Board Diversity and Its Long-Term Effect on Firm Financial and Non-Financial Performance
35 Pages Posted: 28 Nov 2014 Last revised: 17 Apr 2015
Date Written: April 15, 2015
The legislators and regulatory bodies across the globe are mandating public disclosure on diversity or initiating to impose quotas on board structure to enhance gender and ethnic diversity. In this research study, we attempt to fill the void in the literature by investigating the impact of gender and board diversity on long-term firm financial performance and nonfinancial performance which is not addressed in prior studies. Using observations from 2003-2012, we find that a more gender and ethnically diverse board may enhance a firm’s performance on social, environmental and governance dimensions but increasing board diversity does not necessarily result in better financial performance for the firm. Our findings are consistent with the arguments presented in the literature that boards with higher gender and ethnic diversity will be more sensitive to stakeholders other than just shareholders, hence enhancing a firm’s non-financial performance. These findings suggest that improvement in non-financial performance dimensions may bring benefits to the society, in general, and to the firm in longer term.
Keywords: board diversity, gender, financial performance, non-financial performance, corporate social responsibility, corporate governance
JEL Classification: G30, M41, M48
Suggested Citation: Suggested Citation