Diversity–performance nexus in an emerging economy: an investigation of family and non-family firms

Md Tariqul Islam, Shrabani Saha and Mahfuzur Rahman

International Journal of Emerging Markets, 2023, vol. 20, issue 2, 887-912

Abstract: Purpose - The empirical study aims to examine the impact of board diversity with respect to gender and nationality on firm performance in an emerging economy. This research further splits the sample into family and non-family domains and investigates the diversity–performance nexus in isolation. Design/methodology/approach - The sample consists of 183 listed companies in Bangladesh over the period 2007 to 2017. This study employed the generalised method of moments (GMM) technique to address the possible endogeneity issue in the governance–performance connection. To underscore the strength of diversity, three distinctive assessment measures were used: percentage representation of females and foreign directors, the Blau index and the Shannon index. Findings - The results for the full sample models reveal that board heterogeneity regarding both female and foreign directors positively and significantly influences firm performance as measured by return on assets (ROA). Further to this, female directors in family-owned businesses have a positive association with profitability, whereas foreign nationals demonstrate a significant positive association with performance in non-family firms. Additionally, at least three women directors are needed to make a positive difference in profitability; however, a sole director with foreign nationality is capable of demonstrating a similar impact on performance. Practical implications - The findings are significant for policymakers and organisations that advocate diversity on corporate boards of directors, and the minimum number of diverse board members needs to be considered depending on the identity to bring about a significant change in organisational outcome. Therefore, the findings of this study may be applied to other emerging economies with similar institutional characteristics. Originality/value - This study reinforces the existing stock of knowledge on the impact of board diversity on the profitability of firms, especially in the context of an emerging economy – Bangladesh. Irrespective of the given backdrop, this study finds that both gender and nationality diversity in the case of Bangladesh is found to have a positive and significant effect on financial performance with respect to all the diversity metrics, i.e. the proportionate number of female and foreign directors on the boards, the Blau index and the Shannon index.

Keywords: Board diversity; Women directors; Foreign directors; Family and non-family firms; Firm performance; Emerging economy (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

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:eme:ijoemp:ijoem-04-2022-0727

DOI: 10.1108/IJOEM-04-2022-0727

Access Statistics for this article

International Journal of Emerging Markets is currently edited by Prof Ilan Alon

More articles in International Journal of Emerging Markets from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().