Simultaneous Board and CEO Diversity: Does It Increase Firm Value?

8 Pages Posted: 21 Mar 2014 Last revised: 12 Apr 2016

See all articles by Richard Borghesi

Richard Borghesi

University of South Florida-Sarasota

Kiyoung Chang

University of South Florida Sarasota-Manatee - College of Business

Jamshid Mehran

Indiana University South Bend

Date Written: February 11, 2015

Abstract

There remain open questions regarding whether board of director ethnic and gender diversity increases or decreases firm value. Additionally, prior research has yet to examine the value effects of a diverse board in the presence of a gender/ethnic minority CEO. Using the KLD social ratings database, we examine 13,000 firm-years and provide robust evidence that board diversity increases firm value. However, we also show that any value added via board diversity is nullified when a diverse board operates in the presence of a female and/or minority CEO. Results suggest that a significant portion of the value in board diversity may come from gender/ethnic differences between the board members and the CEO. One implication of our study is that when hiring a CEO or electing directors, relative gender/ethnic make-up is important.

Keywords: Diversity, Minority, Firm Value, Board of Directors, CEO

JEL Classification: G30, M14

Suggested Citation

Borghesi, Richard and Chang, Kiyoung and Mehran, Jamshid, Simultaneous Board and CEO Diversity: Does It Increase Firm Value? (February 11, 2015). Borghesi, Richard, Kiyoung Chang, and Jamshid Mehran, 2016. Simultaneous Board and CEO Diversity: Does it Increase Firm Value?, Applied Economics Letters 23(1), pp. 23-26.. Available at SSRN: https://ssrn.com/abstract=2412120 or http://dx.doi.org/10.2139/ssrn.2412120

Richard Borghesi (Contact Author)

University of South Florida-Sarasota ( email )

8350 N. Tamiami Trail
Sarasota, FL 34243-2049
United States
941-359-4524 (Phone)
941-359-4367 (Fax)

HOME PAGE: http://usfsm.edu/academics/faculty-listing/dr-richard-borghesi.aspx

Kiyoung Chang

University of South Florida Sarasota-Manatee - College of Business ( email )

8350 N. Tamiami Trail, SMC-C263
Sarasota, FL 34243-2025
United States
9413594359 (Phone)
9413594367 (Fax)

Jamshid Mehran

Indiana University South Bend ( email )

PO Box 7111
1700 Mishawaka Avenue
South Bend, IN 46634
United States

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