THE ROLE OF WOMEN ON BOARD AND FINANCIAL PERFORMANCE IN INDONESIA.
TI{E ROLE OF WOMEN ON BOARD ANI)
FINANCIAL PEIIJORMANCE IN INDONESIA
TIIESIS DRAFT
Sabnilled
I!
P.niat Fulftttnetrt of tn. Requircn.trr For
UnderZndrate Dc3rce itr EconoEis
IKA NT]RUL SUKMA
BP. 05 153 034
ACCOUNTTNC DEPARTMENT
IACULTY OI' ECONOM]CS
AND,AIAS UNTVERSITA
TH L
ROLI OT WOMIN ON BOARD AND FINANCIAL PEMORM.{NCE
IN INI'ONESLA
AISTRACT
Fis
snrdy
€min6
th€
pBsce aid rols of wonen on hodd in Indonsis
Public Listed cohpeies in th€ €oDr.xt ot fr@cial
Mth their
lmid
od omufeluing
idusEies. €Lted
p€domdce. Furlh.r. this study olso hlestigate atDut doE won@ on
bodd conpding with les wooo on boed, in ordq ro idertined the betlor one, noE
wonen or less wom@. The
mple
@sh1s of all co6panis
neuf@tuins sclor indusiriq ovd the tdiod 20eL2008, whlch
i! fimciql ed
il su
227 conpani6
witir ll55 obeflarios. IlE Fsull of this stndy wilh Nine R€tm on Equity (ROE)
Rerd
on Sals (ROS)
innuence
to*dd
6
the
rerb@ce nruEmenl is
woD@ ob board bot! in
no posilive
fimcial ed neufacding
ed
ad signin@l
se.tor induni6.
Fbm drat €dpilioal Fsul! c& be conclu.led that in hdonesia tlte ole ol wonen is mt
incr€ding the @mpey s perfomee signific dy. Bu! if conpding bet{en
dd IMufactuin!.
@nicxl of their
fmial
mnm\
have a
bd€r
6ult thd mduf&tuing s{lor indElris i!
ole. Ald if @mpN moE
fiMcial ed ndulactunng selor, noe wmen
Kewords: Corlorate
Aovm.
tnecial
mn
have belle!
th€
with less vohen on boad jn
€nlincal
8dl
mle of won€n on bod4 nm perlome@
lno
less
ore.
CIIAPTf,R I
INTRODIJCTION
rle Asid linecial crisis in 1997 h6 highlklted
corporare
govemd€ mong souti
East
Asie cotpomtioru.
mljor indiaror that orponle Sovem.ne pmcli€s
imprcvmflt.
sn
gowance Efom
one
4d
Asia ned
oflhe nosl affeded ountries, Indonesia hd
at the mrin point of rhe
r6onable, tin@ the oipoFtions
syslem
i. Ed
conprniB how io besr imprcve lh€n corDoFte goremsce
pEcties (Novlu4 2007). As
be
Tnis crisis b€.oD6 a
One ol rhc inproveme.ts is lo i.troduce mrpoFte govern ce
codes, directing
coipomre
the problems of
e
ndioMl
Tlis niehl
subslantial part of lhe emnonic
the implementdion of b€s1 eovcndce
si8nilienl impaol
agenda.
pncriB
mieht hare
fronomy (Lukvimd. 2005).
on the
One ofthe mlin points in sund govemdce is agency rh@ry. ln
dd Peme
(1939)
rcrch
state rhaq lne
direrent thorclical peEpetives,
qnomi6 Md vdious @dch
o.l]
ud
Z:nn
rcle of boards h6 been suided by rour
agency
thNry bemme lhe non cruoial in
Elared wirh bdrds. This thory also b€code the
p€Bp€ctive that @ve6 the shregic mle of b@ds! which Lhe tunorion
boaris
ft
a
monitding,
snhlling,
coaodtion
b c$cnal envioment
200n ad
@nttullina
govemsce
(lukvimd.
providing infomatio(
(Monks
sd
Minos,2004
dd
sd
linking
tne
Carter et al..
bonc a fom ol one bcneficirl ncclnism
2005).
of
of
eud
play
As mention above, rgmcy 6edry
to ftsolve
imp.rtont rolc on board, rhal is
pbblds bdwM maageB ad sheholdeu
and replacing
ndageB
thar do nol
oane
by scning coftpensdrion
value for rhe sh@holde6.
board that link wirh rhat theory suggens thar more diveBe
monito!
i
od antolling de mdaeets since boad
€pendence
(Cde.
er
bdd h
(2007) &8ue that
numbe6:
(l)
dcur
ct al..
lin
cial pdfomuce.
febale di@to* b€ in tne low
CoDpanies do not rnow wheE
lo look for qualined lemole
ClOs
(3) cEos
m
foud
l*
rhc
appoinling
*ome. who
concemed thar wonen
m
will havc a
not
cuffitly
boed
\!oncn\ asddai
' (4)
ronen de unqurlificd. (PereM. hd Philpoi p.I78.2006).
Since rhoe facts,
boadr@n. The disptity
e nm)
stndy about the
b.Me. wond dd
mmgenent positions still prompb debat
agajnst femlle
od
presence
sd
distdce ol wono in
men Egardin8 pEvalence in top
study
naageB &d pbfessionals
incrsing authority sd Esponsibility.
ptrity is tben
F
Iwns rhy
CEOS beliele rbrt
bi6
clee prenidio.
m agcncy stlndp.int bodd diversity would imp@ve or
6dchd
cmdidatesi (2)
ncobosi
a
lha!
velue. Cobtrdy wilh
imp.ir $und govemsce and ale colpoBte
Seveal
boed
,l-. 2007), but il linked wi6 fim perfomdce. fleoalin
divdiiy in fim
ton
ol
a b€ner
irc6e
diveBity
Md weisbsh (2000) slate dur agency rhsry does not povi'le
of the nle of board
Divcniiy
Pernaps, key
$
6
lo extent of syslemaiic
they eek positions of
lo fm!1e advoement
ud
i.volvement mong bodd of diEclo6. As in Burkc
(1991) studi6, male CEOS @ognize rhat then female
positivemnllibulions(P€teMnudPhilpot,2006).
dieioN
mo&e unique
od
CHAI{ER V
CONCLUSION
Tle pieedins chafler ns prese.l tbe €npincd
pbvides anclsions
dEM non tne 6ndi4s md discusiom
by
lEvious chapterj followe{i
this studt &d possible
resutls md rhis chapter
tutw
6s6Menl ol
directions lor
the potenrial
pnsented
i!
the
linilarios pi€ent in
reFNh.
Tbe objeclive of &is study is lo sct eopincd Eslni rhar shows wherhd
wohen on board have
dd
lhen lo
a
role in the conpany, which seen by its anmcial
&swc the hylolnesis
about the prcposilion
F.fommce,
of voden on botr( in
najoriry or ninonry b*ard nm !€domdce, tnal nesur€d by ROE ed ROS.
This Esedch invdtisats hypotheses sratB tbal rhere
innuenccs
ol lhe bodd
perfomdce ol Indonsim
L
m
insignjfic t
chect€dstic vdiables tow&ds bdting
kldic
banls which cov€u five
y€s
fD
cial
datz. ihe results
TheE is no signitcet i.Jtren€ beNeen women on bodd iowdd nnmcial
perfoMce ne$uFd by ROE md ROS in lDmciat dd lrnufacluins
seclo. indusrriG. Bui
in omparins fimcial ad neulactunlg s*ror,
nmcia.l h$ better mle ol woneD inside thm DeDtacturins onc in iDcrse
REIERENCES
Adds, R. 8., & Fd€in" D.
Worldng Paper Se/ies in
Ades,
\
R. B., &
Feftir,,
Covel@ce
li.,,.ri.s
ed
(2004). Gend€! Diveuity in the Boardroon. tC6./
No. 57D044. Enor@ Colpo6le covelrm@
Fiwe
dd Then Inp@lon
the Jot.nal af Financial
D. (2008). Womm in the Boddr@n
Per'o'll.dlm. Fo hconihg
i
Ocbher 200R.
M. Aksi! M.. & C€tin, A. T. (2010). rnlad ol Board Divdity oi Boardt
Monitoring dd Fim Perfo@cq Evidence fion the Islalbul Stock Excnsse.
SSIIM t'orii,a Papq Series, El@Eonio @py avoilade al:
Atuar,
1!!d$!!l9trlalsrlnc
,
Do*rl@ded st May 2,2010.
Asim Derelopm€nt Bdl (ADB) (2000) Coryodl€ Govm€ ed Fibmc in Edt
Aia; A Siudy of Indon6ia, Republic of Kore4 Malaysir, Philippin€s. ed
't\aile\d. Caaolittdte.l Aepan (/ol 7). Tne As1& Developn€n1 Ban!, MdilL
Baen.! Sejai and Bollon, Bdo. (2006). Corromte Govemce md
Perf@e*, UnieBily
B€ll, L., A. (2005).
DieNion
Bhasha! S.,
of Coloado al Boulder
Vonm-lid Fids ed
Paper No. 1689.
Fin
Jdt
2005.
the CeDdd Gap in Top Exsutire Jobs.
C€ney.
& B.
Bl@k 0999). The UDcertain R€bnons[ip bctw@n Botrd
Conposition ed Fim Pedomc.. lsws in Business I^.yeL 51, 92\-963,
Bhadat, S.. & B. Black (2001). The No.{,relation b€r{d Bmrd bdepen.ien@
ed Lone Tm Fi@ Pertomce. Issuet ik JoLd.l of Cotpotuno" LN, 27,
23t:274,
Bursess, Z
few.
Jo"ml
t.
(2002). women Bo&d DiEcloB: Chamtensdcs oflle
of B4iness Ethics J7: J9-19, ?0r?. Kluwr Acadmic Pnblishd.
& Thamol!
Buke, R., J., & vimjconbe, S. (2008). wonen on Corpodte Board. of Di@!o6:
lnlemationai ll;ffi od Opportuitib. N.w Huizo$ in Ma@senent.
Publish€d by Edwed Els& Pubtishing Linitd. USA.
FINANCIAL PEIIJORMANCE IN INDONESIA
TIIESIS DRAFT
Sabnilled
I!
P.niat Fulftttnetrt of tn. Requircn.trr For
UnderZndrate Dc3rce itr EconoEis
IKA NT]RUL SUKMA
BP. 05 153 034
ACCOUNTTNC DEPARTMENT
IACULTY OI' ECONOM]CS
AND,AIAS UNTVERSITA
TH L
ROLI OT WOMIN ON BOARD AND FINANCIAL PEMORM.{NCE
IN INI'ONESLA
AISTRACT
Fis
snrdy
€min6
th€
pBsce aid rols of wonen on hodd in Indonsis
Public Listed cohpeies in th€ €oDr.xt ot fr@cial
Mth their
lmid
od omufeluing
idusEies. €Lted
p€domdce. Furlh.r. this study olso hlestigate atDut doE won@ on
bodd conpding with les wooo on boed, in ordq ro idertined the betlor one, noE
wonen or less wom@. The
mple
@sh1s of all co6panis
neuf@tuins sclor indusiriq ovd the tdiod 20eL2008, whlch
i! fimciql ed
il su
227 conpani6
witir ll55 obeflarios. IlE Fsull of this stndy wilh Nine R€tm on Equity (ROE)
Rerd
on Sals (ROS)
innuence
to*dd
6
the
rerb@ce nruEmenl is
woD@ ob board bot! in
no posilive
fimcial ed neufacding
ed
ad signin@l
se.tor induni6.
Fbm drat €dpilioal Fsul! c& be conclu.led that in hdonesia tlte ole ol wonen is mt
incr€ding the @mpey s perfomee signific dy. Bu! if conpding bet{en
dd IMufactuin!.
@nicxl of their
fmial
mnm\
have a
bd€r
6ult thd mduf&tuing s{lor indElris i!
ole. Ald if @mpN moE
fiMcial ed ndulactunng selor, noe wmen
Kewords: Corlorate
Aovm.
tnecial
mn
have belle!
th€
with less vohen on boad jn
€nlincal
8dl
mle of won€n on bod4 nm perlome@
lno
less
ore.
CIIAPTf,R I
INTRODIJCTION
rle Asid linecial crisis in 1997 h6 highlklted
corporare
govemd€ mong souti
East
Asie cotpomtioru.
mljor indiaror that orponle Sovem.ne pmcli€s
imprcvmflt.
sn
gowance Efom
one
4d
Asia ned
oflhe nosl affeded ountries, Indonesia hd
at the mrin point of rhe
r6onable, tin@ the oipoFtions
syslem
i. Ed
conprniB how io besr imprcve lh€n corDoFte goremsce
pEcties (Novlu4 2007). As
be
Tnis crisis b€.oD6 a
One ol rhc inproveme.ts is lo i.troduce mrpoFte govern ce
codes, directing
coipomre
the problems of
e
ndioMl
Tlis niehl
subslantial part of lhe emnonic
the implementdion of b€s1 eovcndce
si8nilienl impaol
agenda.
pncriB
mieht hare
fronomy (Lukvimd. 2005).
on the
One ofthe mlin points in sund govemdce is agency rh@ry. ln
dd Peme
(1939)
rcrch
state rhaq lne
direrent thorclical peEpetives,
qnomi6 Md vdious @dch
o.l]
ud
Z:nn
rcle of boards h6 been suided by rour
agency
thNry bemme lhe non cruoial in
Elared wirh bdrds. This thory also b€code the
p€Bp€ctive that @ve6 the shregic mle of b@ds! which Lhe tunorion
boaris
ft
a
monitding,
snhlling,
coaodtion
b c$cnal envioment
200n ad
@nttullina
govemsce
(lukvimd.
providing infomatio(
(Monks
sd
Minos,2004
dd
sd
linking
tne
Carter et al..
bonc a fom ol one bcneficirl ncclnism
2005).
of
of
eud
play
As mention above, rgmcy 6edry
to ftsolve
imp.rtont rolc on board, rhal is
pbblds bdwM maageB ad sheholdeu
and replacing
ndageB
thar do nol
oane
by scning coftpensdrion
value for rhe sh@holde6.
board that link wirh rhat theory suggens thar more diveBe
monito!
i
od antolling de mdaeets since boad
€pendence
(Cde.
er
bdd h
(2007) &8ue that
numbe6:
(l)
dcur
ct al..
lin
cial pdfomuce.
febale di@to* b€ in tne low
CoDpanies do not rnow wheE
lo look for qualined lemole
ClOs
(3) cEos
m
foud
l*
rhc
appoinling
*ome. who
concemed thar wonen
m
will havc a
not
cuffitly
boed
\!oncn\ asddai
' (4)
ronen de unqurlificd. (PereM. hd Philpoi p.I78.2006).
Since rhoe facts,
boadr@n. The disptity
e nm)
stndy about the
b.Me. wond dd
mmgenent positions still prompb debat
agajnst femlle
od
presence
sd
distdce ol wono in
men Egardin8 pEvalence in top
study
naageB &d pbfessionals
incrsing authority sd Esponsibility.
ptrity is tben
F
Iwns rhy
CEOS beliele rbrt
bi6
clee prenidio.
m agcncy stlndp.int bodd diversity would imp@ve or
6dchd
cmdidatesi (2)
ncobosi
a
lha!
velue. Cobtrdy wilh
imp.ir $und govemsce and ale colpoBte
Seveal
boed
,l-. 2007), but il linked wi6 fim perfomdce. fleoalin
divdiiy in fim
ton
ol
a b€ner
irc6e
diveBity
Md weisbsh (2000) slate dur agency rhsry does not povi'le
of the nle of board
Divcniiy
Pernaps, key
$
6
lo extent of syslemaiic
they eek positions of
lo fm!1e advoement
ud
i.volvement mong bodd of diEclo6. As in Burkc
(1991) studi6, male CEOS @ognize rhat then female
positivemnllibulions(P€teMnudPhilpot,2006).
dieioN
mo&e unique
od
CHAI{ER V
CONCLUSION
Tle pieedins chafler ns prese.l tbe €npincd
pbvides anclsions
dEM non tne 6ndi4s md discusiom
by
lEvious chapterj followe{i
this studt &d possible
resutls md rhis chapter
tutw
6s6Menl ol
directions lor
the potenrial
pnsented
i!
the
linilarios pi€ent in
reFNh.
Tbe objeclive of &is study is lo sct eopincd Eslni rhar shows wherhd
wohen on board have
dd
lhen lo
a
role in the conpany, which seen by its anmcial
&swc the hylolnesis
about the prcposilion
F.fommce,
of voden on botr( in
najoriry or ninonry b*ard nm !€domdce, tnal nesur€d by ROE ed ROS.
This Esedch invdtisats hypotheses sratB tbal rhere
innuenccs
ol lhe bodd
perfomdce ol Indonsim
L
m
insignjfic t
chect€dstic vdiables tow&ds bdting
kldic
banls which cov€u five
y€s
fD
cial
datz. ihe results
TheE is no signitcet i.Jtren€ beNeen women on bodd iowdd nnmcial
perfoMce ne$uFd by ROE md ROS in lDmciat dd lrnufacluins
seclo. indusrriG. Bui
in omparins fimcial ad neulactunlg s*ror,
nmcia.l h$ better mle ol woneD inside thm DeDtacturins onc in iDcrse
REIERENCES
Adds, R. 8., & Fd€in" D.
Worldng Paper Se/ies in
Ades,
\
R. B., &
Feftir,,
Covel@ce
li.,,.ri.s
ed
(2004). Gend€! Diveuity in the Boardroon. tC6./
No. 57D044. Enor@ Colpo6le covelrm@
Fiwe
dd Then Inp@lon
the Jot.nal af Financial
D. (2008). Womm in the Boddr@n
Per'o'll.dlm. Fo hconihg
i
Ocbher 200R.
M. Aksi! M.. & C€tin, A. T. (2010). rnlad ol Board Divdity oi Boardt
Monitoring dd Fim Perfo@cq Evidence fion the Islalbul Stock Excnsse.
SSIIM t'orii,a Papq Series, El@Eonio @py avoilade al:
Atuar,
1!!d$!!l9trlalsrlnc
,
Do*rl@ded st May 2,2010.
Asim Derelopm€nt Bdl (ADB) (2000) Coryodl€ Govm€ ed Fibmc in Edt
Aia; A Siudy of Indon6ia, Republic of Kore4 Malaysir, Philippin€s. ed
't\aile\d. Caaolittdte.l Aepan (/ol 7). Tne As1& Developn€n1 Ban!, MdilL
Baen.! Sejai and Bollon, Bdo. (2006). Corromte Govemce md
Perf@e*, UnieBily
B€ll, L., A. (2005).
DieNion
Bhasha! S.,
of Coloado al Boulder
Vonm-lid Fids ed
Paper No. 1689.
Fin
Jdt
2005.
the CeDdd Gap in Top Exsutire Jobs.
C€ney.
& B.
Bl@k 0999). The UDcertain R€bnons[ip bctw@n Botrd
Conposition ed Fim Pedomc.. lsws in Business I^.yeL 51, 92\-963,
Bhadat, S.. & B. Black (2001). The No.{,relation b€r{d Bmrd bdepen.ien@
ed Lone Tm Fi@ Pertomce. Issuet ik JoLd.l of Cotpotuno" LN, 27,
23t:274,
Bursess, Z
few.
Jo"ml
t.
(2002). women Bo&d DiEcloB: Chamtensdcs oflle
of B4iness Ethics J7: J9-19, ?0r?. Kluwr Acadmic Pnblishd.
& Thamol!
Buke, R., J., & vimjconbe, S. (2008). wonen on Corpodte Board. of Di@!o6:
lnlemationai ll;ffi od Opportuitib. N.w Huizo$ in Ma@senent.
Publish€d by Edwed Els& Pubtishing Linitd. USA.