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

Dilrukshi Dimungu-Hewage and Jannine Poletti-Hughes

Review of Corporate Finance, 2023, vol. 3, issue 1-2, 175-211

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.

Keywords: Corporate fraud; board diversity; family firms; socioemotional wealth (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:now:jnlrcf:114.00000039

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