Relationship of board diversity with firm’s financial performance: The case of publicly listed companies in China

David Qian,Wahed Waheduzzaman,Sarod Khandaker

doi:10.22495/cocv19i1siart2

David Qian, Wahed Waheduzzaman + Show 1 more

Open Access

https://doi.org/10.22495/cocv19i1siart2

Copy DOI

Abstract

This study examines the impact of board diversity including the gender, nationality, and independence of board members on the financial performance of publicly listed companies in China. This study uses a sample of 206 publicly listed companies on the Shanghai Stock Exchange and the Shenzhen Stock Exchange in China to measure the impact of board diversity on their financial performance. Organizational financial performance is measured with the widely-used accounting-based measurement tool return on asset (ROA), and the market value measurement tool Tobin’s Q. After applying a hierarchical regression analysis this study finds that women on the board impact positively on firm’s financial performance while measures by ROA, but not by Tobin’s Q. The study also finds that the nationality of directors and independent board membership is found to have no significant influence on firms’ financial performance. This study has implications on the business firms to develop the strategic guidelines of board composition to ensure the effectiveness and profitability of their companies

Highlights

Board diversity has received much attention from researchers since the financial scandals and failures in maintaining good corporate governance in the past in developing countries (Terjesen, Couto, & Francisco, 2016; Luo, Xiang, & Huang, 2017)
This study aims to investigate the impact of board diversity on firm performance measure by return on asset (ROA) and Tobin’s Q to estimate firms’ accounting return and market value respectively
The findings of this study have positively contributed to the existing literature on board diversity by providing a robust analysis of the effects of female directors, independent directors, and foreign directors on firms’ performance in China

Summary

Introduction

Board diversity has received much attention from researchers since the financial scandals and failures in maintaining good corporate governance in the past in developing countries (Terjesen, Couto, & Francisco, 2016; Luo, Xiang, & Huang, 2017). Board diversity in developed countries has been studied widely, it is still a topic for debate in developing countries (Luo et al, 2017). Due to the differences in cultural, economic, and social factors, the effects of board diversity on firm performance in developed countries may be construed differently to those in developing countries (Durnev & Kim, 2007). Research on board diversity is deemed to be critical to ensure good corporate governance in developing nations

Objectives

Methods

Results

Discussion

Conclusion