Diversity of the Board of Directors and Financial Performance of the Firms

Felipe Arenas-Torres,Roberto Campos-Troncoso,Miguel Bustamante-Ubilla

doi:10.3390/su132111687

Felipe Arenas-Torres, Roberto Campos-Troncoso + Show 1 more

Open Access

https://doi.org/10.3390/su132111687

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Abstract

The diversity of the board of directors continues to be a matter of concern for investors, regulators, and the general public. In this sense, the purpose of the research presented was to identify whether there is a positive and significant impact between the diverse variables of the board of directors and the financial performance of the firms. In this context, the study’s objective was to determine if the diversity in the composition of the boards of directors has a positive and significant impact on the financial performance of the companies listed in the Chilean stock market. The study considered a sample of 1106 reports on social responsibility and sustainable development between the 2015–2020 period and their respective returns. The research was descriptive-correlational, which determined the incidence of gender, nationality, and age diversity in the financial performance of the firms. The results show, in general, a low degree of gender and nationality diversity in Chilean boards. However, a positive and significant impact is observed in the commercial sector, nationality diversity, and the construction and gender diversity axis. In this regard, the study allows confirming the heterogeneity of results by linking the variables of diversity and financial performance and the importance of conducting sufficiently disaggregated studies to understand the relationship between both types of variables. Finally, this study updates the diversity levels of the board of directors for the Chilean stock market and establishes challenges for the regulator in terms of gender quotas and good corporate governance practices.

Highlights

Since the concept of Corporate Social Responsibility (CSR) gained popularity in the1960s, different concerns have arisen regarding how companies expand their competencies beyond the value generated for their shareholders [1]
A descriptive analysis of the main variables is presented, which considers dependent variables related to the financial performance of the firms and independent variables related to the degrees of the diversity of the board of directors
According to the analysis carried out, this research allows us to conclude that the boards of directors of the companies listed in the Chilean stock market have a low degree of diversity when considering the variables of gender, nationality, and age

Summary

Introduction

Since the concept of Corporate Social Responsibility (CSR) gained popularity in the. 1960s, different concerns have arisen regarding how companies expand their competencies beyond the value generated for their shareholders [1]. The questions related to the composition and operation of corporate governance bodies [4], as well as the diversity of the board of directors and its impact on the financial performance of companies [5], continues to be a relevant topic of interest to the different participants in the stock markets. Thematic, promoted by international organizations, considers the introduction of gender quotas in the boards of directors of companies listed on the stock exchange as a good practice [7]. Some nations have introduced voluntary policies to regulate and increase the proportion of women in the Board of Directors [8]

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