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Value in diversity? : A quantitative examination of board diversity and financial performance of publicly listed firms in Germany

Ercan, Yasmin (2017) Value in diversity? : A quantitative examination of board diversity and financial performance of publicly listed firms in Germany.

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Abstract:The board of directors is said to be one of the most important corporate governance functions, especially with regard to their placement at the top of corporations’ hierarchy and their assigned decisional power by shareholders. This means that choosing the right composition of directors that possess a diverse set of knowledge and skills to fulfill their fiduciary duties is of huge importance. Therefore, this research paper investigates demographic board diversity characteristics, in terms of gender, nationality and age, in relation to financial firm performance in Germany. However, prior research results on this topic are rather irresolute. The main body of literature claims for value in diversity, as it should bring complementary perspectives and experiences to the boardroom, that in turn lead to increased decision-making quality, better market understanding and thus performance. However, another part of the literature also highlights the fact that too less and too much diversity can have adverse effects as well. This means, the effect of board diversity on performance is not straight-forward explainable. Therefore, the possible linear as well as quadratic effects of these variables have been examined. Generally, the results show no significant relationship between board diversity and firm performance. However, only in the case of nationality diversity, a constant significantly linear and negative relationship with ROA and ROE has been found, opposite as hypothesized. With regard to the results of this paper and prior study results, diversity management of directors is of importance and should be treated as any other business investment, as it can affect firm performance, positively and negatively.
Item Type:Essay (Bachelor)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:International Business Administration BSc (50952)
Link to this item:http://purl.utwente.nl/essays/72752
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