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Corporate governance, board diversity and firm financial performance: new evidence from Sri Lanka

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  • Nirosha Hewa Wellalage
  • Stuart Locke

Abstract

This paper investigates demographic diversity of board members in the Sri Lankan boardroom and their effect on the firm financial performance. Board diversity is measured by gender, ethnicity, age, education and occupational diversity. After controlling for potential endogeneity, this study finds that though board ethnicity and age diversity increase firm financial performance, board gender, education and occupational diversity reduce firm financial performance. Further, this study's results indicate Sri Lankan corporate boards are not fully diversified in their gender, race and educational qualifications and achievements. The results indicate that in Sri Lanka's uncertain environment, rather than having a diversified board, the preference is for recruitment to be focused on board members with the right skills. However, as a multicultural country, it is essential to introduce new board diversity orientation programmes, because such programmes create a two-way socialisation process, i.e., bias is reduced and minority perspectives can influence organisational norms and values.

Suggested Citation

  • Nirosha Hewa Wellalage & Stuart Locke, 2013. "Corporate governance, board diversity and firm financial performance: new evidence from Sri Lanka," International Journal of Business Governance and Ethics, Inderscience Enterprises Ltd, vol. 8(2), pages 116-136.
    • Handle: RePEc:ids:ijbget:v:8:y:2013:i:2:p:116-136
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    Citations

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    Cited by:

    1. KHAN, Adnan Ullah, 2021. "Impact Of Board Traits On Organisations’ Dividend Payout. Evidence From Pakistan," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 25(2), pages 21-36, June.
    2. Kamil K. Nazliben & Luc Renneboog & Emil Uduwalage, 2024. "Corporate governance from colonial Ceylon to post-civil war Sri Lanka," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 28(1), pages 265-335, March.
    3. Kelly Z. Peng & Fang Lee Cooke & Xuhua Wei, 2023. "Managing minority employees in organizations in Asia Pacific: Towards a more inclusive workplace?," Asia Pacific Journal of Management, Springer, vol. 40(3), pages 877-902, September.
    4. Alharbi, Rana & Elnahass, Marwa & McLaren, Josie, 2022. "Women directors and market valuation: What are the “Wonder Woman” attributes in banking?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    5. Ooi, Chai-Aun & Hooy, Chee-Wooi & Mat Som, Ahmad Puad, 2015. "Diversity in human and social capital: Empirical evidence from Asian tourism firms in corporate board composition," Tourism Management, Elsevier, vol. 48(C), pages 139-153.
    6. Elliroma Gardiner, 2024. "What’s age got to do with it? The effect of board member age diversity: a systematic review," Management Review Quarterly, Springer, vol. 74(1), pages 65-92, February.
    7. Mutalib Anifowose & Hafiz Majdi Abdul Rashid & Hairul Azlan Annuar, 2017. "Intellectual capital disclosure and corporate market value: does board diversity matter?," Journal of Accounting in Emerging Economies, Emerald Group Publishing Limited, vol. 7(3), pages 369-398, August.
    8. Collins Ntim, 2015. "Board diversity and organizational valuation: unravelling the effects of ethnicity and gender," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 19(1), pages 167-195, February.
    9. Giovanni Bronzetti & Maurizio Rija & Graziella Sicoli & Dominga Anna Ippolito, 2021. "Diversit? di genere e sistema sanitario: un?analisi su un campione di aziende sanitarie italiane," MECOSAN, FrancoAngeli Editore, vol. 0(120), pages 63-81.
    10. Ali Shariff Kabara & Saleh F. A. Khatib & Ayman Hassan Bazhair & Hamid Ghazi H Sulimany, 2022. "The Effect of the Board’s Educational and Gender Diversity on the Firms’ Performance: Evidence from Non-Financial Firms in Developing Country," Sustainability, MDPI, vol. 14(17), pages 1-15, September.

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