Board diversity and financial performance : a graphical time-series approach

Show simple item record Taljaard, Cobus C.H. Ward, Michael Muller, Chris J. 2016-04-29T06:17:11Z 2016-04-29T06:17:11Z 2015
dc.description.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. en_ZA
dc.description.department Gordon Institute of Business Science (GIBS) en_ZA
dc.description.librarian am2016 en_ZA
dc.description.uri en_ZA
dc.identifier.citation Taljaard, CCH, Ward, MJD & Muller, CJ 2015, 'Board diversity and financial performance : a graphical time-series approach', South African Journal of Economic and Management Sciences, vol. 18, no. 3, pp. 425-448. en_ZA
dc.identifier.issn 1015-8812 (print)
dc.identifier.issn 2222-3436 (online)
dc.language.iso en en_ZA
dc.publisher University of Pretoria, Department of Economics en_ZA
dc.rights © 2015 The Authors. Published under a Creative Commons Attribution Licence. en_ZA
dc.subject Boards en_ZA
dc.subject Diversity en_ZA
dc.subject Financial performance en_ZA
dc.title Board diversity and financial performance : a graphical time-series approach en_ZA
dc.type Article en_ZA

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