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The Diversity of Corporate Board Committees and Financial Performance

41 Pages Posted: 24 Mar 2008  

David Carter

Oklahoma State University - Stillwater - Department of Finance

Frank P. D'Souza

Loyola University - Sellinger School of Business and Management

Betty J. Simkins

Oklahoma State University - Stillwater - Department of Finance

W. Gary Simpson

Oklahoma State University - Stillwater - Department of Finance

Date Written: March 1, 2008

Abstract

We examine the relationship between the gender and ethnic minority diversity of the board of directors and the financial performance of the firm. The research is unique because we analyze the diversity of important board committees to gain greater insight into the way diversity affects board functions and shareholder value. Our sample consists of all firms listed in the Fortune 500 over the period 1998-2002 which yields a panel of data with approximately 2,000 firm years. The results of three-stage least-squares estimation support the conclusion that board diversity has a positive effect on financial performance as measured by Tobin's q. The evidence on board committees indicates that gender diversity has a positive effect on financial performance primarily through the audit function of the board and ethnic diversity impacts financial performance through all three functions of the board we investigate, audit, executive compensation, and director nomination.

Keywords: corporate governance, board committees, diversity, financial performance

JEL Classification: G34

Suggested Citation

Carter, David and D'Souza, Frank P. and Simkins, Betty J. and Simpson, W. Gary, The Diversity of Corporate Board Committees and Financial Performance (March 1, 2008). Available at SSRN: https://ssrn.com/abstract=1106698 or http://dx.doi.org/10.2139/ssrn.1106698

David A. Carter

Oklahoma State University - Stillwater - Department of Finance ( email )

Spears School of Business
Stillwater, OK 74078-4011
United States
405-744-5104 (Phone)
405-744-5180 (Fax)

Frank P. D'Souza

Loyola University - Sellinger School of Business and Management ( email )

4501 North Charles Street
Baltimore, MD 21210-2699
United States

Betty J. Simkins (Contact Author)

Oklahoma State University - Stillwater - Department of Finance ( email )

336 Business Building
Stillwater, OK 74078-4011
United States
405-744-8625 (Phone)
405-744-5180 (Fax)

HOME PAGE: http://spears.okstate.edu/~simkins

W. Gary Simpson

Oklahoma State University - Stillwater - Department of Finance ( email )

Spears School of Business
Stillwater, OK 74078-4011
United States

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