Diversity Matters: A Study on the Relationship between Board Career Diversity and Firm Performance

Daniel Sungyeon Kim and Hong Kee Sul
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Daniel Sungyeon Kim: CAU Business School, Chung-Ang University, Seoul 06974, Korea
Hong Kee Sul: CAU Business School, Chung-Ang University, Seoul 06974, Korea

Sustainability, 2021, vol. 13, issue 17, 1-24

Abstract: Are shareholders better off hiring directors with in-depth specialties in the company’s core business or hiring directors with broader perspectives? This study addresses the question by investigating the relationship between directors’ career diversity and firm performance. It employs Tobin’s Q, total shareholder return, and return on equity as measures of firm performance. Accordingly, board career diversity has a significant and positive effect on firm performance. Moreover, we find that board directors with diverse industry experiences create value for firms via advisory (e.g., R&D and capital expenditures) and monitoring (e.g., equity compensation) roles. Given that diversity in career matters, corporations can seriously consider board composition and promote career diversity among board members.

Keywords: board of directors; diversity; industry experience; firm performance (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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