Gender Diversity and Firm Performances Suffering From Financial Distress: Evidence
From Indonesia
Kevin Surijanto Putra/215020200111047
1. What is the influence of Gender diversity on the board of commissioners to financial
distress?
Firstly, the board of commissioners has a purpose of being the people who supervise
corporate governance, particularly whether operational executives follow the companies’
policies or not. Research says that the more diverse commissioners there are, the less chance
of financial distress happening.
Morris et al. (2005) stated that decision making is heavily related to gender diversity
in a company since men and women have different personalities and skills in making
decisions. When both genders are combined, they can complement each others’ weaknesses,
hence improving the performance of the company itself. In this case, women can better
communicate with others resulting in better ideas whereas men are better when the situation
forces them to make quick decisions. The sad news is that in Indonesia, only 13% of 467
companies researched have gender diversity in their board of commissioners.
2. What is the influence of Gender diversity on the board of directors to financial distress?
Directors in a company serve as the management team who will create and implement
the vision, mission, and strategy and report the outcomes to stakeholders. According to the
research data, gender diversity on the board of directors does not have a significant effect on
financial distress, which does not support the initial hypothesis. The amount of companies
who have gender diversity in board of directors is only 7% of 467 companies in Indonesia.
3. What is the influence of Gender diversity on board of audit committees to financial
distress?
Audit committees supervise, audit, and evaluate the firm’s overall performance
throughout the year. All companies must at least perform an audit once in a year to avoid
getting exempt. According to the research data, from the 5% of 467 companies researched
regarding gender diversity in board of audit committees, there is no significant difference
where gender diversity affects financial distress. Like directors, the author's hypothesis is
again not supported by the outcome data.
In conclusion, this research found that only gender diversity in board of
commissioners has a significant effect on financial distress.
4. What is the meaning of financial distress in this research?
Based on the Corporate Finance Institution, financial distress is a situation where a
company’s financial condition has a hard time paying their bills, especially debts, which if it
keeps on going, it can lead to bankruptcy. Thakor (2014) opined that financial distress of
companies can be categorized into four characteristics which are; decline in performance,
failure, insolvency, and default. In conclusion, financial distress is when a company cannot
finance its operations due to a decrease in company’s performance.
5. What is the measurement of financial distress?
Financial distress, serving as the dependent variable in this research’s hypothesis
testing using Z-score analysis, refers to a condition of the firm suffering less health/suffering
from financial distress with Z < 2.99 for the manufacturing industry and Z < 2.6 for the
non-manufacturing industry. If any company has higher value from the threshold above, it
indicates that the company does not suffer from financial distress.
6. What is the impact of this research on theory and practice?
This research impacts the future creation of management boards for companies not
only in Indonesia, but throughout the world. There is real evidence that when the board of
commissioners are mixed with both men and women, financial distress will decrease. In my
opinion, gender diversity matters in companies not only to decrease financial distress, but
also to improve the company’s culture and social structure because women also play
important roles in society, not only men. However, a research about the current reality
executed by New York University shows that men are seen to be “more superior” than
women in terms of doing jobs and having different ways to work from them. This situation
has gotten better throughout the year especially if you compare 2023 and the early 2000s, but
I believe people can be better in including women in unimportant and important situations,
just like how men are treated, so we all can play a fair role in society. Hence, I suggest that
more or if not all companies include more gender diversity in all their management boards to
better companies’ performance.