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Do as they say or do as they do? — Uncovering the effects of inappropriate methods and unreliable data in boardroom diversity research

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  • Renz, Franziska M.
  • Vogel, Julian U.N.
  • Xie, Feixue

Abstract

This study examines the impact of ethnic/racial and gender diversity of the board of directors on firm valuation and financial performance using hand-collected data. We show that data on boardroom diversity that is commonly used in diversity research is unreliable and differs significantly from the data reported by the companies directly. Boardroom diversity does not significantly impact firm performance, in accordance with institutional theory. This result is validated across various diversity measures, and different diversity levels. We reconcile our findings with previous literature and show that prior contradicting results are based on unreliable data and misspecified empirical designs. Companies’ utilization of boardroom diversity needs to be redesigned to leverage the benefits of diverse viewpoints in strategic decision-making, and increase firm performance.

Suggested Citation

  • Renz, Franziska M. & Vogel, Julian U.N. & Xie, Feixue, 2023. "Do as they say or do as they do? — Uncovering the effects of inappropriate methods and unreliable data in boardroom diversity research," Journal of Empirical Finance, Elsevier, vol. 72(C), pages 410-420.
    • Handle: RePEc:eee:empfin:v:72:y:2023:i:c:p:410-420
    DOI: 10.1016/j.jempfin.2023.04.004
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    More about this item

    Keywords

    Boardroom diversity; Dynamic panel regression; Financial performance; Firm valuation; Hand-collected data;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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