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The impact of board ethnic diversity on executive pay‐to‐performance sensitivity: Australian evidence

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  • Truc (Peter) Do

Abstract

We examine how board ethnic diversity impacts executive pay‐to‐performance sensitivity. Using firm‐year observations in Australia for the period 2007–2017, we document that board ethnic diversity leads to higher executive pay‐to‐performance sensitivity. The finding is robust in controlling for endogeneity using instrumental variable regression analysis, as well as using modified measures of board ethnic diversity. We also document that the impact of board ethnic diversity on executive pay‐to‐performance sensitivity is more pronounced for firms suffering from high agency costs and when the CEO's ethnicity is different from that of the majority of the board. This study helps to inform the debate on the issue of board ethnic diversity in Australia.

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  • Truc (Peter) Do, 2023. "The impact of board ethnic diversity on executive pay‐to‐performance sensitivity: Australian evidence," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(3), pages 3643-3674, September.
    • Handle: RePEc:bla:acctfi:v:63:y:2023:i:3:p:3643-3674
    DOI: 10.1111/acfi.13065
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