Does Board Demographic Diversity Enhance Cognitive Diversity and Monitoring?

The Accounting Review, forthcoming

50 Pages Posted: 20 Aug 2019 Last revised: 7 Jul 2022

See all articles by Jun-Koo Kang

Jun-Koo Kang

Nanyang Business School, Nanyang Technological University

Seil Kim

Baruch College, City University of New York

Seungjoon Oh

Peking University - HSBC Business School

Date Written: January 19, 2022

Abstract

We examine whether board demographic diversity enhances cognitive diversity (measured as director dissent in the boardroom) and monitoring. At the director level, we find that individual directors who are dissimilar relative to other board members in terms of tenure and experience are more likely to dissent. At the board level, boards composed of directors with heterogenous tenure, experience, and gender are more likely to dissent. We also find that stock market reactions to director resignation announcements are more negative for directors who have ever dissented than for other directors. Moreover, following dissent-driven proposal rejections, firms experience an improvement in value and internal governance and a decrease in risk. The results suggest that directors with diverse qualifications and skillsets and female directors enhance cognitive diversity and that this enhanced cognitive diversity helps increase firm value and monitoring effectiveness.

Keywords: Board Diversity, Cognitive Diversity, Director Voting, Dissent, Proposal Rejection, Firm Value, Monitoring Effectiveness

JEL Classification: G30, G32, G34

Suggested Citation

Kang, Jun-Koo and Kim, Seil and Oh, Seungjoon, Does Board Demographic Diversity Enhance Cognitive Diversity and Monitoring? (January 19, 2022). The Accounting Review, forthcoming, Available at SSRN: https://ssrn.com/abstract=3438714 or http://dx.doi.org/10.2139/ssrn.3438714

Jun-Koo Kang (Contact Author)

Nanyang Business School, Nanyang Technological University ( email )

Nanyang Avenue, Block S3-01b-54
Singapore, 639798
Singapore
(+65) 6790-5662 (Phone)
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HOME PAGE: http://www.nbs.ntu.edu.sg/nbs_corporate/divisions/bnf/index.asp

Seil Kim

Baruch College, City University of New York ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States

Seungjoon Oh

Peking University - HSBC Business School ( email )

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