Corporate governance : balanced boards, board diversity and firm performance

Abstract

The board of a firm are agents, who act on behalf of the shareholders to monitor performance of the firm, reduce agency costs and take care of their interests, both financial and non-financial. Corporate governance codes such as the various King codes have emphasised the importance of having balanced boards in terms of diversity and the need for increased transformation in the boardroom. There is a growing debate on whether a board that is more diversified impacts the performance of the organisation and the research on the subject of diversified boards and organisational performance have had varied results thus far. This research concentrates on boardroom diversity, specifically in respect of gender, in terms of age diversity, race and board independence and whether these diversity variables have influences on organisational performance, in respect of Tobin’s Q and also utilising Return on Assets (ROA). The JSE top 100 firms were analysed for the period 2012 to 2016. Panel data was used and an OLS regression and a fixed effects regression model were utilised. The study concluded that all four board diversity variables have an insignificant impact on organisational performance.