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Does Board Diversity Decrease Corporate Fraud? International Evidence from Family vs. Non-family Firms

Author

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  • Dilrukshi Dimungu-Hewage
  • Jannine Poletti-Hughes

Abstract

We take the perspective that specific traits that distinguish family from non-family firms are essential for the understanding of the impact of board diversity on the likelihood of corporate fraud. Grounded on the behavioural agency theory, we argue that family firms are more likely to commit fraud than non-family firms possibly because of the aim to preserve socioemotional wealth and the weakness of regulatory systems (i.e., in the Latin American region). We find that family firms can offset such frailties by diversifying the board of directors (i.e., gender, education and tenure of independent directors), and such opportunities for diversity increase with board size but decrease with experienced boards.

Suggested Citation

  • Dilrukshi Dimungu-Hewage & Jannine Poletti-Hughes, 2023. "Does Board Diversity Decrease Corporate Fraud? International Evidence from Family vs. Non-family Firms," Review of Corporate Finance, now publishers, vol. 3(1-2), pages 175-211, May.
    • Handle: RePEc:now:jnlrcf:114.00000039
    DOI: 10.1561/114.00000039
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    Keywords

    Corporate fraud; board diversity; family firms; socioemotional wealth;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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