Board gender diversity, efficiency and risk-taking behavior: Empirical evidence from insurance firms in Kenya

Figures & data

Table 1. Selection of the sample

Description	Number
Initial sample of licensed insurers as at 31 December 2020	61
Newly registered firms between 2013 and 2020	4
Excluded firms with incomplete governance and/or financial data	4
Final sample	53
Firm year observations (i.e. 53 × 8 years)	424

Table 2. Inputs and outputs variables used in DEA efficiency analysis

Variable	Symbol	Measure
Input variables
Labor and business services	LBS	This is proxied as management expenses and commissions paid.
Capital from debt	CD	This is proxied using total liabilities.
Owners capital	OC	This is the end of the period overall equity capital.
Output variables
Net earned premiums	NEP	The difference between written premiums and the direct costs related to the insurance policies.
Income from investments	INC	Earnings from financial instruments.

Table 3. Measurement of study variables

Variable	Symbol	Measure
Dependent variables
Z Score	RTB1	Z score it = (ROA it + E/Ait)/[STADEV(ROA)] with ROA = NI/A; STADEV (ROA) is the dispersion of ROA in standard deviation computed during the time horizon 2013–2020
	RTB2	Z score it = (ROE it + E/Ait)/[STADEV(ROE)] with ROA = NI/A; STADEV (ROE) is the dispersion of ROE in standard deviation computed during the time horizon 2013–2020
Leverage	RTB3	Proportion of overall firm debts divided by overall firm assets
Independent variables
Board gender diversity
Fraction of women on boardroom	BGD	Fraction of board members who are women (both nonexecutive and executive directors) to the overall size of the board membership.
Efficiency
Technical efficiency	TE	Technical efficiency using DEA scores
Governance control variables
Size	BS	Overall quantity of corporate board membership
Independence of the board	BI	Portion of the autonomous external directors to full membership of the board
Chief executive officer duality	CEOD	This “1” when the COB also doubles as the CEO, or else “0”
Intensity of board activity	IBA	Total number of annual full board meetings
Audit quality	AQ	Is “1” when the insurer auditor is big-four audit firm, else “0”
Firm characteristics control variables
Age	FG	Overall # of the insurer years from establishment
Size	LnFS	Determined as Ln of overall assets of the insurer
Year	Y	Each year dummy variable

Table 4. Insurers descriptive statistics for the period 2013–2020

Year	Z ROA	Z ROE	LEV	BGD	TE	BS	BI	CEOD	IBA	AQ	FA	FS
2013	6.317	2.984	0.632	0.159	0.390	8.057	0.801	0.000	4.208	0.887	35.906	14.960
2014	6.150	3.096	0.651	0.166	0.392	8.113	0.790	0.000	4.491	0.887	36.906	15.148
2015	5.662	2.533	0.648	0.165	0.300	8.075	0.791	0.000	4.472	0.887	37.906	15.254
2016	5.318	2.318	0.654	0.189	0.421	7.868	0.794	0.000	4.208	0.887	38.906	15.337
2017	5.194	2.157	0.646	0.198	0.312	7.981	0.797	0.000	4.491	0.849	39.906	15.444
2018	4.834	1.941	0.663	0.205	0.308	8.245	0.801	0.000	5.151	0.849	40.906	15.536
2019	4.608	1.883	0.680	0.198	0.337	8.358	0.795	0.000	5.075	0.849	41.906	15.606
2020	5.139	2.363	0.679	0.192	0.323	8.302	0.793	0.019	4.906	0.849	42.906	15.670
Overall Average	5.403	2.410	0.657	0.184	0.348	8.125	0.795	0.002	4.625	0.868	39.406	15.369
Std. Dev.	2.163	1.791	0.173	0.122	0. 243	1.838	0.161	0.049	2.154	0.339	26.084	1.173
Min	0.416	−2.140	0.082	0.000	0.000	5.000	0.250	0.000	0.000	0.000	2.000	12.387
Max	9.884	9.824	0.974	0.500	1.000	12.00	1.000	1.000	22.000	1.000	100.00	18.454
Obs.	424	424	424	424	424	424	424	424	424	424	424	424

Figure 1. Average board gender diversity along the period 2013–2020.

Table 5. DPS-GMM regression analysis results

Predicted variable	Z Score ROA (RTB 1)		Z Score ROE (RTB 2)		Leverage (RTB 3)
	Coefficient	Corrected SE	Coefficient	Corrected SE	Coefficient	Corrected SE
Lag1.	−0.061	0.070	−0.101	0.107	0.388***	0.149
Lag2.	−0.288***	0.094	−0.260**	0.102
Gender diversity	0.023**	0.010	0.180*	0.097	−0.155*	0.091
Technical Efficiency	−0.056	0.178	−0.066	0.352	0.009	0.014
Size of the board	0.489**	0.249	0.372**	0.153	−0.034**	0.016
Independence of the board	0.072	0.090	−0.130	3.256	−0.042	0.167
CEO Duality	−0.181	0.183	−0.014	0.012	0.005	0.146
Intensity of Board Activity	−0.022*	0.013	−0.048*	0.026	0.003	0.005
Audit quality	−0.167*	0.099	−0.147*	0.080	0.001	0.092
Age of the firm	0.005	0.019	0.004	0.015	0.000	0.001
Size of the firm	0.044	0.158	−0.478	0.540	0.020	0.033
Constant	0.024	0.479	0.091	0.060	0.402	0.433
Year	Yes		Yes		Yes
Number of obs	318		318		371
Number of groups	53		53		53
Obs per group: min	6		6		7
Number of instruments	41		41		40
F(16, 52)	4.75***		6.35***		4.87***
P values for AR(1)	0.03		0.021		0.073
P values for AR(2)	0.947		0.618		0.866
P values for Hansen test	0.072		0.408		0.109

***, ** and * signify significant p-values at 0.01, 0.05 and 0.1, correspondingly, and RTB is the risk-taking behavior.

Table 6. DPS-GMM regression analysis for alternative results

Predicted variable	Z Score ROA (RTB 1)		Z Score ROE (RTB 2)		Leverage (RTB 3)
	Coefficient	Corrected SE	Coefficient	Corrected SE	Coefficient	Corrected SE
Lag1.	−0.008	0.130	−0.098	0.108	0.385***	0.144
Lag2.	−0.283***	0.098	−0.271***	0.101
Blau index	0.896**	0.363	0.389**	0.173	−0.285**	0.140
Technical efficiency	0.040	0.474	−0.010	0.334	0.009	0.015
Size of the board	0.035*	0.019	0.104**	0.044	−0.032**	0.016
Independence of the board	0.069	0.318	0.420	0.899	−0.050	0.162
CEO duality	−0.156	0.828	−0.710	0.748	0.024	0.153
Intensity of board activity	−0.184*	0.103	−0.042	0.055	−0.003	0.005
Audit quality	−0.121	0.347	0.046**	0.019	−0.009	0.095
Age of the firm	0.002	0.018	0.003	0.014	0.000	0.001
Size of the firm	0.103	0.899	−0.490	0.597	0.018	0.031
Constant	−0.149	0.709	0.211	0.310	0.028**	0.014
Year	Yes		Yes		Yes
Number of obs	318		318		371
Number of groups	53		53		53
Obs per group: min	6		6		7
Number of instruments	41		41		40
F(16, 52)	4.64***		6.64***		4.65***
P values for AR (1)	0.024		0.018		0.069
P values for AR (2)	0.941		0.601		0.937
P values for Hansen test	0.073		0.425		0.114

***, ** and * signify significant p-values at 0.01, 0.05 and 0.1, correspondingly, and RTB is the risk-taking behavior.

Table 7. Instrumental variables (2SLS) regression

Predicted variable	Z Score ROA (RTB 1)		Z Score ROE (RTB 2)		Leverage (RTB 3)
	Coefficient	SE	Coefficient	SE	Coefficient	SE
Gender diversity	0.308*	0.185	0.361*	0.214	−0.002	0.016
Technical efficiency	0.151	0.972	−0.464	0.732	−0.007	0.054
Size of the board	0.007	0.069	0.044	0.052	−0.016***	0.004
Independence of the board	0.678	0.738	0.315	0.556	0.134***	0.041
CEO duality	−0.654	2.039	0.060	1.535	0.042	0.113
Intensity of board activity	−0.150**	0.054	−0.025	0.041	−0.003	0.003
Audit quality	−0.049	0.315	0.020	0.237	0.033*	0.018
Age of the firm	0.004	0.004	0.020*	0.012	−0.061	0.070
Size of the firm	0.383***	0.109	−0.073	0.082	0.055***	0.006
Constant	−0.415	1.492	2.927	1.124	−0.17152**	0.083
Number of obs	371		371		371
Model Wald chi^2 (11)	67.87***		165.28***		549.76***
R-squared	0.1548		0.3080		0.5971
Root MSE	1.9898		1.4987		.11065

***, ** and * signify significant p-values at 0.01, 0.05 and 0.1, correspondingly, and RTB is the risk-taking behavior.

Table

Variable	1	2	3	4	5	6	7	8	9	10	11	12	13
(1) Z Score ROA	1
(2) Z Score ROE	0.7696***	1
	0.000
(3) Leverage	−0.4162***	−0.6873***	1
	0.000	0.000
(4) Gender diversity	−0.0259	0.0134	−0.1013**	1
	0.5943	0.7825	0.0371
(5) Blau index	−0.0324	0.0112	−0.1005**	0.9716***	1
	0.5062	0.8184	0.0387	0.000
(6) Technical Efficiency	0.1075**	0.0675	−0.0025	−0.0354	−0.0535	1
	0.0268	0.1651	0.9589	0.4669	0.2716
(7) Board size	0.1126*	0.1783***	−0.1854***	−0.0201	0.0684	0.0268	1
	0.0204	0.0002	0.0001	0.6793	0.1595	0.5816
(8) Board independence	0.1434***	0.1066**	0.0962**	−0.1784***	−0.1742***	0.0146	0.3171***	1
	0.0031	0.0282	0.0478	0.0002	0.0003	0.7636	0.000
(9) CEO duality	−0.018	0.0017	−0.0187	−0.0237	−0.0169	−0.0184	−0.0033	−0.1646***	1
	0.7112	0.973	0.7005	0.6261	0.729	0.7057	0.9458	0.0007
(10) Intensity of Board Activity	−0.055	0.0625	−0.0813*	0.1362***	0.1655***	−0.0691	0.3696***	0.1125**	−0.0141	1
	0.2586	0.1992	0.0947	0.005	0.0006	0.1552	0.000	0.0205	0.7719
(11) Audit quality	−0.0249	−0.0797	0.1218**	−0.0171	−0.0415	0.1215**	−0.1328***	−0.0923*	0.019	−0.1716***	1
	0.6086	0.1011	0.0121	0.726	0.3944	0.0123	0.0062	0.0577	0.697	0.0004
(12) Firm age	−0.0161	−0.0534	0.0881*	0.0648	0.0698	0.041	−0.1253***	0.0687	−0.0026	−0.0006	0.0628	1
	0.7408	0.2722	0.0699	0.1829	0.1516	0.3996	0.0098	0.1578	0.957	0.9907	0.1972
(13) Firm size	0.1012**	−0.1043**	0.3912***	−0.0202	0.0183	0.1413***	0.3474***	0.3229***	−0.0044	0.3117***	−0.0603	0.1870***	1
	0.0373	0.0318	0.000	0.6789	0.7075	0.0036	0.000	0.000	0.9284	0.000	0.2156	0.0001

*** p < 0.01, ** p < 0.05, * p < 0.1