Impact of Board Heterogeneity Composition on Firm Risk: An Empirical Study

Kong-Hee Kim and Abdul A. Rasheed
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Kong-Hee Kim: Department of Management, St. Cloud State University, St Cloud, MN, USA
Abdul A. Rasheed: Department of Management, University of Texas at Arlington, Arlington, TX, USA

International Journal of Risk and Contingency Management (IJRCM), 2013, vol. 2, issue 4, 1-17

Abstract: There has been scant research exploring the implications of board heterogeneity for board's functioning and subsequent corporate outcome of stability in firm performance. A number of hypotheses are developed based on a multi-theoretic approach incorporating board resources, board dynamics, and board independence. Results of testing the hypotheses reveal that board heterogeneity in organizational tenure, functional experience, and educational specialty is related to the stability of returns. Furthermore, increased ownership position by directors and institutional investors strengthens the relationship between board heterogeneity and stability of returns. The results of this study suggest that board heterogeneity increases organizational rationality and further the stability in firm performance through its more effective control and counsel functions to management.

Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:igg:jrcm00:v:2:y:2013:i:4:p:1-17

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