Market responses to appointment of women and men as directors: A study of top 40 Johannesburg Stock Exchange-listed companies

Abstract

Background: This study investigates market reactions to the appointment of women and men as directors on the top 40 Johannesburg Stock Exchange (JSE)-listed company boards. Both the social and business rationale for the appointment of women is contextualised to evaluate the potential bias towards their appointment as directors. This research contributes to the literature by concurrently analysing both genders. Aim: The primary objective of the study was to assess market reactions to the new appointment of women and men as directors of the top 40 JSE-listed companies using an event study. Setting: This study focussed on companies from the top 40 JSE-listed companies’ index. The period analysed was from the year 2015 to 2019. Method: The event study methodology was used to analyse announcements of 17 women and 29 men as directors from companies across 12 sectors of the top 40 JSE-listed companies. Results: The study identified a significant negative market reaction to the appointment of women as directors, potentially because of gender bias. The appointment of men as directors was met with positive market reactions, though the results were statistically insignificant. The results align with prior studies that gender bias may impact the negative reaction towards the appointment of women. Conclusion: The study suggests gender is relevant to shareholders because of different market reactions. Companies should not disregard the benefits of board diversity despite negative reactions in the short term. Contribution: This study informs boards of possible market reactions to gender diversity efforts. It emphasises the economic and ethical benefits and necessitates stakeholder engagement.

Keywords

• event study
• women
• board appointments
• directors
• gender diversity
• market reaction