Corporate Governance, Board Diversity, and Firm Performance

Oklahoma State University Working Paper

36 Pages Posted: 26 Mar 2002  

David Carter

Oklahoma State University - Stillwater - Department of Finance

Betty J. Simkins

Oklahoma State University - Stillwater - Department of Finance

W. Gary Simpson

Oklahoma State University - Stillwater - Department of Finance

Date Written: March 2002

Abstract

This study examines the relationship between board diversity and firm value for Fortune 1000 firms. Board diversity is defined as the percentage of women, African-Americans, Asians, and Hispanics on the board of directors. This research is important because it presents the first empirical evidence examining whether board diversity is associated with improved financial value. After controlling for size, industry, and other corporate governance measures, we find significant positive relationships between the fraction of women or minorities on the board and firm value. We also find that the proportion of women and minorities on boards increases with firm size and board size but decreases as the number of insiders increases. For women, there is an inverse relationship between the percentage of women on boards and the average age of the board.

Keywords: Corporate governance, Diversity, Board of directors, Financial value

JEL Classification: G38, M14, J15, J16

Suggested Citation

Carter, David and Simkins, Betty J. and Simpson, W. Gary, Corporate Governance, Board Diversity, and Firm Performance (March 2002). Oklahoma State University Working Paper. Available at SSRN: https://ssrn.com/abstract=304499 or http://dx.doi.org/10.2139/ssrn.304499

David A. Carter

Oklahoma State University - Stillwater - Department of Finance ( email )

Spears School of Business
Stillwater, OK 74078-4011
United States
405-744-5104 (Phone)
405-744-5180 (Fax)

Betty J. Simkins (Contact Author)

Oklahoma State University - Stillwater - Department of Finance ( email )

336 Business Building
Stillwater, OK 74078-4011
United States
405-744-8625 (Phone)
405-744-5180 (Fax)

HOME PAGE: http://spears.okstate.edu/~simkins

W. Gary Simpson

Oklahoma State University - Stillwater - Department of Finance ( email )

Spears School of Business
Stillwater, OK 74078-4011
United States

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