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The Effect of Board Directors from Countries with Different Genetic Diversity Levels on Corporate Performance

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  • Manthos D. Delis

    () (Surrey Business School, University of Surrey, Surrey GU2 7XH, United Kingdom)

  • Chrysovalantis Gaganis

    () (Department of Economics, University of Crete, Rethymnon, Crete GR-74100, Greece)

  • Iftekhar Hasan

    () (Gabelli School of Business, Fordham University, New York, New York 10023; and Bank of Finland, FI-00101 Helsinki, Finland)

  • Fotios Pasiouras

    () (Surrey Business School, University of Surrey, Surrey GU2 7XH, United Kingdom; and Financial Engineering Laboratory, Technical University of Crete, 73100 Chania, Greece)

Abstract

We link genetic diversity in the country of origin of the firms’ board members with corporate performance via board members’ nationality. We hypothesize that our approach captures deep-rooted differences in cultural, institutional, social, psychological, physiological, and other traits that cannot be captured by other recently measured indices of diversity. Using a panel of firms listed in the North American and UK stock markets, we find that adding board directors from countries with different levels of genetic diversity (either higher or lower) increases firm performance. This effect prevails when we control for a number of cultural, institutional, firm-level, and board member characteristics, as well as for the nationality of the board of directors. To identify the relationship, we use—as instrumental variables for our diversity indices—the migratory distance from East Africa and the level of ultraviolet exposure in the directors’ country of nationality. This paper was accepted by Wei Jiang, finance .

Suggested Citation

  • Manthos D. Delis & Chrysovalantis Gaganis & Iftekhar Hasan & Fotios Pasiouras, 2017. "The Effect of Board Directors from Countries with Different Genetic Diversity Levels on Corporate Performance," Management Science, INFORMS, vol. 63(1), pages 231-249, January.
  • Handle: RePEc:inm:ormnsc:v:63:y:2017:i:1:p:231-249
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    File URL: http://dx.doi.org/10.1287/mnsc.2015.2299
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    2. Daron Acemoglu & Ufuk Akcigit & Douglas Hanley & William Kerr, 2016. "Transition to Clean Technology," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 52-104.
    3. Bedendo, Mascia & Garcia-Appendini, Emilia & Siming, Linus, 2017. "Cultural Preferences and the Choice between Formal and Informal Financing," Working Papers on Finance 1707, University of St. Gallen, School of Finance.
    4. Ramana Nanda & William R. Kerr, 2015. "Financing Innovation," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 445-462, December.
    5. Kick, Thomas & Nehring, Inge & Schertler, Andrea, 2017. "Do all new brooms sweep clean? Evidence for outside bank appointments," Journal of Banking & Finance, Elsevier, vol. 84(C), pages 135-151.
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    8. Eerola, Essi & Saarimaa, Tuukka, 2015. "Who benefits from public housing?," Research Discussion Papers 30/2015, Bank of Finland.
    9. Mariotto, Carlotta & Verdier, Marianne, 2015. "Innovation and competition in Internet and mobile banking: an industrial organization perspective," Research Discussion Papers 23/2015, Bank of Finland.
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    More about this item

    Keywords

    genetic diversity; corporate performance; nationality of board members;

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

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