Board Diversity, Corporate Governance, Performance and Executive Pay

Sarhan, A.A., Ntim, C.G., and Al-Najjar, B., ‘Corporate Board Diversity, Corporate Governance, Corporate Performance and Executive Pay’, International Journal of Finance and Economics, 24(2), 761-786, 2019

49 Pages Posted: 10 Mar 2020

See all articles by Ahmed Sarhan

Ahmed Sarhan

University of Huddersfield - Business School

Collins G. Ntim

University of Southampton Business School, UK; University of Southampton

Basil Al‐Najjar

University of London - School of Business, Economics and Informatics

Date Written: 2019

Abstract

Departing from previous studies, this paper investigates the impact of corporate board diversity on corporate performance and executive pay within the context of MENA countries. Our sample includes a balanced panel of 600 firm-year observations, consisting of 100 individual firms drawn from 5 Middle Eastern countries (Egypt, Jordan, Oman, Saudi Arabia and United Arab of Emirates) over the 2009–2014 period. The findings are three-fold. First, board diversity, as measured by director gender and nationality, has a positive effect on corporate financial performance. Second, the relationship between board diversity and corporate performance is stronger in better-governed firms than their poorly-governed counterparts. Finally, board diversity, as measured by director gender, ethnicity and nationality, enhances the pay-for-performance sensitivity, but not the actual executive pay. Our results suggest that decisions about board diversity are not merely influenced by moral values; they arise because of the cost-benefit considerations of what diversity can bring to the firm. The findings are robust to controlling for different alternatives of board diversity measures, corporate governance proxies, corporate outcomes and types of endogeneities.

Keywords: Economics and Finance; Financial and Governance Reforms; Corporate Governance; Corporate Board Diversity; Corporate Performance; Executive Pay; Mena Countries

JEL Classification: G30; G32; G14

Suggested Citation

Sarhan, Ahmed and Ntim, Collins G. and Al-Najjar, Basil, Board Diversity, Corporate Governance, Performance and Executive Pay (2019). Sarhan, A.A., Ntim, C.G., and Al-Najjar, B., ‘Corporate Board Diversity, Corporate Governance, Corporate Performance and Executive Pay’, International Journal of Finance and Economics, 24(2), 761-786, 2019, Available at SSRN: https://ssrn.com/abstract=3534932 or http://dx.doi.org/10.2139/ssrn.3534932

Ahmed Sarhan (Contact Author)

University of Huddersfield - Business School ( email )

Queensgate
Huddersfield HD1 3DH
United Kingdom

Collins G. Ntim

University of Southampton Business School, UK ( email )

Southampton Business School
Highfield
Southampton, England SO17 IBJ
United Kingdom
+44 (0) 238059 4285 (Phone)
+44 (0) 238059 3844 (Fax)

HOME PAGE: http://www.southampton.ac.uk/business-school/about/staff/cgn1n11.page

University of Southampton ( email )

Southampton, SO17 1BJ
United Kingdom

Basil Al-Najjar

University of London - School of Business, Economics and Informatics ( email )

Malet Street
Bloomsbury
London, WC1E 7HX
United Kingdom

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