maximization, while managers prefer projects with low risk and small return due to their concern on job and benefits reaped from the corporate’s wealth. Easterbrook believes that consistent capital in the market is likely to mitigate problems attributed by agency cost. When corporate issues new debts and securities, new creditors and investors engage in monitoring firm’s business and manager is more likely to align their interest with the interests of bondholders and shareholders.

Rozeff (1982) was among the first to propose a model of optimal dividend payouts. In his argument, establishment of higher dividend payouts leads to a decrease in the agency cost but an increase in the transaction cost of external financing. Minimizing the sum of these two costs will result in optimal dividend payouts. He tests the model based on the variation of insider ownership, investment scheme in the past and future, systemic risk level and the number of shareholders. His empirical evidence of 1,000 U.S companies during 1974-1980 period reports that firms pay less dividends when grasping the growth opportunities. The historical and predicted data on growth revenue support this conjecture. Rozeff also finds that firms pay higher dividends when either having the lower percentage of outstanding stocks held by insiders or getting the greater number of shareholders. His last key finding is the negative association between firm’s beta coefficient and dividend policy. Firms with higher operating and financial leverage prefer lower dividend ratio to avoid the cost of external finance.

Under cost agency and signalling theories, Officer (2011) conducts a study involving 1,283 dividend initiations of non-financial and non-utility firms during the period of 1963-2008 from the CRSP database. He argues that firms with lower growth opportunities and the higher free cash flow is more likely to lead higher dividend initiation announcement returns because shareholders find it necessary to not to grant much discretionary power for managers.

3.            HYPOTHESES

The literature above proves the positive impact women presence on boards, the  hypothesis is anticipated to be consistent with the main findings of J. Chen et al. (2017) as below:

Hypothesis : A firm’s gender diversity on its board has a significant and positive effect on firms’ dividend payouts.

According to Liu et al. (2014), the degree of impact of gender diversity on corporate decisions also is decided by the quality of corporate governance. Moreover, China has a fairly poor corporate governance compared to those developed countries. The second conjecture is:


4.1.       Data Source and Sample Selection

This study examines how board gender composition impacts on dividend payout decisions of Chinese companies during the period 2002 – 2015. Only firms that issue A-share and trade on either the Shanghai or Shenzhen stock exchanges are taken into account to ensure the same treatment and advantages in term of tax benefit, regulation and quoted currency in financial reports. Data on financial accounting, corporate governance and individual profile of top management team are collected from the China Stock Market and Accounting Research Database (CSMAR). The sample focuses on those firms having their database at its fiscal year ends in calendar year (2002-2015). Nonetheless, in regard of some corporates reporting both consolidated and parent financial statements, this research only considers accounting figures relating to company’s standalone position. More importantly, financial firms are excluded owing to different application of accounting principles between non- and financial firms. Another reason to exclude financial firms is according to Fama and French (1992) (p.429) “the high leverage that is normal for financial firms probably does not have the same meaning as for the nonfinancial firms, where high leverage more likely indicates distress”. In order to investigate the pure influence of dividend policy decided by boardrooms, firms generating negative earning are also excluded in this research. Our analysis is restricted to firms having dividend payouts ratio from -1 to 1.

As a result, the final sample is unbalanced panel consisting of 19,137 firm-year observations for 2,810 non-financial firms trading A – share from 2002 to 2015, see Table 1 and Table 2.

4.2.       Empirical Design

The main model and estimation method

In general, this research follows the methodology proposed by J. Chen et al. (2017) to form the baseline model as below:

Dividend payouti,t+1 = α + β x Fraction of female directorsi,t + γ Zi,t + Industryt + Yeart + εi,t

The main interest is to explain the part of earning which is paid to shareholders. Thus, the dependence variable is measured by total dividend paid over net profit for the same period. Other measurements are examined in this study such as dividends over total assets, dividends per share and the dividend yield, the ratio of dividends per share to the fiscal year-end stock price and dividend dummy which is equal to 1 if a firm has positive dividends in the fiscal year that ends in year t and 0 otherwise.

The independent variable is defined as the fraction of woman in board of directors.  The idea is that, all other things being equal, companies are more likely to increase their dividend behaviour if women share the power with men in boardrooms. The independent is lagged by one year to reflect the fact that firm performance could be not affected immediately by appointment of female directors.  In line with J. Chen et al. (2017), another measurement of independent variable is also employed and checked. It is the weighted average fraction of female directors with the weights being the tenure of each female director relative to the total board tenure.

Besides, a growing body of literature propose that dividend policy can be driven by some firm-related factors. This study will control some variables relative to some aspects of firm fundamental which potentially cause change in results. The first characteristics are firm size. Fama and French (2001) identify that large companies are more likely to pay dividend than small one. They also confirm that companies generating high earning tend to share their partial profits to shareholders in the manner of dividends. In this case, we also expect to find the significantly positive association between two factors and dividend decisions. Different from the proxies of firm size and profitability Fama and French (2001) employ in their article, we use natural logarithm of total asset as a measure for firm size and return on asset (ROA) as a proxy for profitability as proposed by J. Chen et al. (2017). The calculation of ROA is started with operating profit, knowns as earnings before interest and taxes, then adding depreciation of fixed assets and amortization of intangible assets, finally being divided by total assets.

Investment opportunity set is considered as determinant factor of financing decision. According to Fama and French (2001), J. Chen et al. (2017), Smith and Watts (1992) and Gaver and Gaver (1992), if a company finds attractive opportunities for growth and development, they will pay less dividend to fund valuable projects in the future. Nevertheless, finding of Denis and Osobov (2008) provides mixed results. In the United States, Canada, and the United Kingdom, payment of dividend is negatively associated with prospective investment while the decrease in dividend payers in Germany, France and Japan does not correspond to any measures of firm growth opportunities. To examine impact of growth opportunity on dividend payers in China, Tobin’s Q is applied. It is the ratio of book value of assets minus book value of equity plus market value of equity to the book value of assets. The influence of growth opportunities is expected to be consistent with conclusions of Fama and French (2001), J. Chen et al. (2017), Smith and Watts (1992) and Gaver and Gaver (1992).

Jensen (1986) finds the debt-based policy is better instrument than dividend to mitigate the free cash flow under control of manager as debt commitment would bind managers’ promises legally about certain incomes for debtholders. Keeping the high debt ratio could require high monitoring cost, accordingly reduce agency cost. For that reason, alternatives to reduce agency cost such as dividends are not required frequently. We use the ratio of total debt (short- and long-term debt) to total assets is used a proxy for corporate leverage. In this case, leverage is expected to negatively correlate with dividend payouts.

According to Jensen (1986), increase in accessible money in short term may motivate managers to re-invest in negative projects instead of returning to shareholders. To reduce divergent interests between managers and shareholders, dividend will be paid. Therefore, a high cash reserve could be a signal for high dividend payouts. To measure cash company keeps on hand, we use the proxy of J. Chen et al. (2017). It is computed as cash and marketable securities divided by net assets (total assets minus cash and marketable securities). We expect to find the positive relationship between available cash and dividend policy.

Dividend is a proportional profit which is paid out to investors. To maintain the high dividend payouts ratio over long term, companies are more likely to well generate earnings relative to its total asset. Following J. Chen et al. (2017) we employ the return volatility. It is calculated as the standard deviation of the return on assets over five-year overlapping periods. The sign of association with dividend is expected to be positive.

Fixed assets can be explanatory variable for dividend decisions too. Huang and Song (2006) argue that fixed assets are mandatorily required as collateral to protect creditors from the loss. Holding a high ratio of fixed assets will reduce and eliminate agency cost of debt, probably resulting in increased willingness of corporates to pay dividends. We use the ratio of net property, plant and equipment to total assets, denoted as PPE/TA and expect to find a positive relationship in this case.

The last firm-related variable we want to check in this study is the earned/contributed capital mix (RE/TA) based on evidence of Deangelo, Deangelo, and Stulz (2006). To the extent of industrial firms publicly traded in USA from 1973 to 2002, their results support the life-cycle theory of dividends in which contribution of retained earnings and external capital in its capital structure may cause economic impact the likelihood of paying dividends. Hence, it is necessary to control firm maturity when examining dividends setting. The probability of paying dividend is expected to increase with high earned/contributed capital mix.

Various authors try to explain the change in dividend policy by characteristics of corporate governance. Work of J. Chen et al. (2017) in US case proves board size as determinant of dividends. The larger board size is, the higher dividend level is. In spite of that there is no acceptable standard about how big the board should be across the world, Jensen (1993) argues that firm performance may be enhanced by small size of board and seven or eight is an ideal number for directors in boardrooms to manage workload of board successfully and not being subject to CEO’s administration. According to Jiang and Kim (2015), China Securities Regulatory Commission (CSRC) allows a listed company to establish a relatively large board size from 5 to 19 directors.  This study will control an influence of board size upon dividend policy.  We use the number of directors on the board is proxy for board size.

“By June 30th, 2002, at least two members of the board of directors shall be independent directors; and by June 30th, 2003, at least one third of board shall be independent directors”

Fraction of independent directors is measured as the number of independent directors divided by board size. CEO Chairman is constructed as a dummy variable which takes the value of one if the CEO is the chairman of the board, and zero otherwise. CEO tenure is defined as the number of years the CEO has been in position.

For the fact that most of investigations (G. Chen et al., 2016; J. Chen et al., 2017; de Andrés & Rodríguez, 2011; Dezsö & Ross, 2012; Levi et al., 2014; Matsa & Miller, 2011) face the same endogeneity problems relative to boards of directors, this model include industry-fixed effect and year-fixed effect to reduce the chance that association is driven by omitted variables.

As same as approach of J. Chen et al. (2017), this study will run six regressions to examine how the fraction of women representation on boards explains the dividend policy with a given firm-related and corporate governance-related characteristic. The first regression only considers the explanation of main variable, taking time fixed effects into account. In addition to the former variables, the second regression includes control variables as proxy of firm-related specifics. The next regression supplements exogenous variables relating to CEO’s power and corporate governance (e.g. board size, the fraction of independent directors, the CEO Chairman indicator variable, CEO tenure). The subsequent regression uses the weighted measure suggested by Schwartz-Ziv and Weisbach (2013) to test the possibility that directors with longer tenure (whether male or female) have a greater impact on dividend policy than directors with shorter tenure. The fifth regression is based on literature of Rozeff (1982) concerning how the number of insider ownership attenuates the payout amount. The final regression also includes CEO ownership for additional test.

With respect to other equity owners, Grinstein and Michaely (2005), analyse the relationship between institutional shareholdings and dividend polic

  1. Endogeneity

More importantly, to address possibility of omitted variable bias, this study adopts approaches as proposed by J. Chen et al. (2017), G. Chen et al. (2016), Levi et al. (2014). Firstly, propensity score matching is used to stress the difference in outcome is attribute to difference between firms with female directors (herein called the treatment group) and those without female directors (herein called the control group). The nearest neighbour approach is applied to match observations from the treatment and control based on their propensity score. Only the pair for which the difference between the propensity scores of the two firms is the smallest is retained. To reinforce the results, two diagnostic tests are adopted. The first test consists of re-estimating the logit model for the post-match sample and the second one consists of examining the difference for each observable characteristic between the treatment group and the matched control group.

4.3.       Descriptive analysis

Table 1 – Sample details by year

This table compares the number and proportion of firms which have at least one woman in boardrooms, more than one woman in boardrooms, at least one female independent director, at least one female insider director, and paying dividends in each year.

Year No. of obs No. of firm-year obs with female directors % No. of firm-year obs with more than one female directors % No. of firm-year with female
% No. of firm-year
obs. with female
insider directors
% No. of
obs. with
2002 965 552 57% 202 21% 219 23% 383 40% 569 59%
2003 1033 616 60% 248 24% 320 31% 391 38% 548 53%
2004 1069 655 61% 271 25% 360 34% 418 39% 654 61%
2005 1006 619 62% 241 24% 336 33% 375 37% 533 53%
2006 1165 725 62% 265 23% 395 34% 433 37% 647 56%
2007 510 331 65% 126 25% 183 36% 192 38% 281 55%
2008 596 384 64% 151 25% 211 35% 233 39% 366 61%
2009 1247 797 64% 328 26% 466 37% 474 38% 798 64%
2010 1676 1108 66% 454 27% 643 38% 655 39% 1117 67%
2011 1835 1245 68% 562 31% 739 40% 772 42% 1362 74%
2012 1872 1333 71% 672 36% 808 43% 849 45% 1496 80%
2013 1932 1405 73% 716 37% 880 46% 897 46% 1576 82%
2014 2059 1548 75% 835 41% 1026 50% 981 48% 1681 82%
2015 2172 1652 76% 898 41% 1090 50% 1050 48% 1744 80%
Total 19137 12970 5969 7676 8103 13372

Table 1 reports that women share powers in boardrooms with male colleagues in over a half companies during the survey period. At the beginning of this period, only 57% firms having woman at the highest position. Yet, the participation of women in top managerial team in Chinese firms rises gradually to 76% in 2015. Furthermore, this period also witnesses a double increase in observations with more than one female from 21% in 2002 to 42% in 2015. Similarly, firms having independence female directors jump more than twice from 22% in 2002 to 51% in 2015.  On the other hand, the percentage of insider directors who are female fluctuates over 13 years and rises slightly to 48%.

Another aspect is distribution of dividend-paying companies over years. There is upward trend for dividend payers which account for from 59% in 2002 to 80% in 2015. Our preliminary observation is consistent with works of Wang and Guo (2011). Based on a sample of 4605 listed companies with A-shares in China’s stock market from 13 June, 2003 to 13 June, 2007, they find the economically positive relationship between   China’s dividend tax cut in 2005 and probability of dividend payment. Because before 2005 individual investors in China are entitled higher tax ratio from capital income rather than dividend income, dividend is less preferable for investors.  On 13 June 2005, the ‘Notice on Policies Relating to Individual Income Tax on Dividends and Bonuses’ (Cai Shui [2005] No. 102) issued by the Ministry of Finance and the State Administration of Taxation was enacted. In detail, it stipulates that “taxes on individual investors’ income from dividends and bonuses of listed companies should be levied in accordance with the current tax laws after temporarily deducting 50% of an individual’s taxable income. Therefore, since 13 June, 2005, individual investors’ dividend income has been taxed at a rate of 10%, rather than 20%” (Wang & Guo, 2011).

As dividend policy changes from time to time, it is necessary to include time fixed effect.

Table 2 – Sample details by industry

Year No. of obs % No. of firm-year obs with female directors % No. of firm-year obs with more than one female directors % No. of firm-year with female
% No. of firm-year
obs. with female
insider directors
% No. of
obs. with
Agriculture 280 1.5% 180 64% 86 30% 107 36% 122 43% 166 62%
Mining 550 2.9% 238 44% 67 13% 179 33% 96 18% 381 70%
Manufacturing 11300 59.0% 7706 69% 3471 31% 4712 42% 4710 42% 8109 73%
Power 891 4.7% 636 71% 310 35% 427 48% 385 43% 609 71%
Construction 529 2.8% 308 58% 136 25% 175 33% 208 38% 386 74%
Wholesale and retail 1345 7.0% 1050 79% 536 41% 556 41% 709 53% 855 66%
Transport 795 4.2% 496 63% 235 31% 279 36% 317 40% 661 84%
Accommodation 78 0.4% 54 71% 25 33% 28 37% 28 37% 52 68%
Technology 1090 5.7% 723 67% 345 32% 422 39% 460 42% 811 76%
Real estate 1140 6.0% 775 69% 332 29% 342 30% 555 48% 678 62%
Leasing and commercial 232 1.2% 188 82% 112 47% 105 47% 125 52% 137 63%
Scientific service 95 0.5% 66 70% 47 50% 36 37% 42 45% 70 74%
Public facility management 224 1.2% 145 65% 73 34% 96 44% 78 35% 144 66%
Education 19 0.1% 15 84% 6 32% 4 21% 14 74% 6 32%
Health and social 53 0.3% 42 80% 25 45% 31 60% 16 29% 30 60%
Entertainment 269 1.4% 180 68% 77 30% 101 38% 123 45% 166 64%
Diversified industries 216 1.1% 149 67% 78 37% 71 32% 103 47% 93 47%
Other 31 0.2% 19 61% 8 30% 5 18% 12 39% 18 61%
Total 19137 12970 5969 7676 8103 13372

Table 2 describes how gender diversity in boardrooms and dividend behaviours vary across industries. Industry classification are based on the Guidelines for the Industry Classification of Listed Companies issued by China Securities Regulatory Commission on October 26th 2012. This table shows that firms having women in upper level makes up a half or more of the observations in all industries. The highest representation of female directors working in any industry was in education at 84%, followed by 82% in Leasing & Commercial industry, 80% in Health & Social work industry. The industry with the lowest level of female participation is mining with only 44% firm having woman in boardrooms. The Scientific research and Technical service sector is an industry which favours women to hold more than one board seat with 50% firm-year while mining seems restrict the development of female directors with only 13% firm-years observation having more than one woman in boards.

A related point to consider is the striking concentration of corporate surveyed in manufacturing sector. They make up slightly 60% of total observations whereas no any remaining industry accounts for over 7%. 73% of manufacturing firms are dividend payers during the surveyed period. Thus, any change in dividend policy of manufacturing firms could drive the result of total sample. Consequently, there is not necessary to employ the industry fixed effect.

Table 3 – Summary statistics

This table reports the means and standard deviations of the variables used in this study for the subsamples of firms with and without female directors as well as the subsamples of firms with and without dividends.


(1)                       (2)                       (3)

mean           sd         mean           sd            b               t


div_NI                       0.27         0.26         0.27         0.26        -0.00         (-0.92)

div_TA                       0.02         0.02         0.02         0.02        -0.00         (-1.02)

div_yield1                   0.01         0.01         0.01         0.01         0.00***       (4.56)

p_female                     0.17         0.09         0.00         0.00        -0.17***    (-211.07)

p_w_indep                    0.08         0.07         0.00         0.00        -0.07***    (-114.37)

p_w_ins                      0.08         0.08         0.00         0.00        -0.08***    (-118.49)

p_m_indep                    0.29         0.09         0.36         0.07         0.07***      (55.03)

firmsz                      21.38         1.12        21.54         1.26         0.16***       (8.43)

leverage                     0.15         0.16         0.17         0.36         0.02**        (3.02)

PPE_TA                       0.16         0.16         0.18         0.18         0.02***       (7.20)

cash_res                  -953.15    404912.21     26537.39   2083796.32     27490.54          (1.03)

RE_TA                       -0.09         6.79        -1.78       122.59        -1.70         (-1.09)

tobin                        3.17         5.02        10.12       524.13         6.94          (1.03)

ROA_C                        0.07         0.10         0.07         0.08         0.00*         (1.97)

vol                          0.06         1.65         0.05         0.22        -0.01         (-0.66)

total_dir                   10.02         2.47         9.50         2.19        -0.51***     (-14.57)

p_indep                      0.37         0.07         0.36         0.07        -0.01***      (-6.60)

total_CEO_Chairman           0.00         0.07         0.01         0.09         0.00*         (2.34)

total_CEO_tenure             0.01         0.20         0.02         0.23         0.01          (1.70)


Observations                12970                      6167                     19137


This table reports the means and standard deviations of the variables used in this study for the subsamples of firms with and without female directors as well as the subsamples of firms with and without dividends.


(1)                       (2)                       (3)

mean           sd         mean           sd            b               t


div_NI                       0.39         0.23         0.00         0.00        -0.39***    (-198.84)

div_TA                       0.03         0.03         0.00         0.00        -0.03***    (-109.81)

div_yield1                   0.01         0.01         0.01         0.01        -0.01**       (-3.49)

p_female                     0.12         0.11         0.12         0.11        -0.00         (-0.55)

p_w_indep                    0.05         0.07         0.05         0.07        -0.00         (-0.87)

p_w_ins                      0.06         0.08         0.06         0.08        -0.00         (-0.43)

p_m_indep                    0.32         0.09         0.30         0.09        -0.01***      (-8.15)

firmsz                      21.65         1.13        20.97         1.12        -0.68***     (-37.56)

leverage                     0.13         0.13         0.22         0.40         0.08***      (12.26)

PPE_TA                       0.17         0.17         0.18         0.17         0.02***       (5.88)

cash_res                     0.32         0.57     26266.64   2240151.85     26266.33          (0.89)

RE_TA                        0.14         0.10        -2.44       127.20        -2.58         (-1.54)

tobin                        2.94         2.25        11.16       542.48         8.23          (1.14)

ROA_C                        0.08         0.09         0.04         0.11        -0.04***     (-24.65)

vol                          0.03         0.09         0.11         2.35         0.08*         (2.42)

total_dir                    9.95         2.40         9.62         2.37        -0.33***      (-8.78)

p_indep                      0.37         0.07         0.35         0.07        -0.01***     (-11.07)

total_CEO_Chairman           0.00         0.07         0.01         0.08         0.00          (1.06)

total_CEO_tenure             0.01         0.21         0.02         0.23         0.00          (1.03)


Observations                13372                      5765                     19137


5.            RESULTS

Table X contains the results for the regressions explaining the dividend payout, as measured by dividends over net income. We start the analysis by regressing the dividend payout on the fraction of female directors, as well as industry and year dummies (regression (1)). In addition to the former variables, regressions (2) to (6) include various control variables. Regression (2) includes the firm characteristics as control variables. In addition to these, regression (3) includes the corporate governance variables (board size, the fraction of independent directors, the CEO Chairman indicator variable, CEO tenure, and the E index). Regression (6) also includes CEO ownership. Regressions (4) and (5) include the same control variables as regression (3), but use different measures for female representation on the board of directors. More specifically, regression (4) uses the weighted fraction of female directors with the weights being the tenure of each female director relative to the total board tenure, whereas regression (5) distinguishes between the fraction of female


(1)                  (2)                  (3)

div_NI               div_NI               div_NI


p_female_lag          -0.0444*    (-2.50)   0.0558*     (2.57)   0.0410      (1.74)

firmsz                                      0.0356***  (15.89)   0.0288***  (10.51)

leverage                                    -0.242*** (-13.39)   -0.262*** (-11.48)

PPE_TA                                      0.0366*     (2.37)   0.0367*     (2.10)

cash_res                                    0.0220***   (5.19)   0.0676***   (6.90)

RE_TA                                       0.0167***   (5.68)  0.00751      (1.72)

tobin                                      0.00280***   (5.48) -0.00142     (-1.11)

ROA_C                                        0.134***   (3.99)    0.123**    (2.74)

vol                                       -0.00156     (-1.04)   -0.123***  (-5.74)

boardsize_l                                                     0.00141      (1.25)

p_indep_lag                                                     -0.0383     (-0.98)

CEO_Chairman_lag                                                -0.0691     (-1.68)

CEO_tenure_lag                                                   0.0301      (1.89)

Constant                0.273***  (31.17)   -0.481***  (-9.96)   -0.343***  (-5.80)


Observations            17637                10798                 8466


t statistics in parentheses

* p<0.05, ** p<0.01, *** p<0.001

APPENDIX A – Definition of variables

Variable Definitions Source
Dividend payout measures
Dividend/NI Dividend paid over net profit
Dividend/TA Dividends over total assets
Dividend yield Dividends per share to the fiscal year-end stock price
Measure of board gender diversity
Fraction of female dirs. The number of female directors on the board divided by board size
Fraction of female indep. dirs. The number of female independent directors divided by board size
Fraction of male indep. dirs. The number of male independent directors divided by board size
Fraction of female insider dirs. The number of female insider directors divided by board size
The weighted fraction of female directors with the weights being the tenure of each female director relative to the total board tenure
Control variables
Firm size Natural logarithm of total asset
Profitability ROA, return on asset as computed with operating profit, adding depreciation of fixed assets and amortization of intangible assets, then being divided by total assets
Tobin Q The ratio of book value of assets minus book value of equity plus market value of equity to the book value of assets
Return volatility the standard deviation of the return on assets over five-year overlapping periods
Leverage The ratio of total debt (short- and long-term debt) to total assets
Cash/net assets Cash and marketable securities divided by net assets (total assets minus cash and marketable securities)
PPE/TA The ratio of net property, plant and equipment to total assets
TE/TA The ratio of its earned equity (retained earnings), both relative to total common equity
Board size The number of directors on the board
Fraction of indep. dirs The number of independent directors divided by board size
CEO Chairman as a dummy variable which takes the value of one if the CEO is the chairman of the board, and zero otherwise
CEO tenure number of years the CEO has been in position

APPENDIX B – Correlation Matrix

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