Document Type : Original Research

Authors

Department of Accounting, University of Benin, Benin, Nigeria

Abstract

The study examines the relationship between board diversity and firm performance in Nigeria. The study adopted the cross-sectional research design using data from all the banks quoted on the Nigerian Stock Exchange from 2010-2015. The multiple regression technique is the basis of the data analysis, specifically the ordinary least square regression (OLS) technique to estimate the coefficients of the variables in the model specified. The study found a negative and insignificant relationship between ethnic diversity and frim performance; in the same vein, a negative and insignificant relationship was observed between nationality diversity and firm performance; Gender diversity exhibit a negative and significant relationship with firm performance. We recommend that since gender diversity is significant but negative, management and regulatory bodies should make policy statements towards the inclusion of more women to attain the optimum number that will enhance the performance of the firm going by the time-tested theory of critical mass.

Keywords

Adams, R. B., & Ferreira, D. (2004). Gender diversity in the boardroom. Finance Working Paper No. 58/2004. ECGI Working Paper Series in Finance, Stockholm School of Economics. Retrieved from: www.ecgi.org/wp.
Adams, R.B., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of Financial Economics, 94(2), 291-309.
Alderfer, C., & Smith, K .K. (1982). Studying intergroup relations embedded in organisations. Administrative Science Quarterly, 27(1), 35-65.
Ararat, M., Aksu, M. H., & Cetin, A. T. (2010). The impact of board diversity on boards' monitoring intensity and firm performance: Evidence from the Istanbul Stock Exchange incorporated. Journal of Accounting and Finance, 2(1), 45-52.
Arend, R.J. (2004). The definition of strategic liabilities, and their impact on firm performance. Journal of Management Studies, 41(6), 1003-1027.
Biggins, J. V. (1999). Making board diversity work. Corporate Board, 20(117), 11–17.9
Bryant, P., & Davis, C. (2012). Regulated change effects on board of directors: A look at agency theory and resource dependency theory. Academy of Strategic Management Journal, 11(2), 1-15.
Carter, D. A., Simkins, B. J., & Simpson, W. G. (2003). Corporate governance, board diversity and firm value. Financial Review, 38(1), 33–53.
Carter, D. A., Simkins, B. J., D’Souza, F., & Simpson, W. G. (2007). The diversity of corporate board committees and financial performance. Journal of Business Ethics, 10(20), 1-30.
Choi, B. P., Jeong, J., & Lee, Y. (2014). Diversity and firm performance: An analysis of different workforce level and ethnic groups. Journal of Business Diversity, 14(1), 48 - 58.
Choi, J.J., Park, S.W., & Yoo, S.S. (2007). The value of outside directors: Evidence from corporate governance reform in Korea. Journal of Financial and Quantitative Analysis, 42(4), 941-962.
Cox, Jr., T. (1991). The multicultural organisation. Academy of Management Executive, 5(2), 34-47.
Cox, T., & Blake, S. (1991). Managing cultural diversity: Implications for organisational competitiveness. Academy of Management Executive, 5(3), 45-56.
Darmadi, S. (2011). Board diversity and firm performance: The Indonesian evidence. Journal Corporate Ownership and Control, 8(1),1-38.
Dobbin, F., & Jung, J. (2011). Corporate board gender diversity and stock performance: The competence gap or institutional investor bias? North Carolina Law Review, 89(3), 809-838.
Dutta, P., & S. Bose, 2006. Gender diversity in the boardroom and financial performance of commercial banks: Evidence from Bangladesh. The Cost and Management, November-December, 34(6), 70-74.
Edelman, L. B., Fuller, S. R., & Drita, I. (2001). Diversity rhetoric and the managerialization of law. American Journal of Sociology, 106(6), 1589-1642.
Eklund, J.E., Palmberg, J., & Wiberg, D. (2009). Ownership structure, board composition and investment performance. Electronic Working Paper Series No. 172. The Royal Institute of Technology, Centre of Excellence for Science and Innovation Studies (CESIS) Sweden, pp. 1-28.Retrieved from: www.cesis.se.
Ely, R., & Thomas, D. (2001). Cultural diversity at work: The effects of diversity perspectives on work group processes and outcomes. Administrative Science Quarterly, 46(2), 229-273
Erhardt, N., Werbel, J., & Shrader, C. (2003). Board of director diversity and firm financial performance. Corporate Governance, 11(2), 102–111.
Farrell, K.A., & Hersch, (2005). Additions to corporate boards: The effect of gender. Journal of Corporate Finance, 11(1-2), 85– 106.
Francoeur, C., Labelle, R., & Sinclair-Desgagne, B. (2008). Gender diversity in corporate governance and top management. Journal of Business Ethics, 81(1), 83-95.
Garba, T., & Abubakar, B. A. (2014). Corporate board diversity and financial performance of insurance companies in Nigeria: An application of panel data approach. Asian Economic and Financial Review, 4(2), 257-277.
Gilbert, J. A., Stead B. A., & Ivancevich, J. M. (1999). Diversity management: A new organisational paradigm. Journal of Business Ethics, 21(1), 61-76.
Griscombe, K., & Mattis, M. C. (2002). Leveling the playing field for foreigners in corporate management: Is the business case enough?. Journal of Business Ethics, 37(1), 103-109.
Hambrick, D. C. & Mason, P. A. (1984). Upper Echelon: The organisation as a reflection of its top managers. The Academy of Management Review, 9(2), 193-206.
Hassan, Z., Samian, A. L., & Silong, A. D. (2006). Readings on ethnic relations in multicultural society: Perspectives and research on national unity and integration. Serdang: University Pulra Malaysia.
Hillman, A.J., & Dalziel, T. (2003). Board of directors and firm performance: integrating agency and resource dependence perspectives. Academy of Management Review, 28(3), 383-396.
Hunt, S. D., & Morgan, R.M. (1995). The comparative advantage theory of competition. Journal of Marketing, 59(2), 1-15.
Ibarra, H. (1993). Personal networks of women and minorities in management: A conceptual framework. Academy of Management Review, 18(1), 56-87.
Jackson, S.E., & Alvarez, E.B. (1992). Diversity in the workplace: Human resources initiatives. New York: The Guilford Press.
Jhunjhunwala, S., & Mishra, R. K. (2012). Board diversity and corporate performance: The Indian evidence. IUP Journal of Corporate Governance, 11(3), 71 – 79.
Johnson, J. L., Daily, C. M., & Ellstrand, A. E. (1996). Boards of directors: A review and research agenda. Journal of Management, 22(3), 409–438. 
Kanter, R. M. (1977). Men and women of the corporation. New York: Basic Books
Kilduff, M., Angelmar, R., & Mehra, A. (2000). Top management-team diversity and firm performance: Examining the role of cognitions. Organization Science, 11(1), 21-34.
Kose, J., & Senbei, L. (1998). Corporate governance and board effectiveness. Journal of Banking and Finance, 22(4), 371-403.
Kulkarni, S., A (2012). Study on cultural diversity management for Indian Organisations. International Conference on Emerging Economies – Prospects and Challenges (ICEE-2012)
Lattimer, R. L. (1998). The case for diversity in global business, and the impact of diversity on team performance. Competitiveness Review, 8(1), 3-17.
Lee, C., & Farh, J. L. (2004). Joint effects of group efficiency and gender diversity on group cohesion and performance. Applied Psychology: An International Review, 53(2), 136-154.
Lehman, C. M., & Dufrene, D. D. (2008). Business communication (15th Edition). Thomson South-Western, Mason.
Marimuthu, M. (2008). Ethnic diversity on boards of directors and its implications on firm financial performance. The Journal of International Social Research, 1/4(3), 431-445.
Marimuthu, M., & Koladaisamy, I. (2009a). Ethnic and gender diversity in board of directors and their relevance to financial performance of Malaysian companies. Journal of Sustainable Development, 2(3), 139-148.
Marimuthu, M., & Koladaisamy, I. (2009b). Demographic diversity in top level management and its implications on firms’ financial performance. An empirical discussion. International Journal of Business and Management, 4(6), 176-188.
Marimuthu, M., & Koladaisamy, I. (2009c). Can demography diversity in top management team contribute for greater financial performance? An empirical discussion. The Journal of International Social Research, 2(8), 273-286.
Martin, C.A. (2005). Racial diversity in professional selling: An empirical investigation of the differences in the perceptions and performance of African-American and Caucasian salespeople. The Journal of Business & Industrial Marketing, 20(6), 285-296.
Mazur, B., & Białostocka, P. (2010). Cultural diversity in organisational theory and practice. Journal of Intercultural Management, 2(2), 5–15.
McLeod, P. L., Lobel S. A., & Cox, T. H. (1996). Ethnic diversity and creativity in small groups. Small Group Research, 27(2), 246-264.
Nederveen, P. A., van Knippenberg, D., & van Diererdonck, D. (2013). Cultural diversity and team performance: The role of team member goal orientation. Academy of Management Journal, 56(2), 782-804.
Nishii, L.S., Gotte, A., & Raver, J. L. (2007). Upper echelon theory revisited; The relationship between upper echelon diversity, the adoption of diversity practices and organisational performance. CAHRS Working paper series, WP 07-04. Cornell University.
Nkomo, S. M. (1992). The emperor has no clothes: Rewriting “race in organisations”. Academy of Management Review, 17(3), 487-513.
Omoye, S. A., & Eriki, P. O. (2013). Diversity in board ethnicity and firm performance: an empirical investigation of selected quoted firms in Nigeria. African Journal of Social Sciences, 3(4), 35-45
Oparanma, A.O. (2010). The organisational culture and corporate performance in Nigeria. International Journal of African Studies, 3(1), 34-40.
Oxelheim, L., & Randøy, T. (2003). The impact of foreign board membership on firm value. Journal of Banking and Finance, 27(12), 2369-2392.
Pandey, V. K., Shanahan, K. J., & Hansen, S. W. (2005). The relationship between, shareholder wealth effects, diversity, and publicity as a marketing strategy. Academy of Marketing Science, 33(4), 423-431.
Parker, J. (2016). A report into the ethnic diversity of UK boards.
Department of Business, Energy & Industrial StrategyMargot James
Pfeffer, J. (1972). Size and composition of corporate boards of directors: The organisation and its environment. Administrative Science Quarterly, 17(2), 218-228.
Pfeffer, J., & Salancik, G. (1978). The external control of organisations: A resource dependence perspective. New York: Harper and Row.
Ragins, B. R. (1997). Diversified mentoring relations in organisations: A power perspective. Academy of Management Review, 22(3), 482-521.
Richard, O. C., & Johnson, N. B. (2001). Understanding the impact of human resource diversity practices on firm performance. Journal of Managerial Issues, 13(2), 177-196.
Ridgeway, C. (1991). The social construction of status value: gender and other nominal characteristics. Social Forces, 70(1), 367-386.
Ruigrok, W., Peck, S., & Tacheva, S. (2007). Nationality and gender diversity on Swiss corporate boards. Corporate Governance: An International Review, 15(4), 546–557.
Ryan, M. K., & Haslam, A. (2005). The glass cliff: Evidence that women are over represented in precarious leadership positions. Retrieved from: http://www.uts. edu.au/oth/wexdev/pdfs/ryanhaslan.pdf 
Sessa V. I., & Jackson, S. E. (1995). Diversity in decision-making teams: All differences are not created equal. In Chemers, M.M., Oskamp, S., and Costanzo, M. (Eds.) Diversity in Organisations: New Perspectives on A Changing Workplace, SAGE, Thousand Oaks, 133-156.
Shah, R., Haldar, A., & Rao, S. V. D. N. (2015). Economic value added: Corporate performance measurement tool. Corporate Board: Role, Duties & Composition, 11(1), 47-58.
Swartz, N.P., & Firer, S. (2005). Board structure and intellectual capital performance in South Africa. Meditari Accountancy Research, 13(2), 145-166.
Swartz, N.P., & Firer, S. (2005). Board structure and intellectual capital performance in South Africa. Meditari Accountancy Research, 13(2), 145-166.
Taljaard, C. C. H., Ward, M. J. D., & Muller, C. J. (2015). Board diversity and financial performance: A graphical time-series approach. South African Journal of Economic and Management Sciences, 18(3), 425-448.
Ujunwa, A. (2012). Board characteristics and the financial performance of Nigerian quoted firms. Corporate Governance: The International Journal of Business in Society, 12(5), 656-674. DOI 10.1108/14720701211275587
Ujumwa, A., Okoyeuzu, C., & Nwakoby, I. (2012). Corporate board diversity and firm performance: Evidence from Nigeria. Review of International Comparative Management, 13(4), 605-620.
Williams, S. M. (2000). Diversity in corporate governance and its impact on intellectual capital performance in emerging economy. Working paper number 5. Corporate Governance and Intellectual Capital Archive, Singapore Management University. Retrieved from: http://www.research.smu.edu.sg/faculty/cgic/research papers.htm
Yin, R. (1973). Identity definition and maintenance. In R. Yin (Ed), Race, creed, color or national origin: A reader on racial and ethnic identities in American society: 45-48. Itasca, IL:F.E. Peacockk Publishers, Inc.
Zahra, S. A., & Stanton, W. W. (1988). The implication of board of directors’ composition for corporate strategy and value. International Journal of Management, 5(2), 229-236.
Zhao, M. (2015). Board diversity and firm performance volatility. Ackerman Conference on Corporate Governance at Bar Ilan University, the University of Lancaster, and the Hong Kong Baptist University.