The association between diversity within boards and company financial performance : a graphical time-series approach

[摘要] Directors need to guide and govern companies on behalf of and for the benefit ofshareholders and stakeholders (Adams, Hermalin, & Weisbach, 2010; 'Duties ofdirectors, 2011), but questions remain in academic literature (Carter, D'Souza,Simkins, & Simpson, 2010; Jhunjhunwala & Mishra, 2012; Nielsen & Nielsen, 2013)whether boards with higher levels of diversity amongst directors are better equipped tofulfil their fiduciary duty than boards with lower levels of diversity.This research report set out to determine if increased levels of diversity within boards isassociated with improved financial performance of companies. To accomplish thatliterature was reviewed to confirm the function of boards, determine dimensions ofdiversity that could affect board performance and to identify theoretical frameworks thatcould explain why increased diversity might lead to improved board performance.Share price, dividend payout and directors' demographic data was collected for asample of 40 companies listed on the JSE from 2000 to 2013 and subjected to testsusing Muller and Ward's (2013) investment style engine in a quasi-experimental designcombining cross-sectional and longitudinal methodologies. Graphical time-seriesrepresentations of cumulative portfolio market returns were analysed to determine ifdiversity dimensions tested were associated with improved company financialperformance.The results showed that for the selected sample, racial diversity within boards does notcontribute to improved financial performance. Increased gender diversity anddecreased average board age were shown to have strong associations with improvedcompany performance.

[发布机构] University of Pretoria