The effect of the board diversity on firm performance: An empirical study on the UK

Abstract

This study aims at filling existing research by examining the effect of board composition specially board diversity on firm performance using cross-sectional data from London Stock Exchange (FTSE 350) of non-financial companies with a total observations 3961 companies for the years 2000–2016. To the best of our knowledge, the contribution of this paper is to examine the effect of board diversity (age, gender, education, and nationality) of FTSE 100 and FTSE 250 on firm performance. Our results indicate that age diversity has a negative effect on firm performance, which means that young board members enhance and increase firm performance. Furthermore, education diversity has a negative effect on firm performance. On the other hand, gender diversity has positive effect on firm performance, so if companies increase the number of females in the board of directors, firm performance will increase. Ultimately, our result reveals that nationality diversity has a positive effect on firm performance.

The Nexus between Corporate Governance and Financial Performance of the FTSE 100 Index Entities in the United Kingdom

“…This implies that a good corporate governance practice gives an organization a competitive advantage aimed at improved financial performance. The findings suggests that both ACSz and BGD have significant positive impact on financial performance of FTSE 100 Index entities (ROE), Tobin's Q and Share Price) from 2010-2019 (Aanu et al, 2014;Afza & Nazir, 2014;Adesanmi et al, 2019;Erhardt et al, 2003;Smith et al, 2006;Tornyeva & Wereko, 2012;Low et al, 2015;Kipkoech & Rono, 2016;Gordini & Rancati, 2017;Salloum, 2019;Khan & Subhan, 2019;EmadEldeen et al, 2021).…”

“…Therefore, it can be said that board composition comprises of board diversity and board independence. Board diversity on its own has a series of elements that include gender, age, education and race diversities of a board (EmadEldeen et al, 2021). Gender diversity is a common variable in studies on board diversity (Hsu et al, 2019).…”

“…However, this study shall focus on the influence of gender element of board diversity on companies' profitability. EmadEldeen et al (2021) argued that financial performances of FTSE 100 and 250 non-financial entities from 2000-2016 were positively and significantly influenced by board gender. Similarly, Gordini and Rancati (2017) reported significant positive effect of board gender diversity on the performance of firms in Spain.…”

Does the Inclusion of Disabled Employees Affect Firm Performance? Empirical Evidence from China

“…Social categorization theory believes that diversity has a negative effect on firm performance because diversity may lead to the decrease of team cooperation and the efficiency of the decision-making process [39]. In the context of the including disabled employees in the workforce, people are often reluctant to interact with those with mental health problems and equate mental illness with a tendency towards violence [40].…”

Board gender diversity and firm performance: new evidence from cultural diversity in the boardroom

“…Gender diversity on board has been an imperative topic in firm performance literature (EmadEldeen, Elbayoumi, Basuony, & Mohamed, 2021; Joecks, Pull, & Vetter, 2012). Prior studies have examined the relationship between gender diversity and firm performance from many perspectives like the composition of the board of directors, earning quality and corporate governance (Kılıç & Kuzey, 2016).…”