Key words: Ethnic diversity, Board nationality, financial performance, Corporate Governance

 

Abstract

Table of Content

 

INTRODUCTION

1.0       Background to the Study

1.1       Statement of Problem

1.2       Research Questions

1.3       Research Objectives

1.4       Research Hypothesis

1.5       Significance of Study

1.6       Justification of Study

1.7       Scope and Limitation of Study

1.8       Operational Definition of terms

 

LITERATURE REVIEW

2.0       Introduction

2.1       Conceptual Framework

2.2       Theoretical Framework

2.3       Empirical Framework

 

METHODOLOGY

3.1       Introduction

3.2       Research Design

3.3       Sample Selection

3.4       Data Collection

3.5       Data Analysis Procedure and Instrument

3.6       Measurement of Variables

3.7       Model Specification

 

DATA PRESENTATION AND ANALYSIS

4.0       Introduction

4.1       Descriptive

4.2       Unit Root Test

4.3       Covariance and Correlation

4.4       Panel Data Regression Model

 

SUMMARY, CONCLUSION AND RECOMMENDATION

5.0       Introduction

5.1       Summary of Analysis

5.2       Conclusion

5.3       Recommendation of Study

5.4       Contribution to Knowledge

5.5       Limitation of Study

5.6       Suggestion for Further Study

Bibliography

Appendix

 

 

 

Board diversity in corporate governance structure is beginning to be of growing importance when it comes to the interest of shareholders and firm performance nowadays. With evidence shown from notable studies from, (Erhardt, Werbek & Shrader, 2003; Lee & Far, 2004; Bergen

 

&   Massey, 2005; Robertson & parker, 2007: Adams and Ferreira, 2007; Harris and Raviv, 2008; Ferreira, 2010). Recently, scholars like: (Marimuthu, 2011; Darmadi, 2011; Omoye, Alade, & Eriki, 2013; Cimerovaa, Dodda, & Frijnsa, 2014), and much more have also investigated board diversity and its effects to an entity. There is an accelerated focus on the study of board composition: board independence; board size and board diversity, (Carter, Simikins & Simpson, 2003; Erhardt, Werbek & Shrader, 2003; Garba & Abubakar, 2014 & Heyvon, 2014).

 

The promotion of diversity in the board has been a frequent subject of recent in literature due to the potential benefits from having a wealth of different individual quality and experience on in a single board. Hambick & Mason, (1984), observed that management heterogeneity has a greater tendency to bring about quality decision making. Similarly, with Hambick and Mason, Other studies such as that of Wiersema & Bantel (1992); Watson, Kumar, & Michaelsen, (1993); Cox, (1993) has also spelt out the importance of corporate board diversity. The work of Adams & Ferreira, (2009) in particular highlighted the potential benefits of corporate board diversity to a firm as it brings about: Creativity, variety of views and perspectives; more resource accessibility and more connections; Public relations, legitimacy and investor relations and finally career incentives through mentoring and signaling.

 

Carter, D’souza, Simkins, & Simpson (2007) looked into Fortune 500 board narrowing their scope by using gender and racial diversity between the year 1998-2002 and they observed that gender and racial diversity have positive effects on firms' performance. However, various forms of diversity, such as race, sex, age, and ethnicity could result in tension, conflict, and hinder corporation and affect communication thereby reducing firm’s performance. This satisfies the definition of Ferreira, (2010) that a corporate board of a firm is viewed as the composition of separate individuals who are controlled by different bias and varying preconceived notions and are affected by social constraint & power relation. Diversity in culture is the representation of people of distinct groups of affiliation in one social system, Cox, (1993). These definitions have been reflective in the empirical work of Darmadi (2011) who investigated listed firms in Indonesia stock exchange between the diversity of the board and financial performance of the firms. In his study, he selected three elements of diversity which are gender, nationality, and age, using 169 listed firms and discovered that there was no influence of diversity on firm’s performance. Also, Cultural Heterogeneity may have also resulted in conflicts which have enhanced the performance of an organization; it is linked positively with better problem-solving options, Omoye, Alade, & Eriki (2013).

 

 

Several countries such as Norway (since 2006, 40% of the board are female), Spain, Iceland, France, Singapore and Malaysia (30% of the board are female) have succeeded in passing a regulation for a specific quota of female in board, Adam & Ferreira, (2009); Ahern & Dittmer, (2012); Heyvon, (2014), of which many countries are yet to implement their percentage quota. Nevertheless, certain aspects of diversity (apart from gender) such as ethnic, racial, education, Industrial background seem neglected in determining board composition. The central thought should be, is there a perfect prescription as pertaining to the diversity in corporate board? Authors such as Metz & Harzing, (2009); Marimuthu & Kolandaisamy, (2009); Matlala, (2011); have laid emphasis on the importance of female directors and their positive effect on performance and earnings. The term board diversity cuts across so many variables such as age, race, gender, culture, religion, the level of education and background experience Swartz & Firer, (2005); Ferreira (2010); Kulkarni, (2012).