WOMEN independent directors have a direct positive effect on the financial performance of companies, according to a study conducted by the National University of Singapore (NUS) Business School.

It is the first in Singapore to establish a relationship between board gender diversity and a company's financial performance.

The study analysed data from 500 companies listed in Singapore over the past five years, excluding real estate investment trusts and business trusts. 

According to the study, if the average number of woman independent directors on a board increases by one, the company's financial performance, as measured by Tobin's Q ratio of market value to book value, would rise by 11.8 per cent. A useful measure to value a company, the Q Ratio links the market value of a firm to the replacement cost of its assets.

The findings of the study were presented on Friday at a seminar on board gender diversity organised by the Diversity Action Committee (DAC), a body set up by the Singapore government to address female under-representation on company boards. Women made up just 10.8 per cent of listed company directors last year, said the DAC.

The study, led by NUS Business School associate professor Lawrence Loh, also found that board gender diversity has a "positive and statistically significant" impact on corporate governance, which in turn has a similar effect on financial performance.

It said that the presence of one woman independent director on boards, compared to having no woman independent director, leads to a higher corporate governance score of 55.12, which in turn improves the financial performance of a company. The corporate governance score for having no woman independent director on boards is 45.53.

"This study is timely as proposed revisions to the Code of Corporate Governance promote diversity policy transparency and board renewal," said Loh Boon Chye, DAC chairman and Singapore Exchange CEO.

"We hope that companies will now appreciate the benefits and take action to bring more women onto their boards," he said.