The impact of factors representing the diversity of the board members on the performance of the construction firms on the Vietnamese stock market

Abstract

This paper aims to study the impact of board diversity on the performance (ROA) of the construction firms. The paper analyzed the balance data of of 81 construction firms listed on the Ho Chi Minh Stock Exchanges and Ha Noi Stock Exchanges from 2013 to 2018, using Feasible Generalized Least Squares (FGLS) model. Specifically, diversity of the Board of Directors is the independent variable; and the three indicator variables are gender diversity, nationality diversity and educational diversity. The results show that the diversity of foreigners in the Board of Directors has a positive and statistically significant impact on corporate performance according to two methods of components ratio (Proportion) and degree of heterogeneity (Blau index), while the educational factor has a negative and statistically significant effect on ROA by both methods. In addition, the diversity of gender factors in the Board of Directors has a negative and statistically significant impact on ROA only with the component ratio method. This paper has contributed to the literature by providing evidence of board diversity on corporate performance. Finally, based on the research results, the authors expect that the findings would help construction firms more effectively perform on corporate governance. As the government increasingly considers board diversity policies, this study will have useful implications for Vietnamese managers.