Board governance diversity and international decision of Indonesia’s service companies

Abstract

The objective of this study is to examine the relationship between Board of Commissioners diversity and international decision of service companies. Specifically, this study investigates the effect of ethnic, nationality, qualification, and experience diversity of Board of Commissioners on international decision. Company with high Board of Commissioners diversity tends to have more effective in monitoring the Management Board and therefore reduce the agency cost as well as the company performance. 99 service companies listed in Indonesia’s stock exchange is participated in this study. As this study using the multivariate regression analysis, the classical assumptions must be satisfied. The result shows that the ethnic, qualification and experience diversity of Board of Commissioners have a significant effect on international decision. In addition, company size tends to have a better position to sell in the foreign market. Company with higher leverage is likely to have a higher international decision. Theoretically, this reseach implies that board governance diversity in unique two-tier board model could also be explained by agency theory. In addition, this finding shows that the company can increase the international decision by increasing the qualification and experience diversity of Board of Commissioners. However, the Board of Commissioners ethnic diversity should be reduced to increase the international desicion.