Board Members’ Education and Firm Performance: Evidence from a Developing Economy

38 Pages Posted: 4 Aug 2011

See all articles by Salim Darmadi

Salim Darmadi

Indonesia Financial Services Authority (OJK)

Date Written: August 4, 2011

Abstract

Empirical studies focusing on the influence of the educational backgrounds of CEO and board members on firm performance is scarce in the literature. This study makes a contribution by addressing such an issue in the context of Indonesia, a developing country that adopts a two-tier board system. Using annual reports to collect information on the educational qualification of board members, I employ a sample consisting of 160 firms listed on the Indonesia Stock Exchange (IDX). I use four measures of educational qualification in this study, namely postgraduate degrees, degrees obtained from prestigious domestic universities, degrees obtained from developed countries, and degrees in financial disciplines. I provide evidence that the educational qualifications of board members and CEO matter, to a particular extent, for either return on assets (accounting-based performance) or Tobin’s Q (market-based performance). For example, CEOs holding degrees from prestigious universities perform significantly better than those without such qualifications.

Keywords: intellectual competence, educational qualification, educational background, upper echelons, corporate governance, Indonesia

JEL Classification: G34, J24, I23

Suggested Citation

Darmadi, Salim, Board Members’ Education and Firm Performance: Evidence from a Developing Economy (August 4, 2011). Available at SSRN: https://ssrn.com/abstract=1904762 or http://dx.doi.org/10.2139/ssrn.1904762

Salim Darmadi (Contact Author)

Indonesia Financial Services Authority (OJK) ( email )

Jalan M.H. Thamrin No. 2
Jakarta, Jakarta 10350
Indonesia

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