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Corporate Governance, Board Diversity, and Firm Value: Examining Large Companies Using Panel Data Approach

Author

Listed:
  • Rohail Hassan

    (Department of Management & Humanities, Universiti Teknologi PETRONAS, Malaysia.)

  • Maran Marimuthu

    (Department of Management & Humanities, Universiti Teknologi PETRONAS, Malaysia.)

Abstract

Many governments seek to impose diversity in the boardroom, but the consequences of doing so are inconsistent and could decrease firm performance and economies. This paper shed light on this diversity at board level topic by conceptualizing the relationships as firm value and diverse board. Reasonable theoretical arguments drawn from Upper-echelon theory and agency theory suggest that board characteristics (gender, ethnic and age diversity) may have either a positive, negative, or neutral effect on the firm value. To investigate this phenomenon relevant hypotheses are developed to test diversity at board level and its impact on firm value with the use of appropriate variables and measures. A total sample of large 60 top Malaysian non-financial companies is selected on the basis of their market capitalization from the population of 938 listed companies of Bursa, Malaysia. To investigate this empirical study, data were collected from the Datastream (Thomson Reuters) database and manually, over the period 2009 to 2013 (5 years). This study incorporates econometrics methodology on panel data analysis, which is used rigorously for hypothesis testing. The age profile of Directors has a significant positive impact on firm value. However, gender and ethnic diversity have no significant impact on firm value. The results indicate that demographic diversity at board level does have a relationship with market value.

Suggested Citation

  • Rohail Hassan & Maran Marimuthu, 2016. "Corporate Governance, Board Diversity, and Firm Value: Examining Large Companies Using Panel Data Approach," Economics Bulletin, AccessEcon, vol. 36(3), pages 1737-1750.
    • Handle: RePEc:ebl:ecbull:eb-16-00332
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    References listed on IDEAS

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    Cited by:

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    2. Rohail Hassan & Maran Marimuthu, 2017. "Does Corporate Diversity Really Matter in the Plantation Sector? Empirical Evidence from a World Islamic Leading Country and Market Reaction," IJFS, MDPI, vol. 5(3), pages 1-25, August.
    3. Amin Jan & Maran Marimuthu & Rohail Hassan & Mehreen, 2019. "Sustainable Business Practices and Firm’s Financial Performance in Islamic Banking: Under the Moderating Role of Islamic Corporate Governance," Sustainability, MDPI, vol. 11(23), pages 1-25, November.
    4. Dayana Mastura Baharudin & Maran Marimuthu, 2019. "MCCG 2012 versus MCCG 2017: Board Gender Diversity and Women CEO Issues within the Male-dominated Oil and Gas Industry," Business Management and Strategy, Macrothink Institute, vol. 10(2), pages 122-131, December.
    5. Ali Shariff Kabara & Saleh F. A. Khatib & Ayman Hassan Bazhair & Hamid Ghazi H Sulimany, 2022. "The Effect of the Board’s Educational and Gender Diversity on the Firms’ Performance: Evidence from Non-Financial Firms in Developing Country," Sustainability, MDPI, vol. 14(17), pages 1-15, September.
    6. Irfan Ullah & Muhammad Ansar Majeed & Hong-Xing Fang & Muhammad Arif Khan, 2020. "Female CEOs and investment efficiency: evidence from an emerging economy," Pacific Accounting Review, Emerald Group Publishing Limited, vol. 32(4), pages 443-474, November.
    7. Ali Alhaji Goni Mustapha & Aminu M. Bello & Ali M. Garba & Musa Ibrahim Gobe, 2020. "The Moderating Effect of the Audit Committee on the Relationship between Corporate Governance and Financial Performance: A Conceptual Review," International Journal of Research and Innovation in Applied Science, International Journal of Research and Innovation in Applied Science (IJRIAS), vol. 5(8), pages 01-10, August.
    8. Ramzi Benkraiem & Amal Hamrouni & Anthony Miloudi & Ali Uyar, 2018. "Access to Finance for French Firms: Do boardroom attributes matter?," Economics Bulletin, AccessEcon, vol. 38(3), pages 1267-1278.
    9. Sultan Sikandar Mirza & Muhammad Ansar Majeed & Tanveer Ahsan, 2020. "Board gender diversity, competitive pressure and investment efficiency in Chinese private firms," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 10(3), pages 417-440, September.
    10. Sugeng Suroso & Tri Widyastuti & M. Noor Salim & Irma Setyawati, 2017. "Intellectual Capital and Corporate Governance in Financial Performance Indonesia Islamic Banking," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 96-103.
    11. Lien‐Wen Liang & Tsui‐Jung Lin & Hui‐Fun Yu & Ya‐Wen Li, 2022. "The impact of political connection and board diversity on company performance: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2347-2357, September.
    12. Franziska Handschumacher & Willi Ceschinski, 2020. "Besteht ein Zusammenhang zwischen der Gender-Diversity und Überwachungseffektivität des Aufsichtsrats? Eine empirische Analyse deutscher börsennotierter Unternehmen [Is There a Link Between Gender ," Schmalenbach Journal of Business Research, Springer, vol. 72(2), pages 213-251, June.
    13. Stefan Milojević & Marko Milašinović & Aleksandra Mitrović & Jasmina Ognjanović & Jelena Raičević & Nebojša Zdravković & Snežana Knežević & Malči Grivec, 2023. "Board Gender Diversity and Banks Profitability for Business Viability: Evidence from Serbia," Sustainability, MDPI, vol. 15(13), pages 1-16, July.
    14. Suss, Joel & Angeli, Marilena & Eckley, Peter, 2021. "Gender, age and nationality diversity in UK banks," Bank of England working papers 929, Bank of England.
    15. Saifullah Khan & Adnan Shoaib, 2024. "Firm value adjustment speed through financial friction in the presence of earnings management and productivity growth: evidence from emerging economies," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-17, December.
    16. Sultan Sikandar Mirza & Muhammad Ansar Majeed & Tanveer Ahsan, 2020. "Board gender diversity, competitive pressure and investment efficiency in Chinese private firms," Post-Print hal-02956320, HAL.

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    More about this item

    Keywords

    Gender Diversity; Ethnic Diversity; Age Profile; Board of Directors (BODs); Firm Financial Performance (ROA; ROE; Tobin's Q);
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • M0 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General

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