Board Composition and Financial Performance: Uncovering the Effects of Diversity in an Emerging Economy

By J. Mahadeo, T. Soobaroyen, Vanisha Oogarah Hanuman. Journal of Business Ethics, 2011

498 citations recorded by the source corpus.

We examine the key elements of board diversity (or heterogeneity) amongst listed companies operating in an emerging economy (Mauritius) and the extent to which these influence financial performance. Specifically, we ask whether there is evidence of tangible benefits in pursuing a strategy of board diversity in terms of gender-, age-, educational background and independence in a corporate context which has long been dominated by family-led and ‘closed’ boardrooms. In light of recent corporate governance developments which appear to foster greater diversity, we examine data from the 2007 annual reports of all 42 companies listed on the Stock Exchange of Mauritius. We find that (i) women remain poorly represented on boards (ii) there is a relatively satisfactory level of heterogeneity in terms of educational background, age and independence in relation to developed countries. We also find significant regression coefficients for all four variables in terms of their impact on short-term performance. However, these relationships are characterised by both negative and positive impacts thereby leading to discussions on the validity of a strict heterogeneous or homogeneous board composition in the context of a developing economy.

Subfields: Accounting, Gender Studies, Organizational Behavior and Human Resource Management

View Paper: https://www.semanticscholar.org/paper/f329b4d14fe4f84af59b92c87ff3baa0735147ce

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

In Gender Studies

In Organizational Behavior and Human Resource Management

Citations in the corpus

Black Economic Empowerment Disclosures by South African Listed Corporations: The Influence of Ownership and Board Characteristics (2012, background): “Similarly, the positive link between the other board diversity proxies (BDIVA, BDIVED and BDIVO) and BCSRD adds to the ﬁndings (e.g., Carter et al. 2003; Mahadeo et al. 2012) that boards of diverse age, educational and occupational backgrounds impact positively on organissational outcomes.”
Women on the Board and Managers’ Pay: Evidence from Spain (2015, background): “In the academic field, while some studies have examined the effect of gender diversity on firm performance (Francoeur et al. 2008; Mahadeo et al. 2012), no clear conclusions have been reached.”
Corporate Governance and Performance in Socially Responsible Corporations: New Empirical Insights from a Neo‐Institutional Framework (2013, unknown): “(religion, education, and occupation) (Mahadeo et al., 2012).”
The influence of board characteristics on sustainability reporting Empirical evidence from Sri Lankan firms (2014, background): “likely to have a positive impact on firms (Adams and Ferreira, 2009; Mahadeo et al., 2012; Carter et al., 2003).”
Does the presence of independent and female directors impact firm performance? A multi-country study of board diversity (2016, background): “…Erhardt et al. (2003), Carter et al. (2003), Campbell and Mı́nguez-Vera (2008, 2010), Carter et al. (2010), Kang et al. (2010), Gul et al. (2011) and Mahadeo et al. (2012) Lükerath-Rovers (2013), Ntim (2013), among others, report a positive relationship between gender-diversified boards and firm…”
The Impact of Board Characteristics on the Financial Performance of Tanzanian Firms. (2018, background): “Also, it supports the agency theory that women on boards are argued to be more risk-averse than men (Levi et al., 2013), especially when making investment decisions such as mergers and acquisitions (Mahadeo et al., 2012; Levi et al., 2013).”
Board Age and Gender Diversity: A Test of Competing Linear and Curvilinear Predictions (2014, methodology): “Organizational performance was measured using objective performance measures of employee productivity and return on assets (e.g., Mahadeo et al., 2012; Shrader et al., 1997).”
Board diversity and firm performance: evidence from the U.K. SMEs (2017, background): “On the one hand, Ararat, Aksu, and Cetin (2010) and Mahadeo, Soobaroyen, and Hanuman (2012) found a positive relationship between age diversity and firm performance in Turkey and Mauritius, respectively.”
Comprehensive Board Diversity and Quality of Corporate Social Responsibility Disclosure: Evidence from an Emerging Market (2017, background): “According to Mahadeo et al. (2012), an elderly group of directors will have more experience, networks and ﬁnancial resources, while the middle-aged group is in charge of the main executive responsibilities, and a younger group develops its knowledge of the business.”
Age diversity, directors' personal values, and bank performance (2016, background): “There is some evidence that age-diverse boards lead to improved firm financial performance (Ararat et al., 2010; Kim and Lim, 2010; Mahadeo et al., 2012) by providing comprehensive resources to the board, 3 Increasing attention has been recognized to board diversities by gender (Erhardt et al.,…”
Board composition and forms of innovation: does diversity make a difference? (2012, background): “We also controlled for several board characteristics most often investigated in relation to the influence of board diversity (Kang et al., 2007; Mahadeo et al., 2012) and in particular in studying the relationship between board diversity an innovation (Miller and Triana, 2009; Torchia et al.”