Tài liệu Gender diversity in corporate boardroom and tax avoidance the evidence in hose listed firms

UNIVERSITY OF ECONOMICS HO CHI MINH CITY ERASMUS UNVERSITY ROTTERDAM INSTITUTE OF SOCIAL STUDIES VIETNAM THE NETHERLANDS VIETNAM – THE NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS GENDER DIVERSITY IN CORPORATE BOARDROOM AND TAX AVOIDANCE THE EVIDENCE IN HOSE LISTED FIRMS BY DAO THI HAN MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, December 2016 i UNIVERSITY OF ECONOMICS HO CHI MINH CITY ERASMUS UNVERSITY ROTTERDAM INSTITUTE OF SOCIAL STUDIES VIETNAM THE NETHERLANDS VIETNAM – THE NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS GENDER DIVERSITY IN CORPORATE BOARDROOM AND TAX AVOIDANCE THE EVIDENCE IN HOSE LISTED FIRMS A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS BY DAO THI HAN Academic Supervisor: Nguyen Thi Thuy Linh HO CHI MINH CITY, December 2016 ii ABSTRACT Using data set of 296 publicly listed firms in Ho Chi Minh Stock Exchange from 2010 to 2015, the study analyses the engagement of female board members, also in case of being leader of board and executive manager, on tax avoidance activities, measured by three proxies. The fixed effect regression results indicate gender diversity in boardroom is negatively associated with tax avoidance measured by effective tax rate but chairwomen are more engaged in tax avoidance measured by book-tax difference. As a result, the presence of women in boardroom of HOSE listed firms is important to shareholders who consider about firms’ transparency or profit. iii TABLE OF CONTENT LIST OF ABBREVIATIONS ............................................................................................ iv LIST OF FIGURE............................................................................................................... v LIST OF TABLE ............................................................................................................... vi CHAPTER ONE INTRODUCTION ........................................................................... 1 1.1. Vietnam overview ........................................................................................................ 1 1.1.1. Female labor and pay gap in Vietnam ...................................................................... 1 1.1.2. Women participation in firm management in Vietnam ............................................ 2 1.1.3. Tax avoidance in Vietnam ........................................................................................ 3 1.2. Research objective ....................................................................................................... 6 1.3. Research design ........................................................................................................... 7 CHAPTER TWO LITERATURE REVIEW .............................................................. 9 2.1. Gender diversity and corporate governance ................................................................ 9 2.1.1. Resource-dependence theory .................................................................................. 11 2.1.2. Agency theory ......................................................................................................... 11 2.1.3. Gender equality reaction in corporate boardroom .................................................. 12 2.2. Tax avoidance and corporate governance .................................................................. 13 2.2.1. Tax avoidance ......................................................................................................... 13 2.2.2. Tax avoidance and corporate governance ............................................................... 14 2.3. Gender diversity in boardroom and tax avoidance .................................................... 15 2.3.1. Women’ participation in boardroom and tax avoidance ......................................... 16 2.3.2. Chairwomen and tax avoidance .............................................................................. 17 2.3.3. Female executive in boardroom and tax avoidance ................................................ 18 i 2.3.4. Summary ................................................................................................................. 19 CHAPTER THREE METHODOLOGY.................................................................... 20 3.1. Analytical framework ................................................................................................ 20 3.2. Data and data source .................................................................................................. 20 3.3. Research model .......................................................................................................... 21 3.3.1. Baseline model ........................................................................................................ 21 3.3.2. Variable explanation ............................................................................................... 23 3.4. Research methodology ............................................................................................... 26 3.4.1. Regression models .................................................................................................. 26 3.4.2. Robust standard Errors ............................................................................................ 27 CHAPTER FOUR EMPIRICAL RESULT............................................................... 28 4.1. Descriptive statistic .................................................................................................... 28 4.1.1. Summary descriptive statistic ................................................................................. 28 4.1.2. Women board directors in HOSE listed firms ........................................................ 30 4.1.3. Tax expense in HOSE listed firms having women board directors ........................ 32 4.2. Empirical result .......................................................................................................... 33 4.2.1. GAAP effective tax rate .......................................................................................... 34 4.2.2. CASH effective tax rate .......................................................................................... 35 4.2.3. Book-tax differences ............................................................................................... 37 4.3. Summary results......................................................................................................... 38 CHAPTER FIVE CONCLUSION.............................................................................. 40 4.1. Conclusions ................................................................................................................ 40 4.2. Implications................................................................................................................ 41 4.3. Limitations ................................................................................................................. 41 ii REFERRENCE ................................................................................................................. 43 APPENDIX A SELECTED FIRMS LISTED IN HOSE ............................................. 48 APPENDIX B CORRELATION MATRIX ................................................................ 50 APPENDIX C MULTICOLLINEARITY TEST ......................................................... 52 APPENDIX D PANEL DATA REGRESSION RESULTS – FEM ............................ 54 APPENDIX E PANEL DATA REGRESSION RESULTS – REM ............................ 59 APPENDIX F HETEROSKEDASTICITY AND AUTOCORRELATION TEST ..... 64 APPENDIX G REGRESSION WITH ADJUSTED STANDARD ERRORS............. 66 iii LIST OF ABBREVIATIONS BTD: book-tax different CEO(s): Chief of Executive officer(s) CFO(s): Chief of Finance officer(s) CIT: Corporate Income Tax ETR: effective tax rate EU: European Union FDI: Foreign directed investment FEM: Fixed effect model GAAP: Generally Accepted Accounting Principle GSO: General Statistics Office HNX: Hanoi Stock Exchange HOSE: Ho Chi Minh Stock Exchange ILO: International Labor Organization OECD: Organization for Economic Co-operation and Development REM: Random effect model ROA: Return on asset ROE: Return on equity ROI: Return on investment SG&A: Selling, general and administration VAT: Value-added tax VCCI: Vietnam Chamber of Commerce and Industry VWEC: Vietnam Women Entrepreneurs Council iv LIST OF FIGURE FIGURE 1.1 LABOR FORCE PARTICIPATION RATES (%) ..................................................................... 1 FIGURE 1.2: NATIONWIDE FEMALE EMPLOYED POPULATION ............................................................ 2 FIGURE 2.1: THE SCOPE OF CORPORATE GOVERNANCE................................................................... 10 FIGURE 3.1: ANALYTICAL FRAMEWORK......................................................................................... 20 FIGURE 4.1: GRAPH HISTOGRAM OF TAX AVOIDANCE MEASURES................................................... 28 FIGURE 4.2: GRAPH HISTOGRAM OF CORPORATE BOARD SIZE AND WOMEN MEMBERS ................... 30 FIGURE 4.3: HOSE LISTED FIRMS HAVING WOMEN PARTICIPATING BOARDROOM .......................... 31 FIGURE 4.4: NUMBER OF EXECUTIVE AND NON-EXECUTIVE FEMALE BOARD DIRECTOR ................. 32 FIGURE 4.5: CURRENT TAX EXPENSE IN HOSE LISTED FIRMS (BILLION VND) ............................... 32 FIGURE 4.6: CASH TAX PAID IN FIRMS IN HOSE LISTED FIRMS (BILLION VND) ............................. 33 v LIST OF TABLE TABLE 1.1: CORPORATE INCOME TAX SINCE 2013 ........................................................................... 4 TABLE 2.1: SUMMARY HYPOTHESES AND RESEARCH QUESTIONS ................................................... 19 TABLE 3.1: VARIABLE CONSTRUCTION .......................................................................................... 21 TABLE 3.2: EXPLANATORY VARIABLES .......................................................................................... 22 TABLE 4.1: SUMMARY STATISTICS OF VARIABLES ......................................................................... 29 TABLE 4.2: RESULTS OF FEM WITH TAX AVOIDANCE MEASURED BY GAAPETR ............................. 34 TABLE 4.3: RESULTS OF FEM WITH TAX AVOIDANCE MEASURED BY CASHETR ............................. 36 TABLE 4.4: RESULTS OF FEM WITH TAX AVOIDANCE MEASURED BY BTD ..................................... 37 TABLE 4.5: SUMMARY HYPOTHESIS TEST RESULTS ........................................................................ 39 vi CHAPTER ONE INTRODUCTION 1.1. Vietnam overview 1.1.1. Female labor and pay gap in Vietnam According to Worldbank data, Vietnam keeps a very high female labor participation rate as high as male’s, not lower than 72 percent since 2000, shown in Figure 1.1 (while male rate is around 82 percent)1. General Statistics Office (GSO) of Vietnam also reports more than 40 percent of the nationwide labor force are women (see Figure 1.2). However, the International Labor Organization (ILO) identifies that gender pay gap in Vietnam has been widened. Vietnamese women earn less than men thirteen percent in 2011 and twenty to thirty percent in 2012 while global average gender pay gap is around 17 percent. The latest Labor Force Survey Report (2012) shows that women earn less than male counterparts in all economic sectors, even the favor-female industries like healthcare, social works. Hence, the remuneration seems to reflect gender of worker instead of content of work. It is clear that the principle of “equal pay for work of equal value” stipulated in the Labor Code need to be implemented. Figure 1.1 Labor force participation rates (%) male rate female rate 100 90 80 70 60 50 40 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (Source: worldbank.org) 1 (female/male) labor force participation rate = % of (female/male) population ages 15+ having a job 1 Figure 1.2: Nationwide female employed population 100% 60.000 50.000 80% 40.000 30.000 49% 47% 49% 49% 48% 48% 48% 48% 49% 49% 60% 40% 20.000 20% 10.000 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total Woman % (Source: gso.vn) As one of the key talent pool in total Vietnam labor, the roles and contributions of women to the economic development should be admitted soon rather than the traditional expectation in household responsibility. Madam Nguyen Thi Tuyet Minh, Chairwoman of Vietnam Women Entrepreneurs Council (VWEC) emphasizes that women are the important factor possibly solving international affairs (Women with Business and Gender Equality, 2016). This emerging subject of “Creative women, creative economies,” is discussed in the Global Summit of Women 2015 organized in Sao Paulo, Brazil. In the conference, many specialists agreed that Vietnamese women with the wisdom, insight and determination in any business or social circumstance are deserved to be promoted to leadership. 1.1.2. Women participation in firm management in Vietnam Some representatives of richest and most powerful women in stock market like Ms. Truong Thi Le Khanh (chairwoman cum CEO of Vinh Hoan Company), Ms. Pham Thu Huong, Ms. Pham Thuy Hang (vice presidents of Vingroup), and Ms. Mai Kieu Lien (chairwoman cum CEO of Vinamilk)… are holding important positions in large corporates. However, the more opportunities women have in career, the more obstacles and pressures women have. Participating in the political or economic activities creates pressure of making decision, influencing male employees, satisfying clients…to women. Besides, they have to carry out the housewife responsibility with children, husband and her family. Moreover, the expectation to be 2 outstanding in appearance, knowledge or behavior is the other pressure to female leaders. Certainly, the long-time process to shorten the gender gap needs efforts of not only trade unions, social organization but also, and most important, female workers themselves to access education, improve skills and overcome glass ceiling2. Internationally, the ILO has worked closely with internal organizations, like Vietnam Chamber of Commerce and Industry (VCCI), to create jobs and reduce poverty. Under the valuable support of the ILO, women’s economic empowerment is promoted and starts to be guided legally. Some legal tools favor gender equity like Gender Equity Law (2007), the Directive No. 10/2007/CT-TTg of Prime Minister, Decree No. 90/2001/ND-CP (2001) and Resolution 11/NQ/TW on “Policy for women in the period of industrialization and Modernization” (2007). Moreover, Vietnam takes part in global/regional conferences about women to discuss and learn to encourage the engagement and contribution of women in social and economic life. Recently, in the Global Summit of Woman in 2016, an international forum for women founded in 1990, one of the four breakout sessions of leadership development is “Women on Boards Roundtable: How female board members can drive value and results”. Generally, it is essential to perceive that women prefer to be appointed as leader in business or politics on merit, not in condition of elimination discrimination. Correspondingly, Shoko Ishikawa, Country Representative for United Nations Women in Vietnam, has added on Worldbank news: "We need to highlight role models and positive images of female leaders, and highlight women’s roles in non-traditional jobs such as business leaders, scientists, architects so that we can change perceptions on tasks that women can take on." 1.1.3. Tax avoidance in Vietnam In recent years, Vietnam General Department of taxation has improved in policies and procedures that impact positively on the business community. From 2014 to 2016, the tax declaration and administrative procedures have been simplified gradually to reduce compliance cost and time for business entities. The tax sector has enacted many tax regulations of Government and the Ministry of Finance like Circular No. 92, 96, 110 and 127/2015/TT-BTC and Resolution 19 and 35 on tax administrative simplification and preparing for electronic tax 2 Glass ceiling is invisible but real barrier prevent qualified and deserving employees developed, normally causes by age, ethnicity, political or religious affiliation, and/or sex 3 declaration. Moreover, increasing number of enterprises and enterprises’ competitiveness with reasonable tax rates also helps to acquire capital and ensuring State budget from domestic income sources. Accordingly, the General Department of Taxation will implement some measures to expand the tax base. A single rate of VAT is one proposal of tax reform. Besides, revenue from land and properties on land has been considered as an important source of State budget in future. Especially, in order to ensure the equality for both domestic and foreign business entities, the tax service has proposed a lower corporate income tax and improving legal framework for transfer prices enforcement. Table 1.1: Corporate income tax since 2013 Effective time Before 01 July, 2013 After 01 July, 2013 From 01 January, 2014 From 01 January, 2016 Entities CIT Documents All firms excluding below list 25% Exploration and exploitation oil and gas operations in Vietnam 32%50% Circular 123/2012/TTBTC issued on 27 July, 2012 Exploration and exploitation valuable resources operations Vietnam (exclude oil and gas) 50% Mines (70% locations belongs to region difficult economic and social conditions 40% Firms’ revenue less than VND 20 billion 20% Firms’ revenue from VND 20 billion 25% New established firms since 01 July, 2013 (excluding tax-favored list) 25% Firms’ revenue less than VND 20 billion 20% Firms’ revenue from VND 20 billion 22% New established firms less than 12 months (excluding tax-favored list) 22% All firms (excluding tax-favored list) 20% Circular 141/2013/TTBTC issued on 16 October, 2013 Circular 78/2014/TTBTC issued on 18 June, 2014 Circular 96/2015/TTBTC issued on 25 June, 2015 (Source: the author summarized from gdt.gov.vn) 4 Corporate income tax (CIT) has been adjusted several times since 2013 as shown in Table 1.1. Although the CIT has been dropped 3 percent since 2013 to 2015, many experts agree that total tax expenses that companies must pay are considered very high compared to neighborhood. One of the reasons is Worldbank’s survey results show that Vietnamese business entities have to pay 39.4 to 40 percent of profit for taxes and fees, which includes CIT, land tax, health and social insurance for labors. The results point out a big gap in taxes and fees in Vietnam and Indonesia (29.7 percent), Thailand (27.5 percent), Cambodia (21 percent), and Singapore (18.4 percent). Therefore, another proposal to reduce CIT at 17% has been prepared to send to National Assembly in 2017. Tax and transfer pricing audits are conducted in large provinces and cities including Hanoi, Ho Chi Minh, Binh Duong, Lam Dong, Thanh Hoa, Quang Ninh, Bac Ninh, Khanh Hoa, An Giang, Vinh Phuc, Ba Ria-Vung Tau, Gia Lai and Ha Tinh… In 2012, 7,800 companies with related party transactions were targeted in transfer pricing inspection, especially foreign-invested companies. In 2014, after an investigation in 870 foreign firms nationwide, tax authorities found that 720 cases engaged in tax fraud. Pay back taxes and penalties are nearly VND 400 billion (equal to US$ 19 million) (Vu et al., 2014). Similar to previous reports, the profit shifting is found in higher price for purchase of tangible transactions (materials, machinery and equipment) and lower selling price of finish goods. Moreover, those foreign firms have been paying very high cost for technology transfer and trademark fees. Especially services and consumer product sectors pay overvalue of royalties for parent companies. However, monitoring every purchase and sales evidence of those multinational corporations is very difficult even though tax regulations have allowed valid invoice and inter-company agreements as supporting for corporate income tax and valued added tax. Since 2011, the conference transfer pricing enforcement efforts has agreed to build a specialized transfer pricing team to administer the transfer pricing compliance of taxpayers in Ho Chi Minh City. Later, large provinces are also expected establish a specialized transfer pricing team. Moreover, period from 2012-2013, the EU Commission combined with the OECD and World Bank have implemented the EU project which aims to assist Vietnam to focus on transfer pricing by improving the tax regulations and tax. The project equipped tax officer knowledge, tools and practical skills to implement and enforce Vietnamese transfer pricing regulations 5 efficiently. On 21 May 2012, Vietnam's Ministry of Finance issued Decision No. 1250/QD-BTC approving the National Action Plan for 2012-2015 related to tax avoidance, generally and transfer price, specially. 1.2. Research objective Many regulatory framework, technology, administrative procedure and tax policy… have been improved to facilitate developing healthy business environment. The stock market as the channel for raising medium and long term capital has received a lot of changes for improvement. By the end of 2015, market capitalization achieved over 1298.53 trillion, with 1146.9 trillion in Ho Chi Minh Stock market (HOSE) and more than 151.6 trillion in Hanoi Stock Market (HNX)3. In particular, VN-index in HOSE increased 4.13 percent with 28 billion shares among 39.7 billion shares in the market. From 2016 to 2020, about 500 state firms are completing the equalization which offer more options for investors and increase the market capital. Thus, it is a must to have a transparency, professional and equality for investors and organizations. Furthermore, the tax sector recently examined tax evasion in FDI enterprises as the illegal tax avoidance activities. However, this fraud action is applying the formula of general tax planning which increases reported expenditures to reduce reported profit and tax obligation. Actually, there are some lawful forms of tax planning applied in most of the firms at any tax rate in every country. The taxpayers can conduct tax advantages by any means of legislation offers or loopholes, called broad tax avoidance (Hanlon and Heitzman, 2010). Particularly, this strategy has been considered as one of the issues of corporate governance (Tricker, 2015). The recent economic and social condition has been changed affecting women’s participation in labor market and opportunities to have leaderships. More and more involvement in workplace, women want to achieve not only financial independence but also decision-making influences. Being engaged in the tussle by men, women are forced to show how they can drive value and result for a firm as a female board member. Therefore, the objective of this study is to examine the contribution of women board directors in differential features of corporate governance and social responsibility of HOSE listed firms with special emphasis on tax avoidance behavior. 3 http://ncseif.gov.vn http://tapchitaichinh.vn/ 6 To solve the above research objectives, the study will answer three questions in correspondence with three considered matters: 1. Is presence of women in boardroom associated with tax avoidance? 2. Is there any relationship between chairwoman and tax avoidance? 3. Is female executive in boardroom related to tax avoidance? 1.3. Research design This study considers the effect of gender diversity on boardroom on corporate tax avoidance. Based on the panel data of 296 firms listed in HOSE from 2010 to 2015, the study employs fixed effects regression to test the prediction that woman board director has significant association with tax avoidance. Corporate board of directors is responsive to the stakeholders’ rights and wishes, normally related to investors’ in listed firms. Besides the descriptive benchmarking or questionnaire survey studies examine the influence of women presentation on board, various studies execute quantitative analysis evaluating the impact of having female directors on financial or social performance. Erhard et al. (2003) shows that the share of female and minorities board members is positively correlated with firm financial performance, measured as return on asset (ROA) and return on investment (ROI). Another study from Carter et al. (2003) has found positive relationship between the presence of women on board in companies firm size, board size and Tobin’s Q. In addition, Lückerath-Rovers (2013) suggests that the presence of women on board is an attribute of companies having better performance with higher return on equity (ROE). The psychology and economics literatures have studied gender differences in attitudes toward risk and in risk-related behavior. Most studies support the notion that women are more risk averse than men in the general population. Besides, men are more overconfident than women, affecting the perception of the probability distribution underlying a risk (Huang and Kisgen, 2013). Francis et al. (2014) figure female CFOs and their male counterparts engage similarly in tax avoidance. Especially, the authors emphasize that the female CFOs pursue not all tax saving opportunities to avoid extra risks. Moreover, although the reason behind gender effect on tax aggressiveness is risk-aversion of female, female fund managers do not differ significantly with male in performance and investment behavior (Atkinson et al., 2003) or being the 7 professional analysts with bolder and more accurate forecasts (Kumar, 2010). Hence, the presence of women in boardroom is supposed to negative associated with tax avoidance. By using three different proxies of tax avoidance in the regression, the research implies three different findings. Generally, women’s presence in boardroom is negative associated with tax avoidance activities by paying more cash tax expenses. However, they just focus on reported value to have high rate of book effective tax rate when holding executive positions. On the other hand, since holding leadership role of the firm, chairwomen positively associated with tax avoidance to enhance shareholders’ benefit. The paper is arranged in five chapters. The first one gives an overview of research problem, research objectives and research question. This chapter also summarize the brief data, literature used in the research. The second chapter provides some theoretical literature and prior emprical studies related to presence of female board member and tax avoidance. The next one describes data measurement and regression models in metheodology. The research results are presented in chapter four. Finally, analytical result and implication are outlined in chapter five. 8 CHAPTER TWO LITERATURE REVIEW 2.1. Gender diversity and corporate governance Corporate governance is defined differently under alternative viewpoints of the subjects. Most often viewed as both operational and relationship perspectives, corporate governance is determined as the procedures and processes of directing and controlling the activity and performance of an organization (Tricker, 2015). This issue particularly deals with rights and responsibilities of the board of directors and primary stakeholders. Although, the board of directors is typically central to corporate governance, various stakeholders including shareholders and advisors, the important proxies, and other participants like management team, employees, customers, suppliers, etc. involve in corporate governance as wider relationship perspective (Tricker, 2015). Board of directors elected by shareholders or appointed by other board members is the primary stakeholders influencing corporate governance. The boards are often comprised of insiders, founders and executives, and outsiders. All important decisions such as firm management team appointments, compensations, dividend policy or even financial optimization in some instances are board’s obligations. Commonly, the roles of corporate board are examined under five theoretical perspectives: legalistic, resource-dependence, class hegemony, agency theory and resource base. In spite of various assumptions of board roles, the natures of them are concluded into two main categories: service and control (Mintzberg, 1983). Besides, Huse and Rindova (2001) emphasize that various stakeholders imply different board roles, service and/or control because of different functional relationship with corporates. The Figure 2.1 summarizes all parties involved in various perspectives on corporate governance. This schematic diagram is captured in the book of Trickers (2015) named Corporate Governance: Principles, Policies and Practices. In the described framework, the corporate governance codes pay attention to the centralized players of board of directors, shareholders and the management. Beside other parties, corporate governance of public listed firms is also significant to stock market and listed rules. Some commentators and researchers widen the focus of corporate governance to interrelations of minority shareholders, institutional investors, auditors, government and contractual stakeholders. Moreover, after the bankruptcy of some high9 profile companies such as Enron and WorldCom in the United States (U.S), or Marconi, British Rail in the United Kingdom and some other collapse in Australia, Italy, Germany in the beginning of twenty first century…, corporate governance has become a pressing issues including poor structure boards. Consequently, high level of corporate governance requires transparency in rules and controls which includes incentives alignment and board compositions and how board operates. Thus, it is necessary to have a diversification in the corporate board for managing and satisfying multiple stakeholder relationships. Figure 2.1: The scope of corporate governance Stock market for listed companies Finance market – equity and debt Market intermediaries Shareholders Board of directors Societal influences and other stakeholders Media Government and other corporate regulators External auditors Management Contractual stakeholders: employees, suppliers, customers, etc (Source: Corporate Governance: Principles, Policies, and Practices (3rd ed.) (Tricker, 2015)) In the increasingly complex and uncertain environment, board diversity with a combination of different qualities, characteristics and expertise of members in composition of corporate board has been advocated to increase organizational performance and decision-making (Walt and Ingley, 2003). However, a majority of studies pay more attention to observable/demographic diversity, especially the gender effect, than non-observable category, such as background or knowledge of directors (Erhardt et al., 2003). Therefore, gender diversity is one of the categories of board diversity in corporate governance. In stakeholder perspective 10 (discussed above) and resource dependence theory, gender diversity connects to good relationship with stakeholders and corporate governance (Pfeffer and Salancik, 1989). Moreover, women’s presence also measures the independence advocated in agency theory which creates fair and transparent decision-making (Terjesen et al., 2009). 2.1.1. Resource-dependence theory In resource dependence theory, good corporate governance benefits from the linkage of corporate board between internal and external resources that company depends. This linkage mechanism comes up with at least four benefits for firms those are: establishing useful information, a channel for communication, a significant step to achieve commitments of support internal resources and lastly the value in organizations legitimacy. Particularly, resource dependence theory suggests legitimacy effect as the consequence of gender diversity on the board because female directors highlight positive signal to other stakeholders (Pfeffer and Salancik, 1989). Women directors are considered as the career opportunities equality for all employees. In addition, more women presenting in corporate boards reflects the demographic diversity seizes firms’ reputation and social expectation (Singh, 2007). Thus, the gender diversity engages firms in customer-oriented business and political effects. Moreover, directors not only manage and convey timely information to stakeholders but also have ability to legitimate companies’ actions and mobilize external support and resources for them. Thus, some stakeholders, especially shareholders, profitability is not the only characteristic of firm they focus on, but they also need firm demonstrate good corporate citizenship such as ethical behavior. Diversity might also contribute to improve team performance for sharing different range of perspectives and contributing to the discussion, exchanging ideas (Kang et al., 2007). Structurally, gender diversity in boardroom strengthens the competitive situation inside the firm and positive attitudes from society. Consequently, gender diversity in corporate boardroom enhances firm performance with linkages related resources (Carter et al., 2003, Rose, 2007). 2.1.2. Agency theory In agency theory, the boards and managers should monitor the actions as agent on behalf of their shareholders to maximize shareholders wealth (Huse and Rindova, 2001). This primary 11