1.1 Introduction to Board Diversity
The relationship between the board diversity and the firm performance represents an interesting corporate governance aspect that has received an increasing attention in the latest years. The theme of diversity within firms has old origins, when it has started to be studied with reference to teams, job organization and more in general in relation to people management (Cox 1994; Cox and Blake 1991; Dutton et al. 1994; Kossek and Zonia 1993; Williams and Bauer 1994). Later, it has started to be investigated also with specific refer to the main governing body, the board of directors. All firms worldwide present a boardroom composed by several members. These members, being individuals, present their own characteristics and features. Unavoidably, these characteristics impact on the way the directors interact and, as a consequence, operate. Thus, this puzzling phenomenon has gained extensive attention over the years, as scholars have tried to highlight the characteristics of the directors that are more relevant for generating a positive outcome for the firm. Therefore, the board composition, seen as the result of the mix of the individual characteristics of the board members, has been largely investigated under several theoretical frameworks, ranging from the more traditional agency, stakeholder and the resource dependence theory frameworks, to the newer stewardship and institutional theory.
Literature has posed several questions in terms of board diversity impacts. In other words, being the board the highest body in terms of decision-making process, its outcome can impact on various firmâs aspects. Thus, the boardroom diversity topic finds breeding ground for the analysis of the impacts generated by the heterogeneity among directors on at least five main aspects: (1) the corporate social responsibility (e.g. Harjoto et al. 2015; Rao and Tilt 2016; Katmon et al. 2019), (2) the organizational performance (e.g. Jehn and Bezrukova 2004; Hambrick et al. 1996; Hambrick and Mason 1984; Bell et al. 2011), (3) the firmâs innovation (e.g. Galia and Zenou 2012; Bianchi Martini et al. 2012; Midavaine et al. 2016), (4) the firmâs risks (e.g. Lenard et al. 2014; Bernile et al. 2018), and (5) the firmâs financial performance (e.g. Campbell and MĂnguez-Vera 2008; Carter et al. 2003; Adams and Ferreira 2009; Vieira 2018). This latter aspect has been the most researched one, due to the high relevance also for financial markets, even though no convergent empirical findings have been achieved yet.
Understanding the multiple options in terms of director choices, as well as their effects and implications for the firmâs financial performance, is the main purpose of this book. In fact, the present work empirically analyses the impacts of boardroom diversity features on the firmâs financial performance, estimated with both market-based and accounting-based measures. The authors explore first the effects of each single board diversity dimension on the firmâs performance conducting a single diversity indexes analysis, and, then, the simultaneous effects of several board diversity dimensions still on the firmâs performance though a joint diversity indexes analysis. Thus, from a methodological point of view, following previous studies (Bernile et al. 2018; Harjoto et al. 2015), this book constructs indexes for measuring the board diversity dimensions that take into account the type of variable (categorical or quantitative) behind the dimension itself. Specifically, twelve diversity dimensions were taken into account.
As far as the structure is concerned, the book presents first a literature review part (Chapters 2, 3, and 4), which draws the big picture of the existing literature and the most relevant theories about the board of directors and the board diversity; second, it presents the empirical investigations (Chapters 5 and 6), starting from the data and the model explanations and then continuing with the presentation and the discussion of the achieved results, with some final remarks on a future research agenda that could be further developed.
On the whole, this book seeks to contribute to the board diversity literature covering the most relevant theoretical frameworks used to explain the complex board diversity topic and providing a new empirical approach to investigate the effects of this phenomenon on the financial performance of the firm. In doing so, it tries to address the need for a focused, timely and empirical discussion about this relevant and evergreen topic.
