The Diversity of Expertise on Corporate Boards in Australia

35 Pages Posted: 3 Jun 2017

See all articles by Stephen Gray

Stephen Gray

University of Queensland - Business School; Duke University - Fuqua School of Business; Financial Research Network (FIRN)

John Nowland

City University of Hong Kong

Date Written: June 2017

Abstract

Expertise diversity is expected to enhance the monitoring and advising functions of boards of directors. Yet, little is known about the expertise that actually exists on corporate boards. In this study, we examine the diversity of professional expertise on corporate boards in Australia and implications for shareholder value. We categorise directors by 11 types of professional expertise and find the most common types of expertise are business executives, accountants, bankers, scientists, lawyers and engineers. We find that expertise diversity is primarily related to board size, industry and location. Our analysis also suggests that shareholders benefit when boards diversify their expertise within a subset of specialist business expertise (lawyers, accountants, consultants, bankers and outside CEOs). Further diversity beyond this subset of expertise is associated with lower firm value and performance.

Keywords: Board of directors, Director appointments, Diversity, Firm value, Professional expertise

Suggested Citation

Gray, Stephen and Nowland, John, The Diversity of Expertise on Corporate Boards in Australia (June 2017). Accounting & Finance, Vol. 57, Issue 2, pp. 429-463, 2017. Available at SSRN: https://ssrn.com/abstract=2979627 or http://dx.doi.org/10.1111/acfi.12146

Stephen Gray (Contact Author)

University of Queensland - Business School ( email )

University of Queensland
Brisbane, Queensland 4072
Australia

Duke University - Fuqua School of Business

Box 90120
Durham, NC 27708-0120
United States

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

John Nowland

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China

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