Around the world, policymakers and regulators are pursuing strategies to enhance the presence of women on corporate boards. In various European countries, this drive has taken different forms, with some adopting gender quotas and others employing networking and mentoring programs to expedite women's advancement in leadership positions. For instance, Norway and Spain currently enforce mandatory gender quotas, requiring a minimum of 40% female board representation, while France has set the bar even higher at 50%, imposing penalties for non- compliance. In contrast, Australia has no equivalent legislative mandate in place, but it has witnessed a significant voluntary increase in the number of women serving as directors on corporate boards. 

Recent findings from the Australian Institute of Company Directors (AICD) illustrate this trend. The percentage of female directors on the boards of the Top 200 firms listed on the Australian Securities Exchange (ASX) has experienced substantial growth over the years, rising from 8.3% in 2009 to 28.2% in 2017 and reaching 32.9% in 2021.1 For the Top 300 ASX firms, this figure has climbed to 35% in 2023, up from 32% in 2022.2 Additionally, there has been a noteworthy increase in the number of female directors on boards of smaller companies, with a 15% increase in 2022. Nevertheless, despite these advancements, there are still 15 companies among the Top 300 ASX firms that lack female director representation on their boards. 

The psychology literature has consistently demonstrated that women typically express a reduced inclination to embrace risks when compared to men. This phenomenon is, in part, attributable to women having higher levels of loss aversion. Consequently, the AICD wants to investigate the advantages associated with gender-diverse boards so that they can provide recommendations to Australian regulatory bodies in this regard. 

You, as an analyst of market research division of the AICD, need to report to the AICD board of directors to see whether female participation in company boards is associated with lower risk. You choose the company cost of debt (CoD) as a measure of firm risk. The CoD refers to the interest payment obligation linked to borrowed funds. In simpler terms, it represents the interest rate owed by a company for any financial obligations, such as loans and bonds. The extent of the cost of debt is determined by the creditworthiness of the borrower (i.e. company), with higher costs indicating a higher perceived risk associated with the company. 

You begin the analysis by selecting the Top 500 companies listed on the ASX as at the end of the 2022 financial year (i.e. 30 June 2022). These ASX-listed companies are categorised based on their industry sectors, and there are a total of 11 industry sectors in the Australian market. They include Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care, Industrials, Information Technology, Materials, Real Estate, Communication Services, and Utilities. For the purpose of your analysis, you have chosen to focus on three specific industry groups: Energy, Health Care, and Consumer Staples. Each individual company is classified under one of these industry sectors. You have collected the necessary data for 100 companies within each of these three industry sectors.

A board of directors with women representation is referred to as a "gender-diversity board," whereas a board of directors with no women representation is termed a "non-gender diversity board." The data pertaining to these boards are stored in the Excel file named "ECOM5005_BR_2023_s2_datafile.xlsx" and organised as follows: 

1. Does the representation of female directors on the board of directors depend on industry sectors? 
2. Do companies with gender-diversity boards have a lower cost of debt (CoD), compared to those without female representation on the board? 
3. Is there any difference in the cost of debt (COD) among the three industry sectors, namely Energy, Health Care and Consumer Staples? 

 

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