Email this article 
Hide
Show all
Original Research
Board diversity and financial performance: A graphical time-series approach
Submitted: 21 February 2014 | Published: 25 August 2015
About the author(s)
Cobus CH Taljaard, GIBS University of Pretoria, South AfricaMichael JD Ward, GIBS University of Pretoria, South Africa
Chris J Muller, GIBS University of Pretoria, South Africa
Full Text:
PDF (2MB)Abstract
Directors need to guide and govern companies on behalf of and for the benefit of shareholders and stakeholders. However questions remain as to whether boards with higher levels of diversity amongst directors are better equipped to fulfil their fiduciary duty than boards with lower levels of diversity. This research examines whether increased levels of diversity within boards are associated with improved financial performance to shareholders. From the literature, several theoretical frameworks that could explain why increased diversity might or might not lead to improved board performance were noted. Share returns and directors’ demographic data were collected for a sample of the largest 40 companies listed on the JSE from 2000 to 2013. This data was analysed using Muller and Ward’s (2013) investment style engine by forming portfolios of companies based on board-diversity constructs. Time-series graphs of cumulative portfolio market returns were analysed to determine if the diversity dimensions tested were associated with improved share performance. The results show that racial diversity within boards is not associated with financial performance. However, increased gender diversity and younger average board age are shown to have strong associations with improved share price performance. These findings are mainly attributed to agency-, resource dependency, human capital and signalling theories. Increased diversity is seen to bolster independence and lessen agency problems. Rising diversity levels also enlarge boards’ external networks, allowing diverse stakeholders’ needs to be accommodated and limiting dependence on strategic resources. Finally, as human capital is increased, the collection of different skills and experiences are associated with better performance. The results, based on a more robust methodology and improved data set, provide additional support to previous studies.
Keywords
Metrics
Total abstract views: 6749Total article views: 3049
Crossref Citations
1. A review of accounting research in internationalising journals in the South African region
Charl J. De Villiers, Pei-Chi K. Hsiao
South African Journal of Economic and Management Sciences vol: 20 issue: 1 year: 2017
doi: 10.4102/sajems.v20i1.1729
2. Non-Home-Base Internationalization and Firm Performance in the Hospitality Industry: The Moderating Role of Board Capital
Hyoung Ju Song, Ngoc Tran Nguyen, Bora Kim, Jihwan Yeon
Cornell Hospitality Quarterly vol: 67 issue: 2 first page: 169 year: 2026
doi: 10.1177/19389655251405170
3. The role of women on board of directors and firm performance: Evidence from Saudi Arabia financial market
Ebrahim Mohammed Al-Matari, Mushari Hamdan Alosaimi
Corporate Governance and Organizational Behavior Review vol: 6 issue: 3 first page: 44 year: 2022
doi: 10.22495/cgobrv6i3p4
4. Does Female on Board Affect M&A Participating Firms’ Performance? Empirical Evidence from India Using Dynamic Panel Data Analysis
Sarika Kumar, Sheeba Kapil
The Indian Economic Journal vol: 72 issue: 4 first page: 672 year: 2024
doi: 10.1177/00194662241238504
5. Board heterogeneity and corporate performance: An insight beyond agency issues
Farheen Akram, Muhammad Abrar ul Haq, Vinodh K Natarajan, R. Stephen Chellakan, David McMillan
Cogent Business & Management vol: 7 issue: 1 first page: 1809299 year: 2020
doi: 10.1080/23311975.2020.1809299
6. The mediating role of innovation between corporate governance and organizational performance: Moderating role of innovative culture in Pakistan textile sector
Sajjad Nawaz Khan, Rai Imtiaz Hussain, Shafique -Ur-Rehman, Muhammad Qasim Maqbool, Engku Ismail Engku Ali, Muhammad Numan, Collins G. Ntim
Cogent Business & Management vol: 6 issue: 1 year: 2019
doi: 10.1080/23311975.2019.1631018
7. The effect of industry nuances on the relationship between corporate governance and financial performance: Evidence from South African listed companies
Jonty Tshipa, Leon M. Brummer, Hendrik Wolmarans, Elda Du Toit
South African Journal of Economic and Management Sciences vol: 21 issue: 1 year: 2018
doi: 10.4102/sajems.v21i1.1964
8. The influence of board interlocks on firm performance: In the context of geographic diversification in the restaurant industry
Hyoung Ju Song, Seoki Lee, Kyung Ho Kang
Tourism Management vol: 83 first page: 104238 year: 2021
doi: 10.1016/j.tourman.2020.104238
9. The state of play of ethno-racial representation on boards: A comparative analysis
Dimitria Groutsis
European Management Journal year: 2023
doi: 10.1016/j.emj.2023.09.001
10. Recasting trust and distrust in the boardroom
Morris Mthombeni, Amon Chizema
Corporate Governance: The International Journal of Business in Society vol: 22 issue: 5 first page: 1004 year: 2022
doi: 10.1108/CG-06-2021-0235
11. Equity at the Top: Board Diversity and Executive Remuneration in South Africa
Gretha Steenkamp, Mareli Dippenaar, Tamzin de Lange, Jenna Frade, Cara Jordaan
Journal of Risk and Financial Management vol: 19 issue: 2 first page: 109 year: 2026
doi: 10.3390/jrfm19020109
12. Do board-level controls matter? – An agency perspective on socially responsible investment (SRI) company boards in South Africa
Blanche Steyn, Farai Kwenda, Lesley Stainbank
South African Journal of Accounting Research vol: 34 issue: 3 first page: 205 year: 2020
doi: 10.1080/10291954.2019.1675255
13. The impact of board gender diversity on the accrual/real earnings management practice: evidence from an emerging market
Eman F. Attia, Sameh Yassen, Ahmed Chafai, Ahmed Qotb
Future Business Journal vol: 10 issue: 1 year: 2024
doi: 10.1186/s43093-024-00307-7
14. The relationship between board diversity and firm performance in the lodging industry: The moderating role of internationalization
Hyoung Ju Song, Yu Na Yoon, Kyung Ho Kang
International Journal of Hospitality Management vol: 86 first page: 102461 year: 2020
doi: 10.1016/j.ijhm.2020.102461
15. Impact of board gender diversity on performance of public sector vis-à-vis private sector banks in India
Minnu Baby Maria, Farah Hussain
Gender in Management: An International Journal
vol: 39 issue: 8 first page: 1095 year: 2024
doi: 10.1108/GM-06-2023-0232
16. The Impact of Corporate Governance with Mediating Effect of Digital Innovation on Firm Performance
Muhammad Shaukat Malik, Sabah Younus, Shahzadi Sattar
Sustainable Business and Society in Emerging Economies vol: 4 issue: 1 first page: 179 year: 2022
doi: 10.26710/sbsee.v4i1.2210
17. Chief executive officer’s gender and firm performance in the JSE SRI firms
Siphiwa L. Baloyi, Collins C. Ngwakwe
Corporate Board role duties and composition vol: 13 issue: 1 first page: 73 year: 2017
doi: 10.22495/cbv13i1c1art1
18. Board diversity and financial performance: A data-driven analysis of listed commercial banks in Vietnam
Linh Thi Ha Bui, Huyen Thi Thanh Lam, Anh Hoang Nguyet Nguyen
International Journal of ADVANCED AND APPLIED SCIENCES vol: 12 issue: 6 first page: 77 year: 2025
doi: 10.21833/ijaas.2025.06.008
19. Necessarily Optimistic? Upper Echelons’ Social Capital and IPO Valuation in the Hospitality Industry
Hyoung Ju Song
Cornell Hospitality Quarterly vol: 66 issue: 3 first page: 394 year: 2025
doi: 10.1177/19389655241265949
20. Relationship between Women on Board Directors and Economic Value Added: Evidence from Latin American Companies
Maria Camila Arango-Home, Juan David González-Ruiz, Alejandro Valencia-Arias
Sustainability vol: 15 issue: 17 first page: 13179 year: 2023
doi: 10.3390/su151713179
21. Board Management Characteristics and Financial Outcomes in Sustainability-Oriented European Companies
Alexandra-Mădălina Țăran, Grațiela-Georgiana Noja, Mihaela Diaconu, Flavia Barna, Kamal Naser, Marilen-Gabriel Pirtea
Sustainability vol: 18 issue: 2 first page: 657 year: 2026
doi: 10.3390/su18020657