ENTERPRISE S URVEYS ENTERPRISE NOTE S ERIES GENDER Female Top Managers in Malaysia 2018 Mohammad Amin and Amanda Zarka R ecent rm-level survey data collected by the World Bank’s Enterprise Surveys (ES) shows that about a quarter of all Malaysian rms have a female top manager. Female top managers are more likely to be found in large rms than in small rms, in the retail sector vs. the rest of the economy, and in exporting than in non-exporting rms. In contrast to what the literature might suggest, in Malaysia, rms with a female top manager have higher labor productivity on average than rms with a male top manager. However, the business environment, along several important dimensions such as the regulatory burden, corruption, and the crime and security environment, is ENTERPRISE NOTE No . 36 more di cult for rms with female top managers. Introduction Malaysian firms are more likely to have a Gender inequality is an issue that persists in every female top manager than firms in country around the world (Hausmann et al., 2006). In upper-middle-income countries rms, gender inequality at the managerial level occurs Over a quarter of all rms in Malaysia have a female when men receive a disproportionate share of managerial top manager. is is signi cantly higher than upper- and positions, greater job security, and higher wages, among lower-middle-income countries, where only 17 percent other things. Studies show that women tend to be and 19 percent of the rms have a female top manager, respectively ( gure 1). However, Malaysia still falls concentrated in low-paying and vulnerable jobs, and are signi cantly behind the EAP region, where on average 40 less likely to be found in dynamic and high-paying percent of the rms have a female top manager. Within positions such as CEOs and managers of companies the EAP region, Malaysia only outperforms Indonesia and (World Bank 2011, Elson 1999, Blau and Kahn 2003). Vietnam, although not signi cantly so, where only 22 Using the World Bank’s Enterprise Survey (ES) data,1 percent of rms have a female top manager. All these this Enterprise Note analyzes various issues related to results continue to hold qualitatively even after private rms in Malaysia having a female (vs. male) top accounting for di erences in basic rm characteristics manager, i.e. the main decision-maker. Malaysia’s mentioned above. In short, while Malaysia has a reasonable share of female top managers by international experience is benchmarked against the average across standards, the regional experience suggests it could do WORLD BANK GROUP countries for the following comparator groups: countries even better. in the East Asia & Paci c (EAP) region,2 upper- middle-income countries, and lower-middle-income Over a quarter of Malaysian firms Figure 1 countries.3 Unless otherwise stated, all gures and have a female top manager discussion below refer to the private sector as covered by % of firms with a female top manager 45 40% the ES. Results discussed for Malaysia and the comparator 40 groups are based on regression analysis. e statistical 35 30 signi cance of the results, and their robustness with 26% 25 regards to di erences in basic rm characteristics, which 20 17% 19% include rm size (log of number of employees), age of the 15 rm, percentage of foreign ownership of the rm, and the 10 5 industry to which the rm belongs, are discussed. 0 roughout, the term “signi cant” or “signi cantly” Malaysia EAP Upper-middle Lower-middle income income means statistical signi cance at the 10 percent level or less. Source: Enterprise Surveys (various years). Figure 2 Greater gender parity in tertiary Figure 3 Large firms in Malaysia are much more education is associated with a higher likely to have a female top manager percentage of firms with a female than small- and medium-sized firms top manager 45 41% % of firms with a female top manager 60 41% % of firms with a female top manager (residuals) 40 50 35% 34% 35 40 30 27% 25% 30 25 21% 20 18% 20 16% 15% MYS 15 13% 10 10 9% 0 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00 5 -10 0 Malaysia EAP Upper-middle Lower-middle -20 income income -30 Small (<20 workers) Medium (20 to 99 workers) Large (100+ workers) Gender parity in tertiary education (residuals) Source: Enterprise Surveys and World Development Indicators, World Source: Enterprise Surveys (various years). Bank (various years). Note: “MYS” in the figure denotes Malaysia. The graph is a partial scatter plot of the relationship between the percentage of firms with a female top manager in the country and gender parity in tertiary education. The relationship is obtained after controlling for differences in GDP per capita (log values). The positive relationship shown in the figure is statistically significant at the 1 percent level. For its level of education among women large rms are more visible, and hence less likely to discriminate against women candidates for the top relative to men, Malaysia outperforms other manager position. However, it is also possible that large countries in the proportion of rms are more hierarchical – making it di cult for female-managed firms women to reach the top managerial position, as they often Education is one of the most important determinants fall behind men in networks, training, and relevant job of a women’s career path. erefore, education is key to experience. closing the gender gaps in income and employment e ES data show that in the case of Malaysia, there is (World Bank 2011). For higher levels of gender parity in a positive and signi cant relationship between rm-size tertiary education, we expect the percent of female top (log of number of employees) and the tendency of having managers to increase signi cantly (see Amin and Islam a female top manager. Close to 41 percent of large rms in 2016). is positive and signi cant relationship is shown Malaysia have a female top manager as compared with in gure 2, and it continues to hold even after accounting only 25 percent of small-sized rms and 27 percent of for di erences in GDP per capita across countries and medium-sized rms ( gure 3). In contrast, the stated basic rm characteristics.4 e relationship is stronger in relationship is the opposite in the comparator groups and Malaysia than in other countries. at is, as more females statistically signi cant except for the EAP region ( gure receive tertiary education (relative to men), even more are 3). All the results discussed in this paragraph continue to hired as top managers in Malaysia than in other countries. hold even after accounting for di erences in basic rm characteristics. Bucking the international trend, large firms in Malaysia are more likely to have a female top Like other countries, retail firms in Malaysia manager than small firms are much more likely to have a female top manager than firms in manufacturing and Firm-size is considered an important proxy measure and determinant of various rm characteristics. For other services sectors instance, large rms – measured by annual sales or A large literature exists on the segregation of men and number of employees – are often associated with greater women workers by occupation as well as industry (World exporting activity, innovation and R&D, productivity etc. Bank 2011, Hsieh et al. 2013, Randall 2012). In fact, However, it is not clear how rm-size a ects the tendency using the ES data for a large cross-section of countries, of having a female top manager. One possibility is that Amin and Islam (2014) report that the tendency of having 2 a female top manager is much higher in the retail sector Corruption is another important area where rms than in the rest of the economy (other services and with a female top manager in Malaysia fare worse. In the manufacturing). is holds in Malaysia too, where about ES, respondents were asked if rms pay bribes to public 35 percent of retail rms have a female top manager, o cials to “get things done” as well as how much. A signi cantly higher than the 21 percent of rms in the rest signi cantly higher proportion of rms with a female top of the economy (28 percent in manufacturing and 20 manager in Malaysia reported paying such bribes, percent in the other services sectors). e comparator compared with rms with a male top manager (36 percent groups exhibit a similar result, except for the EAP region vs. 17 percent). Although the di erence is not signi cant, where the di erence is not signi cant. Moving beyond bribes paid as a percentage of rms’ annual sales is sectors, one area where Malaysia stands out over quantitatively much higher for rms with a female top comparators is the signi cantly higher proportion of rms manager than a male top manager (7 percent vs. 3 with a female top manager among exporters (43 percent) percent). In contrast, in the comparator groups, the compared with non-exporters (24 percent). In contrast, gender-based gap for both the corruption variables is comparator groups do not show any noticeable di erence much smaller, insigni cant, and often favors rms with a in these proportions. Accounting for di erences in the female top manager. Figure 4B illustrates the point. e basic rm characteristics does not make any qualitative ndings for corruption for Malaysia and the comparator di erence to the ndings discussed in this paragraph. countries remain qualitatively unchanged even after accounting for di erences in basic rm characteristics. Firms with a female top manager experience a In terms of crime and security, rms with a female top more difficult business environment than firms manager in Malaysia are more likely to experience crime with a male top manager in several ways and spend on security, than rms with a male top manager; as a percentage of rms’ annual sales, losses due e ES data show that for several business to crime as well as expenses on security are higher for rms environment measures, rms with a male top manager in with a female top manager than a male top manager. Malaysia enjoy a better business environment than rms While these gender-based di erences are quantitatively with a female top manager. First, the time tax – an overall large, they are not always statistically signi cant. For measure of the regulatory burden on private rms – is instance, losses due to crime equal 2.4 percent of annual signi cantly higher for Malaysian rms run by females sales for a typical rm with a female top manager than males (7.1 percent vs. 2.9 percent, respectively). e compared with 1.2 percent for a rm with a male top time tax is higher for female-managed rms in the upper- manager. e di erence is quantitatively large but not and lower-middle-income countries and lower in the EAP signi cant. For the comparator groups, the results are region, but these di erences are quantitatively small and mixed, as rms with a female top manager face tougher not signi cant ( gure 4A). Accounting for di erences in crime and security situations in some cases and better basic rm characteristics does not make any di erence to situations in others. However, these gender-based the qualitative nature of the results discussed above for the di erences are typically small in magnitude and time tax. statistically insigni cant. Figure 4 Firms with a female top manager in Malaysia exhibit a higher regulatory burden and seem to face greater corruption than firms with a male top manager Figure 4A Figure 4B Bribes firms pay to get things done as % of their annual sales (firm-level average) % of firms' senior management's time 16 14.3% 8 6.8% spent in dealing with goverment 13.2% regulations (firm-level average) 14 7 11.3%11.7% 12 6 10 8.6% 5 7.6% 8 7.1% 4 3.0% 6 3 2.0% 1.8% 4 2.9% 2 1.0% 1.0% 2 1 0.6% 0.7% 0 0 Malaysia EAP Upper-middle Lower-middle Malaysia EAP Upper-middle Lower-middle income income income income Male-managed firms Female-managed firms Male-managed firms Female-managed firms Source: Enterprise Surveys (various years). 3 For instance, in Malaysia, the combined crime losses – the so-called “female rm under-performance and security expenses for a typical rm with a female top hypothesis”. Possible explanations could be the relatively manager and with a male top manager equals 6 percent small size of female-owned or -managed rms, and 2.2 percent, respectively. e gender-based gap in the discrimination that women often face in access to nance comparator countries is much smaller where the and public infrastructure facilities, social norms and laws corresponding gures (for rms with a female or male top that often favor men over women, and providing care at manager, respectively) are 1.4 percent and 1.8 percent in home that is largely borne by women. However, most of the EAP region, 2.2 percent and 2.1 percent in the this literature focuses on developed rich countries (see upper-middle-income group, and 4.1 percent and 3.9 Robb and Wolken 2002, Sabarwal and Terrell 2008). percent in the lower-middle-income group. e e ES shows that in the case of Malaysia, labor qualitative nature of the results discussed in this paragraph productivity as de ned by annual sales per worker is much does not change when accounting for di erences in basic higher for rms with a female rather than a male top rm characteristics. manager (USD 17,965 and USD 12,369, respectively; median values). is holds despite the fact that A comprehensive measure of credit-constrained rms female-managed rms face a more di cult business that factors in why rms do not apply for loans shows that environment in several ways (discussed above), suggesting rms with a female top manager tend to face greater that other factors that a ect productivity dominate. di culties in obtaining nance in Malaysia. About 47 However, this productivity gap is not signi cant, and is percent of rms with a female top manager in Malaysia are driven largely by the retail sector. ese ndings hold even credit constrained (partially or fully), compared with a after accounting for di erences in basic rm much lower 36 percent of rms with a male top manager. characteristics. While the di erence is large, it is not signi cant. In Higher productivity among rms with a female top contrast, there is almost no di erence in the proportion of manager is observed in the individual sectors ( gure 5B). rms with a female rather than male top manager that are e productivity di erence is large and signi cant for credit constrained among upper middle income or lower retail rms, and this holds even after accounting for middle-income groups. For the EAP region, the di erences in basic rm characteristics. For the proportion is lower among rms with a female rather than manufacturing sector and the other services sectors, the male top manager (33 percent vs. 38 percent, productivity gap is noticeable but not signi cant; even respectively), although not signi cantly so. e qualitative quantitatively, it becomes much smaller when accounting nature of the results in this paragraph is una ected when for di erences in basic rm characteristics. accounting for di erences in basic rm characteristics. In the EAP region, the productivity level is roughly the same for rms with a female or a male top manager. In Labor productivity is higher for firms with a the upper- and lower-middle-income countries, the female top manager, a result largely driven by productivity level is somewhat lower for rms with a female top manager ( gure 5A). ese productivity retail-sector firms di erences in the comparator groups are not signi cant. Studies comparing the productivity of female- vs. Results discussed here for the comparator groups are male-owned or -managed rms seem to suggest that qualitatively unchanged even after accounting for productivity is lower for rms with a female top manager di erences in basic rm characteristics. Figure 5 Female-managed firms have higher productivity than male-managed firms in the retail sector in Malaysia Figure 5A Figure 5B 25 22.7 40 34.8 Annual sales per worker 35 20 Annual sales per worker ('000 USD, median) 29.7 ('000 USD, median) 30 15.2 15.2 25 15 13.0 11.7 12.1 20 18.0 16.2 14.6 10 15 12.4 12.3 12.3 10 5 5 0 0 Malaysia EAP Upper-middle Lower-middle Manufacturing Retail Other services income income Female top manager Male top manager Female top manager Male top manager Source: Enterprise Surveys (various years). 4 Conclusion References Over a quarter of all rms in Malaysia have a female Amin, Mohammad and Asif Islam (2016), “Women Managers and top manager. e tendency of having a female top e Gender-Based Gap in Access to Education: Evidence from Firm-Level Data in Developing Countries”, Feminist Economics manager in Malaysia is particularly high among large 22(3): 127-153. rms, exporting rms, and rms in the retail sector. ere Amin, Mohammad and Asif Islam (2014), “Are ere More Female is no evidence that rms with a female top manager are Managers in the Retail Sector? Evidence from Survey Data in less productive than rms with a male top manager; in Developing Countries,” Journal of Applied Economics 17(2): 213-228. fact, the opposite result holds and is largely driven by the Blau, Francine D., and Lawrence M. Kahn (2003), "Understanding retail sector. One worrisome feature is that across many the International Di erence in the Gender Pay Gap," Journal of important dimensions of the business environment, such Labor Economics, 21(1) 106-144. as regulatory burden, corruption, and crime and security, Elson, D. (1999), “Labor Markets as Gendered Institutions: Equality, female top managers in Malaysia tend to work in rms E ciency and Empowerment Issues”, World Development, 27(3): 611-627. that experience a more di cult business environment Hausmann, R., L. D. Tyson, and S. Zahidi (2006), e Global Gender than rms with male top managers. Policy measures Gap Report 2006, World Economic Forum, Geneva, Switzerland. aimed at improving the business environment faced by Hsieh, Chang-Tai, Erik Hurst, Charles I. Jones and Peter J. Klenow rms with female top managers may therefore be needed (2013), “ e Allocation of Talent and U.S. Economic Growth,” NBER Working Paper No. 18693. to maximize the contribution of females as top managers. Rendall, Michelle (2012), “Structural Change in Developing Countries: Has it Decreased Gender Inequality?” World Notes Development, 45:1-16. Robb A., and J. Wolken (2002), “Firm, Owner and Financing 1. Enterprise Surveys are designed to be representative of the Characteristics: Di erences between Male and Female-owned non-agricultural and non- nancial formal (registered) private Small Businesses,” Working Paper, Federal Reserve Board of sector of the economy. Note that the survey does not cover rms Governors. with less than ve employees or those in the informal sector. e Sabarwal, Shwetlana and Katherine Terrell (2008), “Does Gender surveys are strati ed by rm-size (small, medium, and large), Matter for Firm Performance? Evidence from Eastern Europe and sector, and location within the country. e surveys follow a Central Asia,” IZA Discussion Paper Series No. 3758. common sampling methodology and a common questionnaire, World Bank (2011), Gender Equality and Development, World allowing for cross-country comparability. More information on the Development Report 2012, World Bank, Washington DC. surveys and the raw data can be obtained from www.enterprisesurveys.org. 2. e EAP region comprises the six large economies in the region for which data are available. ese are Cambodia, Indonesia, Lao PDR, the Philippines, ailand, and Vietnam. e EAP regional averages exclude Malaysia. 3. e upper-middle-income and lower-middle-income classi cation follows the World Bank, excluding Malaysia and countries already included in the EAP comparator group. ere are 45 countries in the lower-middle-income group and 41 in the upper-middle- income group. Due care is taken to ensure that the results discussed for the various comparator groups are not unduly a ected by outlier countries. 4. Gender parity in tertiary education is de ned as the ratio of gross enrollment rate in tertiary education for women to men. Data source is WDI, World Bank and for the years covered by the ES. e Enterprise Note Series presents short research reports to encourage the exchange of ideas on business environment issues. e notes present evidence on the relationship between government policies and the ability of businesses to create wealth. e notes carry the names of the authors and should be cited accordingly. e ndings, interpretations, and conclusions expressed in this note are entirely those of the authors. ey do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its a liated organizations, or those of the Executive Directors of the World Bank or the governments they represent. Global Knowledge & Research Hub in Malaysia 5