To read this content please select one of the options below:

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

Khaled Hosny (Department of Accounting and Information Systems, Qatar University, Doha, Qatar)
Adel Elgharbawy (Department of Accounting and Information Systems, Qatar University, Doha, Qatar)

Accounting Research Journal

ISSN: 1030-9616

Article publication date: 24 December 2021

Issue publication date: 17 June 2022

2263

Abstract

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.

Keywords

Citation

Hosny, K. and Elgharbawy, A. (2022), "Board diversity and financial performance: empirical evidence from the United Kingdom", Accounting Research Journal, Vol. 35 No. 4, pp. 561-580. https://doi.org/10.1108/ARJ-02-2020-0037

Publisher

:

Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

Related articles