The influence of board diversity in human capital and social capital in crisis

Abstract

Purpose

The purpose of this paper is to investigate whether board diversity in human capital and social capital effectively mitigates the negative impacts of crises on firm performance.

Design/methodology/approach

Cross-sectional time series data for 2001-2011 are collected from all the tourism-related public listed firms across four Asian markets. Linear and non-linear effects of board diversity on firm performance are examined.

Findings

This study finds that board diversity in human capital and social capital does not significantly improve firm performance, but it significantly mitigates the negative impacts of crises striking firm performance. The effects of board diversity show difference with sudden and gradual crises. The effects of board diversity show non-linear when tackling sudden crises. Only high levels of board diversity in external network ties are effective to tackle gradual crisis.

Practical implications

The best composition of board capital should depend on the external environment. Only through adopting excessively high board diversity in social capital is suitable when the firms have lower frequency of industry cycle, or prone to the crisis which is likely to sustain. Instead, a moderate level of board diversity in human and social capital is crucial if the firms are always situated in harsh circumstances such as high competition environment, or prone to face industrial bubble.

Originality/value

This study directly investigates board diversity in human capital and social capital, rather than investigating through the proxy of age, gender, ethnicity, etc. This study sheds light on the influence of the board diversity in the crisis periods, the findings are enhanced with the classification of crises into sudden and gradual-onset type.

Citation

Ooi, C.-A., Hooy, C.-W. and Mat Som, A.P. (2017), "The influence of board diversity in human capital and social capital in crisis", Managerial Finance, Vol. 43 No. 6, pp. 700-719. https://doi.org/10.1108/MF-08-2016-0226