Governance Diversity, Macroeconomic Conditions, and Firm Value: A Panel Analysis of Malaysian Firms

Abstract

This study investigates the impact of board gender diversity on firm financial performance in Malaysian financial institutions, with a focus on the distinct roles of female directors and female commissioners across banking and non-banking sectors. Grounded in agency theory, resource dependence theory, and contingency theory, the study examines how governance diversity interacts with firm-specific and macroeconomic conditions to influence return on equity. A quantitative panel data approach is employed using data from 2000 to 2024, and a random effects regression model is applied to capture cross-sectional and temporal variations while controlling for unobserved heterogeneity. The model incorporates governance variables, firm-level controls such as asset growth and leverage, and macroeconomic indicators including gross domestic product and interest rates, along with interaction effects. The empirical findings reveal that female commissioners have a positive and statistically significant impact on firm performance, particularly in the banking sector, highlighting their critical role in strengthening monitoring and governance quality. Female directors also demonstrate a positive and significant effect in banking institutions, indicating that gender diversity in executive roles enhances decision-making and operational efficiency in highly regulated environments. In contrast, the effects of gender diversity in the non-banking sector are largely insignificant, suggesting that female representation may be more symbolic in less regulated contexts. Male directors exhibit a consistent positive influence, especially in non-banking firms. Among control variables, asset growth positively affects performance, while leverage exerts a negative effect. Interest rates show contrasting sectoral effects, enhancing banking profitability but reducing performance in non-financial firms, whereas gross domestic product remains insignificant.