Gender, ethnic and age diversity of the boards of large Malaysian firms and performance
Board diversity is important especially in countries which practice a one-tier board system, such as Malaysia. Under the system, board appointments are usually controlled by the firm’s substantial shareholders, and as a result, directors are chosen based on “the old-boy” network or “people like us...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Penerbit Universiti Kebangsaan Malaysia
2013
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| Online Access: | http://journalarticle.ukm.my/6968/ http://journalarticle.ukm.my/6968/ http://journalarticle.ukm.my/6968/1/4609-10780-1-SM.pdf |
| Summary: | Board diversity is important especially in countries which practice a one-tier board system, such as Malaysia. Under
the system, board appointments are usually controlled by the firm’s substantial shareholders, and as a result, directors
are chosen based on “the old-boy” network or “people like us”, who are typically middle-aged males and from similar
ethnicity which could lead to “group think”. Board diversity ensures breadth and depth of the board’s judgments. To
this end, this study examines board diversity of the top 100 non-financial Malaysian firms, specifically directors’ gender,ethnicity and age and their effects on firm performance. Data are collected from the 2007 annual reports of the sample firms. The evidence indicates the lack of diversity of the Malaysian boards of directors. Results from the multivariate analyses reveal that gender diversity is negatively associated with Tobin’s q and ROA. Age diversity is found to be negatively related to ROA. Ethnic diversity, on the other hand, is found to be positively associated with ROA. Hence, findings on the effect of board diversity and firm performance are mixed. Nevertheless, this study offers insights to policy makers in enhancing corporate governance in Malaysia where diversity is one of the areas that could strengthen the effectiveness of the board. |
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