Table of Contents

1.0 Background. 4

2.0 Literature Review.. 8

2.1 Effect of Board Gender Diversity on Corporate Performance. 9

2.2 Board Gender Diversity and Firm Profitability. 14

2.3 Board Gender Diversity and Firm Value. 14

2.4 Summary. 15

3. 0 Methodology. 16

3.1 Population and Sample. 16

3.2 Variables. 16

3.3 Independent Variables. 17

3.4 Research Model 19

4.0 Results and Analysis. 19

4.1 Results. 20

4.2 Analysis. 24

4.3 Discussion. 26

5.0 Conclusion and Recommendation. 27

References. 29

Appendix. 34

List of Tables

Table 1: Correlation Analysis. 20

Table 2: Regression Analysis. 21

Table 3: Analysis of Variances (ANOVA). 21

Table 4: Coefficients, Standard Error, t-statistic, P-Value. 22

Table 5: ANOVA Single Factor 23

Table 6: Source of Variation (ANOVA Single Factor) 23

Table 7: Correlation of Ratio of Women Directors to ROA and ROE.. 24


Effect of Board Diversity on Corporate Performance

1.0 Background

The board of directors plays an essential role in overseeing the governance of the corporation and observing the overall performance of an organization (Fidanoski, Simeonovski, & Mateska, 2014, pp. 81-123). There is a need for the board to ensure the corporation realizes prosperity by influencing the management of the company’s affairs. It is the role of the board to work toward ensuring that the company meets the interests of its stakeholders and shareholders. For the board to realize prosperity and meet the expectation of stakeholders and shareholders, the board needs to make the most suitable decisions. An important factor that can influence the effective decision-making process related to ensuring diversity by including members from different races, languages, ethnicity, age, gender, sexual orientation, physical and mental ability, religion, physical and psychological ability, weight, and appearance, and work and family status. Creating and ensuring diversity in the board is essential in realizing better decision-making that can influence the performance of the business. Additionally, creating and maintaining a diverse board is necessary in deliberations to the boardroom to identify and address different forces in the business world (Fidanoski et al., 2014, pp. 81-123).

Diversity can real difference among persons in gender, ethnicity, language, age, race, sexual orientation, mental and physical ability, religion, work is a and family status that influence their relationships and interactions (Fidanoski et al., 2014, pp. 81-123). Another definition of board diversity focuses on the percentage of minorities or women on a corporation’s board of directors and the value of a firm, as measured by Tobin’s q. Thus, board diversity refers to the proportion of people of color and women on a corporate board. Still, the difference also concerns other personalities such as age, ethnicity, and mental and physical ability (Fidanoski et al., 2014, pp. 81-123). There is increased attention on diversity on boards among authors and researchers to investigate whether diversity influences the company’s performance — increased awareness in board diversity the need to measure the effect of diversity and governance in a company. According to Fidanoski et al. (2014), proper corporate governance requires diversity management and optimal board composition (Fidanoski, F., Simeonovski, K. and Mateska, V., 2014).

The board of directors in any corporation influence a control mechanism required for the company’s processes relating to supervision, appointment, and remuneration (Rajula, 2016). Composition of the board composition can influence firm financial performance through the decision making and implementation of different strategies and policies that can improve the growth and development of a business. However, in some organizations, the boards constituted usually involve persons from one gender, particularly the male. As a result, males make appointments influenced by closed networks controlled by male directors who employ their preferred members to board. The nominations prove disadvantageous to many women seeking opportunities to serve on corporate boards (Rajula, 2016).

The board of directors holds important responsibility for directing and leading a company to realize success in a competitive business environment. The board also helps to protect the interests of the shareholders in the organization (Kılıç & Kuzey, 2016, pp.434-455). The board performs different functions that include deciding the suitability of the corporation’s strategies, controlling and monitoring managers. Other notable roles that the board plays include supervising, appointing, and compensating the senior management team. It is the role of the board to connect the company to the external environment and to correct and to offer relevant information to managers to facilitate effective decision-making processes. Gender diversity is an issue attracting increased attention from different parties that include corporations, governments, the public, and academicians. Board’s gender diversity is a high public profile issue because of increased shareholder proposals and reports in the press by advocacy groups, and policy statements from different corporate investors. Additionally, the increased attention for the issues relating to a board’s gender diversity relates to several corporate scandals involving corporations such as Parmalat, WorldCom, Enron, and Tyco. Additionally, researchers and scholars in the 21st century continue to focus on investigating the effect of gender diversity on corporate financial and value performance (Kılıç & Kuzey, 2016, pp.434-455).

There are a few women directors in most organizations across the world, leading to some countries to develop the gender quota regulation to influence the appointment of women directors to serve in the board of directors (Reddy, & Jadhav, 2019, p.1). Lack of women directors influences researchers to investigate the effects of board gender diversity on business performance. It is essential to have a well-constituted board of directors to ensure that the affairs of all the management team of the company take into consideration the needs of different groups of people. A male-dominated committee of directors may help to reinforce group boundaries and eliminate women from the directorship, leading to adverse effects that can influence the performance of a business. There is an increased awareness of gender bias among women directors. The leading cause of gender bias when constituting an aboard of directors relates to attitudes of the male board members. The findings from a study by Burke (1997) that involved 278 respondents, women directors in Canadian boards, showed that under-representation relates to attitudes of Board Chairmen and male CEOs. Male CEOs consider women as less qualified to serve in a board of directors. The CEO avoid appointing new and untried women because of the fear that women might introduce women’s agenda in the organization (Reddy, & Jadhav, 2019, p.2).

It is important to have gender diversity in the board of directors to ensure that the organization realizes corporate goals (Akca & Çalışkan, 2019, p.2). Men board members mainly focus on improving financial performance. The main focus of women board members relates to humane and social performance. Woman members can help to influence corporate social responsibility and influence organizational financial performance. Organizations with woman board members are more social, charitable, artistic, communal, and cultural. By creating and maintaining diversification in the structure of the board of directors, it is possible to make suitable decisions that can positively influence the corporate performance of the organization (Akca & Çalışkan, 2019, p.3). The focus of the current study is to investigate the effect of board diversity on corporate performance, A Case Study of Walmart.

1.1 Aims and Objectives

            This paper analyzes the effects of board gender diversity on corporate performance of Walmart Incorporated. The impact of board diversity on the performance of corporations is mostly unclear. While diversity broadens the board’s understanding of various issues, various scholars have established that it also increases the chances of misunderstanding within the board. One of the major characteristics of a board, it the nationality of its directors. According to Carpenter, Sanders, and Gregersen (2001, p. 498), there is an increased need for a diverse board in organizations due to the internationalization of businesses. Foreign directors are beneficial to a corporation because they introduce new ideas, experience, and expertise that help the firm to penetrate various international markets. As a consequence, nationally diverse firms are likely to excel in their operations. On the contrary, Ruigrock, Peck, & Tacheva (2007, p. 552) asserts that relations-oriented diversity leads to negative communication and adversely affects the execution of tasks through low speed in decision making, as well as increased risks of misunderstandings and conflicts.

            Studies on the effects of gender diversity on corporate performance are also mostly inconclusive. According to Carter, Simkins, and Simpson (2003, p. 49), the inclusion of women into the board of organizations results in the increased financial performance of organizations. Chakrabarty and Bass (2014, p. 382) observed that gender-based diversity helps in reducing operating costs and improving financial performance for microfinance firms. Liu, Wei, and Xie (2013, p. 179) also observed that companies with female directors are better positioned to understand the need of their female clients, and this enables them to maintain healthy relationships. On the contrary, some scholars have observed that there is no relationship between gender diversity and firm performance.

 By evaluating 14 financial statements of Walmart, from 2005 to 2018, this research aims to understand the following:

Hypothesis

            An increase in gender diversity at Walmart Inc. increases its financial performance.  

2.0 Literature Review

Several studies focus on the impact of board gender diversity on business performance (Wahid, 2019; Darmadi, 2011; Boulouta, 2013; and Zhang, 2019). The focus of this chapter is a literature review to explore previous studies related to the study topic. A literature review is essential in providing relevant information to support current research.

2.1 Effect of Board Gender Diversity on Corporate Performance

Papangkorn, Chatjuthamard, Jiraporn, and Chueykamhang (2019) conducted a study to investigate the impact of female directors on firm performance. The study focused on the economic crisis relating to the Great Recession of 2008. The main factor that influenced the researcher to conduct an investigation was the lack of conclusive evidence concerning the effect of board gender diversity on business performance. According to Papangkorn et al. (2019), firms need to seek and monitor advice during times of economic crisis. Female directors have an essential role to play by proposing new ideas and different viewpoints. The findings of the study indicated that having female directors on the board of directors significantly increased firm performance during the recession period. However, there were no similar results outside the recession period. During the recession period, an increase in female directors by one standard deviation led to an upsurge in return on assets (ROA) by about 8.41% (Papangkorn et al., 2019).

A study by Ben Slama, Ajina, and Lakhal (2019) focused on investigating the connection between board gender diversity and company performance. The authors used a dose-response function and Quantile difference-in-differences estimations. The study findings indicated that the comply-or-explain recommendation leads to the reduction of production for under-performing companies. According to the study findings, there was increased performance after the enabling date among the high-performing companies. The results also indicated that there was an increase in accounting performance in companies that had women on boards (Ben Slama et al., 2019, p.1626526).

Wallgren and Andersson (2018) conducted a study to investigate the connection between gender diversity on boards and corporate financial results. The researchers used a sample of 100 Swedish firms listed on Nasdaq Stockholm for the duration between 2013 and 2016. The researchers used a quantitative method. The data analysis involved the use of Ordinary Least Square Regression. The study findings showed that having one or more women on the board of directors led to a positive impact on financial performance. The study findings also showed that higher board gender diversity positively influenced firm performance.

The focus of the study by Boulouta (2013) was to examine whether female board directors can influence corporate social performance (CSP). The researcher conducted the study by drawing on feminist ethics literature and social role theory. The investigation involved an empirical analysis of 126 companies from the S&P500 group of corporations for five years. The findings of the study indicated that board gender diversity affects CSP. The study findings also showed that more significant gender-diverse boards apply led to a greater impact on CSP metrics. The study results revealed that the relationships between board gender diversity and CSP have substantial implications for managers, socially responsible investors, and non-governmental organizations (Boulouta, 2013, pp.185-197).

Ujunwa, Okoyeuzu, and Nwakoby (2012) conducted a study to investigate the effect of company board diversity on the business’ financial performance. The study involved 122 quoted Nigerian firms. Among the aspects of board diversity that the researcher studied comprised board gender, board nationality, and board ethnicity. The researcher used Fixed Effect Generalised Least Square Regression to examine the effect of board diversity on company performance within the duration between 1991 and 2008. The findings of the study indicated that gender diversity influences firm performance. According to the results, board, ethnicity, and board nationality were positive in forecasting company performance. According to Ujunwa et al. (2012), the study gives insights for policymakers and practitioners on the importance of creating and maintaining aboard as a tactical resource in proportion to the resource dependency theory. The politicians and practitioners should not view the board only concerning agency theory perspective.

A study by Garanina and Muravyev (2019) focused on the economic impacts of the gender confirmation of company boards. The researchers used a longitudinal dataset of almost all Russian firms with shares listed on the country’s stock market between the years 1998 and 2014. The study involved the use of alternative measures of gender diversity and multiple identification approaches. The researchers found out those firms with gender-diverse boards had better profitability and higher market values. The impacts are particularly noticeable when companies appoint women directors. The effects are stronger during the economic crisis or when companies face financial difficulties (Garanina & Muravyev, 2019).

Wahid (2019) examined the effect of board gender diversity on corporate financial misconduct. From the study, the researcher found out that companies with gender-diverse boards are associated with fewer financial reporting errors. The study finding showed that companies with gender-diverse boards engage in less fraud. The researcher used an instrumental variable approach to account for the possibly endogenous state of board demographic features. The study findings do not appear influenced by differences in quality or effort in terms of expertise and independence of male and female directors. The results also showed that higher levels of gender diversity lead to the reduced likelihood of financial misconduct in the company (Wahid, 2019).

Ionascu, Ionascu, Sacarin, and Minu (2018) investigated the connection between gender diversity on company boards’ European and business performance. The study focused on an emerging market that lags concerning both the quality of corporate governance and social cohesion indicators. The researcher used a sample involving Romanian companies with shares on the Bucharest Stock Exchange (BSE) during the period between 2012 and 2016. The study findings indicated that diversity has no significant effect on business performance. Finding from sub-sample analysis revealed that there is a connection between gender diversity on company boards and profit-firms. Ionascu et al. (2018) concluded that policies that focus on increasing board gender diversity have better financial performance. Board gender diversity is beneficial for the listed companies in economic constituents of sustainable development and balancing the social cohesion (Ionascu et al., 2018, p.1644).

Zhang (2019) sought to determine whether a firm’s gender diversity impacts its performance. The main factor that influenced the researcher to conduct an investigation is conflicting evidence shown by previous studies. The findings of some previous studies indicate that there is a positive effect of gender diversity on business performance. Other study findings also show that there is a negative effect of gender diversity on business performance. The focus of most previous work is a single country or industry.

Additionally, some previous studies have not focused on possible variations in different social contexts. As a result, Zhang (2019) focused on determining the effects of gender diversity on performance on a business. The researcher used a unique longitudinal sample involving 1,069 leading public companies, 24 industries, and 35 countries. The researcher found out that the impact of gender diversity on business performance significantly varies across industries and countries as a result of variations in institutional contexts. According to Zhang (2019), the more the countries and industries continue to accept gender diversity, the more it benefits a companies’ revenue and market valuation. The findings are essential in increasing the understanding of broader social perspectives in influencing the impacts of gender diversity.

According to Garcia-Izquierdo, Fernández-Méndez, and Arrondo-García (2018), there is underrepresentation among women on the corporation board of directors. The researchers investigated the relationship between female directors both at audit and remuneration committees and board meetings and CEO remuneration and the shareholders’ vote on managerial payment plans. The researchers used a large sample involving Spanish companies listed in the stock market between the years 2011 and 2015. The study findings showed that companies with female directors on their remuneration committee have lower levels of CEO compensation and CEO compensation growth. The authors also collected evidence showing that the effect of CEO compensation and CEO compensation growth is attributable to the female directors. Female directors serving in the remuneration committee lead to a lower number of votes regarding the director remuneration reports and other policies related to compensation. The study results showed that female directors serving on the remuneration committee influence moderation of executive compensation growth. The study findings confirmed the effect of the females in influencing the sustainable growth of listed companies. According to Garcia-Izquierdo et al. (2018), the results confirm the importance of female directors to influence the good governance practice of a company.

Siantar (2016) conducted a study to determine the impact of board gender diversity on the companies’ performance. The researcher used instrumental variables regression analysis in the study to examine the connection between board gender diversity and companies’ performance. The researcher used data from listed companies on the Borsa Istanbul between the years 2008 and 2012. The study findings female directors are positively connected to the firms’ financial performance. According to Siantar (2016), the measure of the financial performance of a company involves the use of the return on assets, the return on sales, and the return on equity.

2.2 Board Gender Diversity and Firm Profitability

Dang, Houanti, Reddy, and Simioni (2019) investigated to determine the connection between board gender diversity and the company’s profitability. The researcher used the control function (CF) method. The researchers used a sample of firms in the S&P 500 between the years 2004 and2015. The study findings indicated that the involvement of women on corporate boards led to a significant and positive effect on company profitability (Dang et al., 2019).

Shafique, Idress, and Yousaf (2014) conducted a similar study to investigate the relationship between the board’s gender diversity and the company’s performance. The focus of the research was the firms in the banking sector of Pakistan. The researchers used a sample comprising six banks for the duration of between 2008 and 2012. The findings of the study indicated that the number of women serving on board of directors has a significant influence on the company’s performance (Shafique et al., 2014, pp.296-307).

2.3 Board Gender Diversity and Firm Value

A study by Vo and Bui (2017) focused on investigating the effect of board gender diversity on a company’s performance. The researchers used a sample of 880 listed companies from 10 developed nations. The study findings indicated that gender diversity negatively affects a company’s market performance. The results also revealed that there is a negative connection between the presence of women on the board of directors and upsurge in the monitoring function. According to Vo and Bui (2017), the management team should consider a proportion of the exact expectation of female directors serving on the board of directors.

Agyemang-Mintah and Schadewitz (2019) conducted a study to examine whether the board gender diversity onto the company board of directors can influence a firm’s value. The focus of the research was companies in the United Kingdom (UK) financial institutions. The researchers also sought to investigate whether having females on the board of directors can influence the firm’s value before or after the global financial crisis. The researchers used secondary data from DataStream of 63 financial institutions. The findings of the study showed that the females’ board members have a positive and statistically significant connection with the company’s value. The results revealed that there is a positive and statistically significant effect on the firm’s value before the financial crisis period (Agyemang-Mintah & Schadewitz, 2019, pp.2-26).

2.4 Summary

The focus of this literature review is to examine several studies that focus on the effects of board gender diversity on business performance. The primary variables reviewed to determine the impact of board gender diversity included corporate performance, and firm profitability, and firmvalue. Several studies indicate that there is a connection between board gender diversity and organizational performance concerning financial performance, firm profitability, and firmvalue. Papangkorn et al. (2019) found that having female directors on the board of directors significantly increased firm performance. Ben Slama et al. (2019) indicated that there was an increase in accounting performance in companies that had women on boards.

The findings of a study by Wallgren and Andersson (2018) showed that higher board gender diversity positively influenced firm performance. According to Boulouta (2013), there are relationships between board gender diversity and CSP that have significant implications for managers, socially responsible investors, and non-governmental organizations. Ujunwa et al. (2012) found out that gender diversity negatively influences firm performance. Wahid (2019) revealed that higher levels of gender diversity lead to the reduced likelihood of financial misconduct in the company. According to Ionascu et al. (2018), there is a connection between gender diversity on company boards and profit-firms. In their studies, Garcia-Izquierdo et al. (2018) found out that female directors can influence the good governance practice of a company.

Some studies showed that there is a connection between board gender diversity and firm profitability. Dang et al. (2019) found out that the involvement of women on corporate boards led to a significant and positive effect on company profitability. According to Shafique et al. (2014), the number of women serving on board of directors has a considerable influence on the company’s performance. Other studies showed the relationship between board gender diversity and firm value. According to Vo and Bui (2017), there is a negative connection between the presence of women on the board of directors and upsurge in the monitoring function. (Agyemang-Mintah & Schadewitz (2019) revealed that there is a positive and statistically significant effect on the firm’s value before the financial crisis period.

3. 0 Methodology

3.1 Population and Sample

            This paper examines the relationship between firm diversity and performance. The research analyzes Walmart Inc., which is in the consumer defensive sector. The period of the analysis is from 2005 to 2018. Data for the analysis was retrieved from the company’s financial statements filings in the United States Securities and Exchange Commission (SEC). The object e of the research was to obtain information regarding board independence and gender diversity at the board level to establish whether diversity affects the performance of Walmart Inc.    

3.2 Independent Variables  

            The explanatory variables in the model include percentage of women on board, percentage of indirect directors, firm size, and leverage levels. The percentage of women on board shows whether the inclusion of women on the board of companies helps in increasing their overall performance. The study’s hypothesis assumes that more men are naturally on the board, and a board’s diversity is enhanced by including women. This assumption is reasonable, particularly concerning patriarchal societies. For increased credibility on the findings, and to avoid biased results, the study considered the board’s independence. The level of the board’s independence is determined by the board’s structure. Board independence measures how the board can make independent decisions without undue interference from the management or conflict of interests. Therefore, the research used the percentage of independent directors (IndepDir.) on the board was used as a measure of board diversity.

            According to Randoy, Thomsen, and Oxelheim (2006, p. 22-23), a small board is more efficient than a large one when it comes to control management. Nonetheless, larger boards have a greater access to individuals with various competencies and backgrounds (Randoy et al., 2006, p. 23). Moreover, large boards are more likely to reduce the discretionary powers of managers, than smaller boards, and this enhances accountability. Independent directors refer to non-executive or outside directors and play a useful role in improving accountability in an organization. Ararat, Aksu, and Cetin (2010, p. 26-28) assert that independent directors help in controlling the discretionary behavior of managers or majority shareholders, and this ensures that firms’ decisions are made in the best interest of all stakeholders. There are various arguments in support of independent directors. de Andres and Vallelado (2008, p. 276), opine that independent directors are keen in their oversight roles and also help in reducing conflicts of interests among stakeholders.

There is a relationship between firm size and performance because large companies usually have a better performance than small ones due to their market power and higher efficiency levels (Isidro & Sobral, 2014, p. 16). The logarithm of a firm’s total assets measures its size.  Leverage refers to the ratio of the total debt to total assets in a firm. The higher the debt levels of a company, the more likely it can default its payments. Moreover, high debt levels increase firms’ financing costs, and this reduces their profits. Accordingly, there is a negative relationship between firm performance and leverage (Isidro & Sobral, 2014, p. 16).

3.3 Research Design

            These study uses correlation analysis and ANOVA to establish the effectiveness of gender diversity on Walmart’s financial performance. Two sets of correlation analysis will be done in the study: a correlation of Walmart’s financial performance, percentage of independent directors, firm size, leverage levels, and percentage of women on board of directors; a correlation of percentage of women on board of directors and the return on assets (ROA) and return on equity (ROE). A regression model will also be drawn based on the findings of the research.

ROA and ROE are important financial indicators of the financial performance of a company. Return on assets is calculated by dividing the income before extraordinary items, taxes, and interest expense by the total assets for the company for each particular year. ROE helps in expounding the robustness of the study. It is done by dividing the income before extraordinary items, taxes, and interest expense by the total equity of Walmart. Agency theory postulates that managers are likely to mismanage shareholders’ equity and profits if there are few oversight measures from the board (Ujunwa, Okoyeuzu, & Nwakoby, 2012, p. 214). Therefore, the composition of the board determines ROE and ROA. In particular, ROA indicates how effectively the management is using shareholders’ assets to increase the company’s wealth. Lastly, ROE shows the effectiveness of the management in investing shareholders’ capital. Therefore, the correlation of percentage of women on board of directors with ROA and ROE provides detailed information on the effectiveness of gender diversity in influencing Walmart’s financial performance.

3.4 Research Model

            Correlation and regression analysis will be used to establish the relationship between gender and nationality diversity with the performance of an organization.

PERF= β0 + β1IndepDir. + β2F.Size + β3Lev. + β4P.Women + e

Where

PERF= Firm performance (Sales)

IndepDir.= Percentage of independent directors in the board

F.Size= Firm size

Lev.= Leverage level of a firm.

P.Women= Percentage of women in the board of directors

β = Coefficients

e= Error

4.0 Results and Analysis

            The correlation analysis examined the relationship among variables (PERF, IndepDir., F.Size, Lev., and P.Women). The regression analysis demonstrated the specific impacts of the independent variable on the dependent variables.

4.1 Results and Analysis

Table 1: Correlation Analysis

 PerformanceIndeDir.P.WomenF.SizeLev.
Performance1
IndeDir.-0.05331
P.Women0.0516370.0586641
F.Size-0.02069-0.264210.6846171
Lev.-0.594190.023124-0.112380.0994611

            There is a weak negative correlation between performance and the number of indirect directors in the company. The relationship is -0.0533. There is a weak positive correlation between the percentage of women and performance in the company of 0.05163. There is also weak negative relationship between firm size and performance at Walmart, which -0.0207. Lastly, there is a negative relationship between leverage and performance of -0.59419.

Table 3: Regression Analysis (Inde. Directors, % Women)

 CoefficientsStandard Errort StatP-value
Intercept22600.7416639.211.3582820.201579
IndeDir.-4447.5823696.29-0.187690.854536
P.Women5899.70132331.060.1824780.858527

            The p-vales for independent directors is 0.85453. Since the p-value is larger than the alpha value of 0.05, there is a weak evidence against the null hypothesis, and therefore we do not reject the null hypothesis. Accordingly, an increase in indirect directors affects the financial performance of the company.

            The p-value for percentage of women directors is also 0.858527, and this is larger than the alpha value of 0.05. Therefore, there is a weak evidence against the null hypothesis. Accordingly, we fail to reject the null hypothesis. A change in percentage of women in the board of directors can affect the performance of the company.

From the regression analysis, the estimator model for the study is as follows:

PERF=22600.74 -4447.58IndeDir. + 5899.701 P.Women

Table 4: Regression (Independent Directors, % Women) (Firm Size, Leverage Level)

 CoefficientsStandard Errort StatP-value
Intercept79494.1140888.50.5642340.586379
IndeDir.-803.88623437.65-0.03430.973387
P.Women-852843628.87-0.195470.849369
F.Size6078.20627817.770.2185010.831913
Lev.-14705967338.86-2.183870.056815

Firm size and leverage levels are considered in this regression as control variables.

The p-value for Independent directors is 0.973, which is greater than the alpha value of 0.05. Since the p-value is larger than the alpha value, there is a weak evidence against the null hypothesis, and therefore we do not reject the null hypothesis.

The p-value of percentage of women is 0.849, which is greater than alpha value. Since the p-value is larger than the alpha value, there is a weak evidence against the null hypothesis, and therefore we do not reject the null hypothesis.

The p-value for f-size is 0.8319. Since the p-value is larger than the alpha value of 0.05, there is a weak evidence against the null hypothesis, and therefore we do not reject the null hypothesis. The p-value for leverage is 0.0568. Although the p-value is larger than the alpha value of 0.05, it is only marginally larger, therefore, both the null and alternative hypothesis can be true.

From the regression analysis, the estimator model for the study is as follows:

PERF= 79494.1 -803.886 IndeDir. -8528 P.Women + 6078.206 F.Size -147059Lev.

Table 5: Correlation of Ratio of Women Directors to ROA and ROE

 ROAROERatio of Women   
ROA1ROAROAROA
ROE0.986181ROEROEROE
Percentage of Women-0.37818-0.444051Ratio of WomenRatio of WomenRatio of Women

The correlation of percentage of women to ROA is -0.378, which is a weak negative relationship. The correlation of percentage of women to ROE is -0.444, which is also a weak negative relationship. Therefore, there is an opposite direction in the movement of ROA and ROE relative to that of the percentage of women.

4.2 Analysis

             Noteworthy, Boardsize was not considered in the final calculation of the regression model because of homoscedasticity error. In particular, there is a close relationship between the number of women on the board and the board size, and this adversely affects the regression results.

After factoring the control variables, the following conclusion was established from the regression analysis. The estimator model for the study is as follows:

PERF= 79494.1 -803.886 IndeDir. -8528 P.Women + 6078.206 F.Size -147059Lev.

4.3 Discussion

            The board of directors is vital in any organization because it provides direction and leadership, and this protects the interests of all stakeholders. Since directors’ competencies and attributes greatly influence their leadership, the composition of the members of the board of directors is crucial for determining a firm’s performance. A distinct characteristic of a board is its composition with regards to gender. Globally, the number of women working at managerial levels have been increasing, and this has necessitated the establishment of gender-diverse boards. Moreover, there is the belief that diversity in boards enables them to have a broader view of issues that affect their organizations.

            While diverse boards may have a broader outlook of issues than less diverse ones, studies have established that an increase in gender-diversity in company’s board of directors does not significantly affect their performance (Wang & Cliff, 2009, p. 29). The findings of this study support the hypothesis that female board members significantly and positively impact the firm’s performance. In this study, the financial performance of Walmart Inc., which is measured through ROA and ROE, is weakly negatively correlated to the percentage of women in the board of directors.

Results of this research conform to the findings by Wallgren and Andersson (2018), that showed that having women in board of directors enhance a company’s financial performance. On the contrary, Wang and Cliff (2009, p. 29), which established that there is no significant impact of having gender-diverse boards on the performance of organizations. Various theories such as social identity, similarity-attraction, and self-categorization, assert that diversification is on the overall disadvantageous to organizations. Since gender is an essential component of social categorization, it impliedly means that having a gender-diverse board can undermine its performance. Therefore, diverse groups are likely to fragment to smaller gender homogeneous groups, and this may lead to concomitant intergroup communication, cooperation and communication difficulties, conflicts, and tension (Chatman and Flynn 2001, p. 970; Pelled 1996, p. 626; Kravitz, 2003, p. 18). The adverse effects of intergroup conflicts affect individual and group performance, and this results in the overall poor performance of the organization (Richard, Barnett, Dwyer, & Chadwick, 2004, p. 263).

            Blalock (1967, p. 49-86) asserts that impairments occasioned by gender diversity are significantly stronger in highly gender-diverse organizations because there is always a power struggle that arises when the two groups of gender have an almost equal number of members in the board. Since the benefits of gender diversity for a board are initially positive, as minority members increase, a power struggle arises, and this undermines the initial benefits (Ali, Kulik, & Metz, 2011, p. 1478). Similarly, research by Nakagawa and Schreiber (2014, p. 18) established that high gender diversity at the management level is initially positive to the company but it later changes to have negative effects when the minority members become too many.

5.0 Conclusion and Recommendation

            Effective corporate governance is necessary for ensuring companies excel in their operations. One measure of ensuring proper corporate governance is establishing a competent and capable board of directors. There have been various studies that have discussed the role of diversity in enhancing corporate governance. Interestingly, they all come with conflicting information, with some advocating for its implementation while others asserting that it leads to poor performance.

  1. The p-value for Independent directors is 0.973, which is greater than the alpha value of 0.05. Since the p-value is larger than the alpha value, there is a weak evidence against the null hypothesis, and therefore we do not reject the null hypothesis.

Accordingly, an increase in the number of independent directors affects the performance of Walmart Inc.

  1. The p-value of percentage of women is 0.849, which is greater than alpha value. Since the p-value is larger than the alpha value, there is a weak evidence against the null hypothesis, and therefore we do not reject the null hypothesis.

An increase in the percentage of women affects the performance of Walmart Inc.

  1. The p-value for f-size is 0.8319. Since the p-value is larger than the alpha value of 0.05, there is a weak evidence against the null hypothesis, and therefore we do not reject the null hypothesis.

An increase firm size affects the performance of Walmart Inc.

  1. The p-value for leverage is 0.0568. Although the p-value is larger than the alpha value of 0.05, it is only marginally larger, therefore, both the null and alternative hypothesis can be true.

An increase in leverage levels can result in either an increase or a decrease in Walmart’s performance because the p-value is close to the alpha value (0.05). Its deviation from the alpha value is marginal.

Also, the study has established that an increase in the percentage of women on Walmart’s board of governance improve its financial performance. Correlation between performance and the percentage of women on the board is 0.05164, which is a positive but very weak relationship. Nonetheless, the percentage of women in the board of directors plays a critical role in controlling the firm’s leverage levels, and this has a net positive effect on Walmart’s financial performance. Correlation between percentage of women on board and leverage levels is -0.11238, which is a weak and negative correlation. Further, the correlation between Walmart’s performance and leverage is also negative (-0.59419). This information discloses that an increase in the percentage of women directors on the board reduces Walmart’s leverage levels, and a decrease in leverage levels is accompanied by an increase in firm performance.

            Firm size and the percentage of independent directors have a very weak and negative correlation with performance of -0.02069 and -0.0533 respectively. These results imply that an increase in Walmart’s size does not increase its performance. Similarly, an increase in the percentage of independent directors in the company does not have positive impact on its performance. From the results, it appears that the non-independent directors of the company are as professional as the independent ones in protecting the interests of all stakeholders.

Recommendation

            Walmart Inc. should not increase the percentage of women on its board with the objective of increasing its performance, because the correlation between Walmart’s financial performance and number of women on the board is very weak although positive. However, it can increase the number of women on its board of directors based on their competencies.

            Walmart Inc. should reduce its leverage levels to enhance its performance. The correlation between leverage and performance is -0.59419, and this shows an increase in leverage levels reduces the company’s financial performance.

            Walmart should not increase the percentage of its independent directors on the board with the sole reason of increasing its financial performance, because the correlation between Walmart’s financial performance and its leverage level is small and negative (-0.0533). However, it can increase the number of independent directors if they are competent to enhance the overall transparency in the firm, and this may translate in higher performance in the future. Moreover, an increase in the company’s independent directors will likely reduce Walmart’s appetite for credit.

Limitations

            The main limitation in this research was access to data. Walmart started revealing its independent directors in the company’s financial statements in 2005. As a result, the study was limited to the years 2018 to 2015. Another limitation was time. The shortage of time limited the amount of data I could access and the scope of the research.

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Appendix

Appendix 1

Table 1: Correlation Analysis

 PerformanceIndeDir.F.SizeLev.P.Women
Performance1
IndeDir.-0.05331
F.Size-0.02069-0.264211
Lev.-0.594190.0231240.0994611
P.Women0.0516370.0586640.684617-0.11238351

Appendix 2

Table 2: Regression Analysis

Regression Statistics
Multiple R0.598494
R Square0.358195
Adjusted R Square0.072949
Standard Error3783.597
Observations14

Appendix 3

Table 3: Analysis of Variances (ANOVA)

 dfSSMSFSignificance F
Regression471906694179766731.2557396220.355030725
Residual91.29E+0814315606
Total132.01E+08   

Appendix 4

Table 4: Coefficients, Standard Error, t-statistic, P-Value

 CoefficientsStandard Errort StatP-value
Intercept79494.1140888.50.5642340.586378812
IndeDir.-803.88623437.65-0.03430.973387435
F.Size6078.20627817.770.2185010.831913115
Lev.-14705967338.86-2.183870.056815315
P.Women-852843628.87-0.195470.849369143

Appendix 5

Table 5: Correlation of Ratio of Women Directors to ROA and ROE

 ROAROERatio of Women   
ROA1ROAROAROA
ROE0.986181ROEROEROE
Ratio of Women-0.37818-0.444051Ratio of WomenRatio of WomenRatio of Women

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