Board diversity and corporate investment oversight

Maretno A. Harjoto, Indrarini Laksmana and Ya-wen Yang

Journal of Business Research, 2018, vol. 90, issue C, 40-47

Abstract: Drawn from theories in group diversity and group performance, this study examines the association between board diversity, measured in both relation-oriented dimension (i.e., gender, race, and age) and task-oriented dimension (i.e., tenure and expertise), and board performance in corporate investment oversight. We assess suboptimal investment by measuring how much firms deviate from the expected level of capital expenditures, R&D expenses, and acquisition spending within their industry. Using a sample of 15,125 firm-year across 1898 firms from 1998 to 2014, we find that task-oriented diversity attributes, such as tenure and expertise, are negatively associated with suboptimal investment, suggesting that diverse boards in terms of firm specific experience and functional expertise are more effective in overseeing corporate investment activities than homogeneous boards. Our results shed light on the recent regulatory requirements on board diversity and recommend greater task-oriented diversity in corporate boardrooms.

Keywords: Board diversity; Board effectiveness; Board composition; Corporate investment oversight (search for similar items in EconPapers)
JEL-codes: G30 G34 G38 M14 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0148296318302091
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:90:y:2018:i:c:p:40-47

DOI: 10.1016/j.jbusres.2018.04.033

Access Statistics for this article

Journal of Business Research is currently edited by A. G. Woodside

More articles in Journal of Business Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().