When Two Tribes Go To Work: Board Political Diversity and Firm Performance

47 Pages Posted: 14 Jun 2019

See all articles by James Rockey

James Rockey

University of Birmingham - Department of Economics

Nadia Zakir

University of Leicester

Date Written: May 20, 2019

Abstract

A substantial literature has studied how increased diversity in terms of gender, age, education, and race amongst members of firms' boards affects decisions and performance. This paper studies whether ideological diversity in the boardroom affects firm performance. We find that whilst a board with a broader range of political opinions and beliefs is correlated with better performance ceteris paribus, that the causal impact of such an increase in diversity is negative and substantial. This negative effect is still present when diversity is measured excluding top management, and when diversity is defined in terms of the difference between firms' management and non-executive directors. In conclusion we consider the implication of these findings given the recent growth in both political polarization and ideological segregation.

Keywords: Diversity, Corporate Governance, Political Polarization, Firm Performance, Ideology

JEL Classification: G34, G30, L24, D72

Suggested Citation

Rockey, James Charles and Zakir, Nadia, When Two Tribes Go To Work: Board Political Diversity and Firm Performance (May 20, 2019). Available at SSRN: https://ssrn.com/abstract=3396993 or http://dx.doi.org/10.2139/ssrn.3396993

James Charles Rockey (Contact Author)

University of Birmingham - Department of Economics ( email )

University House
University of Birmingham
116 Edgbaston Park Rd, Birmingham B15 2TY
United Kingdom

Nadia Zakir

University of Leicester ( email )

University Road
Leicester, LE1 7RH
United Kingdom

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