Board Diversity: Impact on Company Performance in Stock Market Returns and ROA

Last name 1
Board Diversity
Student’s name:
Course title:
Date:

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Introduction
The following study aims to determine whether female participation in company boards is
perceived to be valuable. The measures of company profitability chosen for the investigation are
return on asset (ROA) and annual company stock market return. Companies were chosen from
the top 500 companies listed on the ASX as at the end of the financial year 2018. The companies
identified were 100 companies in 3 industry sectors (Consumer Staples, Energy and Health
Care). The board of directors with women representation is referred to as a gender-diversity
board. Oppositely, the board of directors with no women representation is referred to as a non-
gender diversity board.
Statistical Analyses
1. Is the representation of female directors on the board dependent on the type of industry
sectors?
To answer this question a chi-square test was chosen. The chi-square test is the most appropriate
since it determines the relationship between two categorical variables1. The categorical variables,
in this case, are board diversity by gender and industry. Consequently, the data of these two
categories are qualitative in nature.
The developed hypothesis is:
H0: There is no difference between gender board diversity and industry
H1: There is a difference between gender-based board diversity and industry
Table 1: Observed
1 Test, Omnibus. "Your chi-square test is statistically significant±now what." Pract Assess Res Eval 20, no. 8
(2015): 2-10.

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Observe
d 1 2 3 Total
Yes 33 31 30 94
No 67 69 70 206
Total 100 100 100 300
Table 2: Expected
Expecte
d 1 2 3 Total
Yes 31 31 31 94
No 69 69 69 206
Total 100 100 100 300
Chi-square = =(((33-31)^2)/31)+(((31-31)^2)/31)+(((30-31)^2)/31)+(((67-69)^2)/69)+(((69-
69)^2)/69)+(((70-69)^2)/69) = 0.233754
Critical Chi-square = χ2 (0.05,2) = 5.991465
Since 0.23 < 5.99, there is sufficient evidence to infer that board representation based on gender
is not dependent on industry sectors.
2. Is there any difference in stock market returns among the 3 industry sectors, that is, Consumer
Staples, Energy and Health Care?
To answer this question, an ANOVA test was chosen. ANOVA was the most appropriate since it
determines whether there are any statistically significant differences between two or more
unrelated groups’ means2.
The three groups chosen, consumer staples, energy, and healthcare were independent and
normally distributed as seen in the figures below.
2 Cuevas, Antonio, Manuel Febrero, and Ricardo Fraiman. "An anova test for functional data." Computational
statistics & data analysis 47, no. 1 (2004): 111-122.