Board Diversity, Director Dissent, and Monitoring Effectiveness
61 Pages Posted: 20 Aug 2019 Last revised: 2 Jan 2020
Date Written: January 2, 2020
Using Korean firms’ unique director voting data, we examine how board diversity affects director dissension and whether proposal rejection resulting from dissension affects firm value and policies. We find that directors on diverse boards are more likely to dissent. The result is robust to using the 2008 political regime change and director resignation as exogenous shocks to board diversity and controlling for proposal fixed effects in the regressions. Following proposal rejection, firms, particularly those with diverse boards, experience improvements in firm value and governance and a decrease in risk, suggesting that board diversity enhances directors’ monitoring effectiveness.
Keywords: Board Diversity, Director Voting, Dissent, Proposal Rejection, Firm Value, Monitoring Effectiveness
JEL Classification: G30, G32, G34
Suggested Citation: Suggested Citation