Board Ancestral Diversity and Firm Performance Volatility
68 Pages Posted: 8 Dec 2015 Last revised: 17 Jul 2018
Date Written: May 11, 2018
We proxy for board members’ opinions and values using directors’ ancestral origins and show that diversity has costs and benefits, which lead to high performance volatility. Consistent with the idea that diverse groups experiment more, firms with ancestrally diverse boards have more numerous and more cited patents. In addition, their strategies conform less to those of the industry peers. However, firms with greater ancestral diversity also have more board meetings and make less predictable decisions. These findings suggest that diversity may lead to inefficiencies in the decision-making process and conflicts in the boardroom.
Keywords: Boards, Diversity, Culture, Genetics
JEL Classification: Z1, G3, O4
Suggested Citation: Suggested Citation