Board diversity and financial performance: empirical evidence from the United Kingdom

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Khaled Hosny ◽  
Adel Elgharbawy
Keyword(s):  
Financial Performance ◽  
Gender Diversity ◽  
Ordinary Least Squares ◽  
Study Data ◽  
Executive Directors ◽  
Cross Sectional ◽  
Board Diversity ◽  
Content Type ◽  
Thomson Reuters ◽  
Education Network

Purpose This study aims to investigate the relationship between board diversity and financial performance from a wide perspective, including multiple dimensions of board diversity. Design/methodology/approach The cross-sectional design of the FTSE 350 companies in the period of 2013–2019 was adopted in this study. Data were collected using the Thomson Reuters Eikon and BoardEx databases and analyzed via ordinary least Squares (OLS) regression. Findings Both gender and skill diversity positively affect financial performance. However, other dimensions of diversity, including board tenure, education and network, have no significant influence on financial performance. On the other hand, nationality diversity negatively affects financial performance, and the gender diversity of executive directors negatively affects market-based performance. The results remain unchanged after considering endogeneity concerns and using alternative measures of financial performance. Practical implications This study provides useful insights into the importance of board diversity and its implications for firm performance, which can help in the development of future regulations and policies, such as female representation on the board. The findings can also guide companies toward the best way of diversifying their boardrooms in different aspects. Originality/value This study extensively investigates board diversity, including gender, tenure, skill and education, network and nationality, using the lens of the resource dependency theory. It also extends the scope of the study to examine some characteristics of executive directors, including gender and age. The evidence is provided from one of the leading countries in regulating corporate governance (CG), i.e. the UK.

Board gender diversity, board compensation and firm performance. Evidence from Jordan

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Taha Almarayeh
Keyword(s):  
Firm Performance ◽  
Financial Performance ◽  
Least Squares ◽  
Gender Diversity ◽  
Ordinary Least Squares ◽  
Content Type ◽  
Firm Financial Performance ◽  
Board Compensation ◽  
Board Gender Diversity ◽  
The Impact

Purpose This study aims to analyze the relationship between board gender diversity, board compensation and firm financial performance in the developing country, Jordan, whose cultural, economic and institutional context is very different from most previously analyzed countries’ context. Design/methodology/approach Ordinary least squares regression was used to examine the association between board gender diversity, board compensation and firm financial performance in a sample of 510 firm-year observations during the years 2009–2018. Generalized least squares estimation method was used to confirm that the results are robust. Findings The author provides new evidence that board gender diversity does not contribute to firm financial performance. The author also detects that there is a positive relationship between board compensation on firm financial performance. Originality/value This paper examines the under-researched relationship between board gender diversity, board compensation and firm financial performance. In so doing, the author tries to provide new insights into this relationship within the developing context, the case of Jordan that has a different environment from that of advanced markets. To the best of the researcher’s knowledge, this is almost certainly the first research to investigate the impact of board gender diversity and board compensation on firm financial performance in the Jordanian market. This manuscript is expected to be used as a reference by the regulators and policymakers – both in Jordan and other countries with a similar institutional, cultural setting – to provide a deep understanding of the impact of board gender diversity and board compensation on the firm performance.

Gender diversity and financial performance of Islamic banks

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Huthayfa Nabeel Jabari ◽  
Rusnah Muhamad
Keyword(s):  
Financial Performance ◽  
Least Squares ◽  
Gender Diversity ◽  
Estimation Method ◽  
Supervisory Board ◽  
Ordinary Least Squares ◽  
Least Squares Estimation ◽  
Islamic Banks ◽  
Content Type ◽  
Gender Diverse

Purpose The purpose of this paper is to examine the influence of gender diversity among the board of directors (BOD) and Shariah supervisory board (SSB) members on the financial performance of Islamic banks in Indonesia and Malaysia. Design/methodology/approach Data for a sample of 19 Islamic banks for the period 2010–2018 were collected to test the research hypotheses using pooled ordinary least squares estimation method. Generalized least squares estimation method was used to confirm that the results are robust. This study lagged the explanatory variables by one period to control for potential endogeneity. Findings The findings suggest that Islamic banks with more gender-diverse BOD and SSB are expected to have better financial performance. In addition, this paper finds that an increase in Islamic banks’ size may undermine the positive impact of gender diversity among SSB members on Islamic banks’ financial performance. Research limitations/implications This study was conducted only on Islamic banks in Indonesia and Malaysia owing to data constraints; thus, the results may not be generalizable to Islamic banks in other countries. Practical implications Improving financial performance is crucial for banks, especially for Islamic banks, to sustain their fast-growing share globally. Therefore, the findings of this study are expected to provide insight and understanding in the selection and appointment of BOD and SSB members at Islamic banks. Social implications By having women represented in the BOD and SSB, Islamic banks will benefit equally from valuable abilities across demographic groups in the society. Furthermore, if the members of the BOD and SSB are properly selected, Islamic banks with more gender-diverse boards can effectively contribute to enhancing social welfare of various segments in the society. Originality/value This is the first study, as far as is known to the authors, that provides empirical evidence on the influence of gender diversity among BOD and SSB members on the financial performance of Islamic banks. This paper is expected to be used as a reference by the shareholders and customers of Islamic banks in ensuring that the BOD and SSB have the best optimal composition that maximizes their profits.

Executive directors' pay-performance link and board diversity: evidence from high free cash flow and low-growth firms

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Chwee Ming Tee
Keyword(s):  
Cash Flow ◽  
Least Squares Method ◽  
Gender Diversity ◽  
Free Cash Flow ◽  
Executive Directors ◽  
Corporate Boards ◽  
Board Diversity ◽  
Content Type ◽  
Growth Firms ◽  
And Gender

PurposeThe purpose of this study is to examine whether board diversity can attenuate weaker executive directors' pay-performance link in high free cash flow and low-growth firms (HFCF_LGRW).Design/methodology/approachThis study employed the Malaysian dataset from 2005 till 2016 and the fixed-effect model to investigate the developed hypotheses. The two-stage least squares method (2SLS) is employed to mitigate endogeneity issues.FindingsThis study finds that a positive association between executive directors' pay and firm performance is weaker in HFCF_LGRW firms. However, board diversity, namely ethnic and gender diversity, can mitigate weaker executive directors' pay-performance link, indicating effective monitoring.Originality/valueThis study is among the first to reveal that executive directors' pay-performance link is weaker in firms with HFCF_LGRW growth, consistent with Jensen's (1986) free cash flow hypothesis. However, findings suggest that this agency problem in HFCF_LGRW firms is attenuated by board diversity, namely ethnic and gender diversity. This supports the notion that diversity in corporate boards serves as an effective internal monitor.

Does the board diversity impact bank performance in the MENA countries? A multilevel study

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ayman Issa ◽  
Hesham Yousef ◽  
Ahmed Bakry ◽  
Jalal Rajeh Hanaysha ◽  
Ahmad Sahyouni
Keyword(s):  
Financial Performance ◽  
Educational Level ◽  
Random Effect ◽  
Generalized Method Of Moments ◽  
Ordinary Least Squares ◽  
Bank Performance ◽  
Board Diversity ◽  
Content Type ◽  
Mena Countries ◽  
The Impact

Purpose The purpose of this study is to examine the impact of board diversity (e.g. nationality, gender and educational level) on financial performance for a sample of banks listed in 11 countries in the Middle East and North Africa region. Design/methodology/approach This paper uses the system generalized method of moments estimation approach on the data of banks listed in the MENA countries over the period 2011–2018 to investigate the relationship between board diversity and financial performance. Also, the findings are supported by additional robustness tests, including ordinary least squares, fixed and random effect techniques. Findings The empirical results show that there is a significant relationship between board diversity and financial performance in banks. Specifically, the findings demonstrate that board diversity related to nationality has a significant positive impact on bank performance. The findings also show an insignificant association between gender and educational level diversity and bank performance. The robustness analysis supports the findings of the baseline model. Practical implications The study provides multi-country evidence on the importance of board diversity in the MENA region and it sheds light on possible tracks for future reforms aimed at enhancing the effectiveness of the board’s functions. Originality/value This paper extends the existing literature by providing empirical evidence on the association between board diversity and financial performance of banks in the MENA countries. This paper also provides preliminary evidence on the importance of board diversity to influence financial performance.

Board gender diversity and environmental, social and corporate governance performance: evidence from ASEAN banks

2020 ◽  
Vol 12 (3/4) ◽  
pp. 269-281 ◽  
Author(s):  
Hamdan Amer Al-Jaifi
Keyword(s):  
Corporate Governance ◽  
Social Performance ◽  
Random Effect ◽  
Generalized Method Of Moments ◽  
Gender Diversity ◽  
Ordinary Least Squares ◽  
Board Diversity ◽  
Content Type ◽  
Board Gender Diversity ◽  
The Impact

PurposeThis study examines the associations between board gender diversity and banks' environmental, social and corporate governance performance in the ASEAN context.Design/methodology/approachThe study uses a sample of yearly observations for ASEAN banks over the period 2011–2016. Generalized method of moments (GMM) regression is used for the main models, and the findings are supported by other robustness tests, namely ordinary least squares (OLS) regression and panel models (fixed and random effect regression).FindingsThe findings imply that board gender diversity positively influences corporate governance performance, although it has no impact on the banks' environmental and social performance.Research limitations/implicationsThis study offers insights to regulators, investors and bank managers concerning board diversity and its impact on environmental, social and corporate governance performance. The findings imply that having a specific percentage of female directors on the board positively influences corporate governance performance. However, the impact of gender diversity on environmental and social performance is not supported.Originality/valueFew empirical studies have examined the impact of gender diversity on non-financial performance. This study contributes to the debate on the importance of gender diversity by providing empirical evidence for the impact of board gender diversity on three non-performance measures (environmental, social and corporate governance) for ASEAN banks, a topic not previously examined. There is scant attention to it in ASEAN countries, which have unique characteristics, and there remains a gap in the literature regarding the impact of board diversity among banks in this region. The findings of the study are confirmed by several robustness tests.

Diversity and the Performance of Selected Financial Institutions of Asia

2018 ◽  
Vol 2 (1) ◽  
pp. 1
Author(s):  
Shafaque Fatima ◽  
Saqib Sharif
Keyword(s):  
Financial Institutions ◽  
Positive Impact ◽  
Financial Institution ◽  
Gender Diversity ◽  
Business Case ◽  
Ordinary Least Squares ◽  
Cross Sectional ◽  
Age Diversity ◽  
The Impact ◽  
Nationality Diversity

Linking with the business case for diversity, this study examines whether the top management team (TMT) and the board of directors (BODs) diversity has a positive impact on financial institution (FI) performance in select countries of Asia least researched domain. We use data from 119 financial institutions across Asia for the year 2015, initially 1,447 institutions; however, incomplete data was excluded from final analysis. We use three proxies for diversity, that is, nationality diversity, gender diversity, and age diversity of TMT and BODs. To investigate the impact of TMT and BODs diversity, cross-sectional ordinary least-squares estimation is applied, using Return on Average Assets (ROAA%) as a measure of performance.  We find that nationality diversity and age diversity is positively and significantly related to FIs performance. Our evidence indicates that executives and board members with diverse exposure and younger age improve FIs profitability. However, there is no significant relationship between gender and FIs performance.

Is it attractive to invest in alternative energy? Evidence from a five-factor Fama-French model for regional DJSI and renewable stock indexes

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Antonio Garcia-Amate ◽  
Alicia Ramírez-Orellana ◽  
Alfonso A. Rojo Ramirez
Keyword(s):  
Renewable Energy ◽  
Alternative Energy ◽  
Factor Model ◽  
Five Factor Model ◽  
Private Investment ◽  
Ordinary Least Squares ◽  
Green Economy ◽  
Economic Implications ◽  
Content Type ◽  
Thomson Reuters

PurposeThis study aims to examine the attractiveness of the regional Dow Jones Sustainability Indexes (DJSI) and several renewable energy indexes during December 31, 2010 to December 31, 2019. This study uses a risk-return analysis and a set of explanatory factors. Lastly, this study conducts a comparative analysis of these indexes with conventional indexes. Design/methodology/approachThis study uses data from Eikon, a Thomson Reuters database. To analyze the indexes’ behavior, this study uses the indexes’ annual return as of December 31 for each year. Next, this study estimates the Fama and French’s five-factor model using an ordinary least squares regression for regional DJSI and renewable energy indexes. FindingsThe results show that regional DJSIs delivered returns both above and below conventional indexes. In contrast, renewable energy indexes had high betas and negative returns, making them unattractive to investors. Practical implicationsThe results imply the need for public financing programs that support the transition to a sustainable economy and reduce risk and increase the return on private investment. Social implicationsThis study provides insights for policymakers regarding the importance of sustainability indexes in the transition to a green economy. Originality/valueThis study contributes to the growing literature on Fama and French’s five-factor model of sustainability indexes, especially in the current context characterized by intense green political changes. In particular, this study complements the few studies that have addressed the economic implications of renewable energy indexes in markets.

Board gender diversity: performance and risk of Brazilian firms

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mauro Mastella ◽  
Daniel Vancin ◽  
Marcelo Perlin ◽  
Guilherme Kirch
Keyword(s):  
Firm Performance ◽  
Boards Of Directors ◽  
Gender Diversity ◽  
Ordinary Least Squares ◽  
Firm Risk ◽  
Content Type ◽  
Study Approach ◽  
Female Presence ◽  
Board Gender Diversity ◽  
The Impact

Purpose This study aims to intend to check if female board representation affects performance and risk and to analyse the evolution of the demographic aspects of the presence of women on boards in Brazil. Design/methodology/approach The authors used a sample of 150 Brazilian publicly traded companies from 2010–2018, with different measures of firm performance, firm risk and women’s presence on the board. The study approach is based on a set of ordinary least squares, quantile and panel data regressions. Findings The presence of women on the board has a positive effect on all of our accounting and market performance measures. However, the result of the impact on risk is not conclusive. The study also found that the number of females on the board has a more significant effect at the lower levels of firm performance measured by return on equity, but at the higher levels when measured by Tobin’s Q. Regarding return on assets, the more significant effect happened on the extremes of the performance distribution. The study findings point that market investors place more value in female presence on the board than in director positions. Originality/value By estimating the impact of women’s presence on the boards of directors in firm performance and risk, this study aimed to verify this impact in different aspects of the company. In addition, the authors did so in a sample with many years, making it possible to evaluate the historical evolution of the feminine presence in the boards of administration as well as in the groups of directors, assisting Brazilian legislators with new evidence about the possible impacts of Draft Law 7179/2017.

Does capacity utilisation influence financial performance? A study of Indian public bus transport companies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shivam Kushwaha ◽  
Shankar Prawesh ◽  
Anand Venkatesh
Keyword(s):  
Financial Performance ◽  
Public Transport ◽  
Ordinary Least Squares ◽  
Positive Influence ◽  
Data Envelopment ◽  
Truncated Regression ◽  
Capacity Utilisation ◽  
Content Type ◽  
Unit Increase ◽  
Unused Capacity

PurposeThe objective of the paper is to get a better understanding of capacity utilisation (CU) in Indian public bus companies. More specifically, this paper would be measuring CU and identifying the drivers of the same. Finally, the influence of CU on the financial performance of Indian bus companies is examined.Design/methodology/approachThe study adopted data envelopment analysis (DEA) to measure the CU in Indian public bus companies. Truncated regression was used to identify the drivers of CU. Subsequently, the ordinary least squares (OLS) regression was used to analyse the influence of CU on Indian bus companies' financial performance. The period of study was from 2013 to 17.FindingsThe significant drivers of CU were fleet age, passenger lead and fleet utilisation. Additionally, it was found that CU had a significant positive influence on the financial performance of Indian public bus companies and a unit increase in unused capacity has led to an increase of 7% in the operating ratio of the bus companies.Practical implicationsGetting insights into CU, apart from technical efficiency, is of immense use to both public transport researchers and practitioners. Managers of public bus companies should be mindful of CU as it has a significant bearing on their financial performance.Originality/valueThis is the first study in public transport, which establishes the linkage between CU and financial performance. Besides, a modified measure of cost-efficiency has also been conceptualised in this study.

scholarly journals Board diversity and financial performance: A graphical time-series approach

2015 ◽  
Vol 18 (3) ◽  
pp. 425-448 ◽  
Author(s):  
Cobus CH Taljaard ◽  
Michael JD Ward ◽  
Chris J Muller
Keyword(s):  
Time Series ◽  
Human Capital ◽  
Financial Performance ◽  
Demographic Data ◽  
Gender Diversity ◽  
Fiduciary Duty ◽  
Share Price ◽  
Theoretical Frameworks ◽  
Data Set ◽  
Board Diversity

Directors need to guide and govern companies on behalf of and for the benefit of shareholders and stakeholders. However questions remain as to whether boards with higher levels of diversity amongst directors are better equipped to fulfil their fiduciary duty than boards with lower levels of diversity. This research examines whether increased levels of diversity within boards are associated with improved financial performance to shareholders. From the literature, several theoretical frameworks that could explain why increased diversity might or might not lead to improved board performance were noted. Share returns and directors’ demographic data were collected for a sample of the largest 40 companies listed on the JSE from 2000 to 2013. This data was analysed using Muller and Ward’s (2013) investment style engine by forming portfolios of companies based on board-diversity constructs. Time-series graphs of cumulative portfolio market returns were analysed to determine if the diversity dimensions tested were associated with improved share performance. The results show that racial diversity within boards is not associated with financial performance. However, increased gender diversity and younger average board age are shown to have strong associations with improved share price performance. These findings are mainly attributed to agency-, resource dependency, human capital and signalling theories. Increased diversity is seen to bolster independence and lessen agency problems. Rising diversity levels also enlarge boards’ external networks, allowing diverse stakeholders’ needs to be accommodated and limiting dependence on strategic resources. Finally, as human capital is increased, the collection of different skills and experiences are associated with better performance. The results, based on a more robust methodology and improved data set, provide additional support to previous studies.

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