Abstract
This study analyzes board diversity and its effect on financial performance, as measured by age, gender, and nationality of board members using a sample of nine (9) commercial banks in Cikarang, West Java, Indonesia. The study uses multiple linear regression analysis. The results show that age and nationality have significant effect, while gender has insignificant effect on financial performance. However, simultaneously all of the independent variables significantly affect the Return on Asset, with the coefficient determinant in this research is 20.8%.
Highlights
The purpose of this study is to analyze the effects of board member diversity on the financial performance of commercial banks in West Java, Indonesia
As an emerging capital market, Indonesia is a big draw for foreign investments where, by the end of 2015, the Indonesia Stock Exchange (IDX) recorded foreign investors had 67.1 percent of the shares total value traded on the IDX
Age has a significance level less than 0.05 (0.02
Summary
The purpose of this study is to analyze the effects of board member diversity on the financial performance of commercial banks in West Java, Indonesia. As an emerging capital market, Indonesia is a big draw for foreign investments where, by the end of 2015, the Indonesia Stock Exchange (IDX) recorded foreign investors had 67.1 percent of the shares total value traded on the IDX. This signals that it is most likely foreigners would like to participate in the management of Indonesian companies, and might themselves be interested in having representation and position in boards. Except for the study by Darmadi (2013) on board diversity and firm performance using IDX data, research and awareness on the significance of board diversity to firm performance is dearth in Indonesia. One of the reasons being that Indonesia does not have guidelines for board diversity under the Indonesia Stock Exchange code, resulting in lack of institutional support, especially for better gender representation in boards
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