Does board demographic diversity influence firm performance? Evidence from Indian-knowledge intensive firms

Abstract

Purpose In the wake of inconsistent findings between board diversity and firm performance, the purpose of this paper is to advance the research by examining the linear and non-linear nature of the relationship between board demographic diversity (gender, age, tenure, and education) and firm performance in Indian knowledge-intensive firms (KIFs). Design/methodology/approach This study uses a panel data set of top KIFs in India that is listed in National Stock Exchange’s Top-200 list for the period 2010-2014. Findings Results indicate that there exists a positive linear relationship between the overall board demographic diversity index (board gender, age, tenure, and education) and firm performance. Among the effects of individual board diversity variables, the authors have found that board age diversity positively whereas education diversity negatively influences firm performance. Furthermore, gender diversity and tenure diversity do not significantly influence the firm performance. Research limitations/implications This study is based on the following demographic factors: gender, age, tenure, and level of education. The authors did not include other demographic variables such as nationality and language. Practical implications This research would help knowledge-intensive companies in designing their corporate boards. The results indicate that companies should have more diverse boards to enhance firm performance. Originality/value To the best of the authors’ knowledge, this is the first research to examine the effect of the overall board diversity index and individual board demographic diversity indices (gender, age, education, and tenure) on firm performance in the context of KIFs in India.

Ibero-American corporate ownership and boards of directors: implementation and impact on firm value in Chile and Spain

“…According to the OCDE statistics for 2016, female share of seats on boards of the largest publicly listed Chilean companies was 4.7%, and in Spain this percentage rises to 20.0%. As suggested by recent academic literature, including more women on boards could bring benefits to corporations in terms of economic value (Kagzi & Guha, 2018). Therefore, we propose the following hypothesis: H4: Everything else constant, increasing the presence of female board members in the board of directors will positively impact firm value.…”

Do Diversity of Directors Improve Market Performance

“…According [39], Tobin's Q produces a viewing window into the company through the market value of the securities issued and captures the longterm impact of company actions. Other researchers, [2] note that the value of future cash flows, which are captured in the market value of company's assets can be predicted by using Tobin's Q. [40] use the ratio of market value of equity plus total debt divide total assets.…”

“…Folowing prior study of [2] and [14], this study uses Blau index to measure directors' diversity variables (gender, ethnic and skill directors). According to [41], Blau index is an appropriate measure for heterogeneity.…”

“…In addition, most prior research focus on the relationship between diversity of directors and company performance [2] and the finding of that study is still in questionable [14].…”

“…Board of Directors has a significant contribution in enhancing value of stakeholders. Their contribution is depend on diversity of board members such as gender, ethnic, and skill [2]. Diversity of directors means that difference in background of directors members in a company [3].…”