Affiliations: [a] Glasgow Caledonian University, Glasgow, United Kingdom
| [b] Department of Business, The Higher Colleges of Technology, Emirate of Ras Alkaimah, United Arab Emirates
| [c] Higher Institute of Management of Sousse, Erriadh, Tunis-Tunisia
Correspondence:
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Corresponding author: Tarek Ben Noamene, PhD, Department of Business, The Higher Colleges of Technology, Women’s campus, Emirate of Ras Alkaimah, United Arab Emirates. Tel.: +97 122067137; E-mail: [email protected].
Abstract: BACKGROUND:This paper examines the effects of a board’s diversity on firm financial performance using a sample of 76 companies listed on FTSE100 over the period 2010–2015. This period reflects the years following the financial crisis of 2008 when mounting criticism emerged that weak corporate governance partly explained The Financial Crisis. It is suggested that the Board of Directors’ composition may have played a pivotal role in the Crisis and that Boards that better reflect society perform better. OBJECTIVE:This research examines the impact of gender, age, nationality, and presence of independent directors on firm performance. METHODS:Data on board characteristics were collected from Hemscott, as well as information from the companies’ annual reports and financial database FAME. Using the Generalized Method of Moments, the data were assessed to examine board diversity and firm financial performance. RESULTS:This study consists of 456 observations from 76 listed FTSE 100 companies during the period 2010–2015. Twenty-four companies were excluded due to missing data that related to directors’ attributes after controlling for firm characteristics, board structure, and potential endogeneity issues, the findings support the business case for gender and nationality board diversity. However, no significant associations were found between firm financial performance and board age diversity or board independence. CONCLUSION:This study, although British based, joins a growing global body of evidence that more diverse boards improve firm performance. It is incumbent on practitioners, decision-makers, and politicians to educate and persuade firms’ directors of the merits of more diverse boards.
