Social Diversity on Corporate Boards in a Country Torn by Civil War

Abstract

We examine how social diversity and inclusiveness in corporate boards affect corporate performance and monitoring in Sri Lanka, a country subject to decades of polarization, civil war, and even genocide. Barely a decade after the civil war, we find that board social diversity on the basis of ethnicity, language, religion, and gender of the board members is positively related to corporate performance, both in terms of stock market performance and accounting returns, and to corporate financial stability. We find no evidence that inter-personal conflicts or communication problems among board members negatively affect firm performance.

Keywords: Board of Directors, Social Diversity, Ethnic Diversity, Gender Bias, Corporate Performance, CEO Turnover, Corporate Governance, Board Meeting Attendance

JEL Classification: G33, G34