Board Diversity and Its Long-Term Effect on Firm Financial and Non-Financial Performance

35 Pages Posted: 28 Nov 2014 Last revised: 17 Apr 2015

See all articles by Parveen P. Gupta

Parveen P. Gupta

Lehigh University - Department of Accounting

Kevin C. K. Lam

Hang Seng Management College; The Chinese University of Hong Kong (CUHK) - School of Accountancy

Heibatollah Sami

Lehigh University

Haiyan Zhou

University of Texas - Pan American

Date Written: April 15, 2015

Abstract

The legislators and regulatory bodies across the globe are mandating public disclosure on diversity or initiating to impose quotas on board structure to enhance gender and ethnic diversity. In this research study, we attempt to fill the void in the literature by investigating the impact of gender and board diversity on long-term firm financial performance and nonfinancial performance which is not addressed in prior studies. Using observations from 2003-2012, we find that a more gender and ethnically diverse board may enhance a firm’s performance on social, environmental and governance dimensions but increasing board diversity does not necessarily result in better financial performance for the firm. Our findings are consistent with the arguments presented in the literature that boards with higher gender and ethnic diversity will be more sensitive to stakeholders other than just shareholders, hence enhancing a firm’s non-financial performance. These findings suggest that improvement in non-financial performance dimensions may bring benefits to the society, in general, and to the firm in longer term.

Keywords: board diversity, gender, financial performance, non-financial performance, corporate social responsibility, corporate governance

JEL Classification: G30, M41, M48

Suggested Citation

Gupta, Parveen P. and Lam, Kevin C. K. and Sami, Heibatollah and Zhou, Haiyan, Board Diversity and Its Long-Term Effect on Firm Financial and Non-Financial Performance (April 15, 2015). Available at SSRN: https://ssrn.com/abstract=2531212 or http://dx.doi.org/10.2139/ssrn.2531212

Parveen P. Gupta

Lehigh University - Department of Accounting ( email )

621 Taylor Street
RBC #37
Bethlehem, PA 18015
United States
610-758-3443 (Phone)
610-758-5992 (Fax)

HOME PAGE: http://www.lehigh.edu

Kevin C. K. Lam (Contact Author)

Hang Seng Management College ( email )

Hang Shin Link
Siu Lek Yuen
Shatin, Hong Kong
China

The Chinese University of Hong Kong (CUHK) - School of Accountancy ( email )

Shatin, N.T.
Hong Kong

Heibatollah Sami

Lehigh University ( email )

Bethlehem, PA 18015
United States
610-758-3407 (Phone)

Haiyan Zhou

University of Texas - Pan American ( email )

1201 West University Drive
Edinburg, TX 78539
United States
956-381-3334 (Phone)
956-381-2407 (Fax)

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