Types of director, board diversity and firm performance
ISSN: 1472-0701
Article publication date: 17 January 2020
Issue publication date: 24 February 2020
Abstract
Purpose
The purpose of this paper is to investigate the effect of board diversity on firm performance.
Design/methodology/approach
From different theories perspective and based on data collected about the composition of board of directors in Spanish non-financial firms, the paper determines statistically the relationship between board diversity and performance for the period 2005-2015.
Findings
The results reveal differences between inside and outside board members in terms of the performance impact of board diversity. Thus, while age diversity has a positive effect on firm performance in both, insider and outsider directors, nationality mix is associated with higher performance levels just in the case of insiders. In addition, educational diversity seems to have a negative effect on performance for supervisory directors. On the contrary, the authors do not find any evidence about a possible influence of gender diversity on performance.
Research limitations/implications
The authors are just taking some board’s attributes, but the concept of board diversity is a very wide one. In this regard, less traditional methodologies that do not rely on extant archival databases may be necessary to get a deeper understanding of the impact of boards on firm’s performance.
Practical implications
This study demonstrates that the claim of “one size fits all” often implicitly stated by regulators and advisors is misleading. Board’s attributes analysis over the boardroom as a whole turns out in too simplistic conclusions. This is particularly important for regulators: a rigorous analysis should be performed before including general recommendations about, for instance, the age or the board tenure in corporate governance codes.
Social implications
As diverse boards contribute to a greater social value, the paper analyses the performance consequences of demographic diversity.
Originality/value
The paper analyses the firm performance impact of diversity among insider directors, on the one hand, and outsider directors, on the other. Although there is a clear difference between the roles assigned to insider and outsider directors, to the authors’ knowledge, there has been no analysis of the firm performance effect of the diversity of each type of director using the same sample and methodology.
Keywords
Acknowledgements
The authors acknowledge the financial support from the Spanish Government (Projects ECO2017-84864-P and MTM2015-71217-R).
Citation
Fernández-Temprano, M.A. and Tejerina-Gaite, F. (2020), "Types of director, board diversity and firm performance", Corporate Governance, Vol. 20 No. 2, pp. 324-342. https://doi.org/10.1108/CG-03-2019-0096
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited