Board Diversity and Dividend Payout Ratio: Evidence from Family Firms in Indonesia

Abstract

This study investigates the impact of Board of Commissioners (BoC) diversity on dividend payments in the listed family firms in Indonesia. This study uses diversity for gender, nationality and tenure to describe the board of commissioners diversity. Using a data set of listed family firms in Indonesia Stock Exchange over the period 2012-2016, we find evidence indicating that board gender diversity is positively related to dividend payments. Secondly, we find evidence that board tenure diversity is positively related to dividend payments. However, the board nationality diversity does not remain significant on dividend payments.

Does board demographic diversity affect the dividend payout policy in Turkey?

“…Nationality diversity is important since board directors from different countries have diverging knowledge, ideas, experiences, and values that affect the strategies and performance of companies (Daniel et al, 2013;Van Veen and Marsman, 2008). Foreign directors on boards could (1) provide social, business, and political connections, (2) shape company's future plans, (3) promote trustworthiness in the eyes of stakeholders, and (4) indicate efficient monitoring, mitigating concerns on minority rights (Ararat et al, 2010;Setiawan and Aslam, 2018). Thus, one may expect a positive association between nationality diversity and dividend policy in decreasing agency problems as reported by Pucheta-Mart ınez and L opez-Zamora (2017) and Setiawan and Aslam (2018).…”

“…Foreign directors on boards could (1) provide social, business, and political connections, (2) shape company's future plans, (3) promote trustworthiness in the eyes of stakeholders, and (4) indicate efficient monitoring, mitigating concerns on minority rights (Ararat et al, 2010;Setiawan and Aslam, 2018). Thus, one may expect a positive association between nationality diversity and dividend policy in decreasing agency problems as reported by Pucheta-Mart ınez and L opez-Zamora (2017) and Setiawan and Aslam (2018). Thus, we propose the following hypothesis:…”

“…They may experience fewer challenges than long-tenured directors, but they may be less successful in advising due to the limited business knowledge and historical background (Pozen and Hamacher, 2015). Hence, blending longand short-tenured directors may improve monitoring, and help companies formulate right policies, including dividend payout ones (Liu and Sun, 2005;Setiawan and Aslam, 2018). Notwithstanding its functional significance, the literature presents limited insights into how the tenure of board members influences corporate performance.…”

“…They have mainly focused on gender diversity, although there are studies investigating the influence of nationality, age, and tenure diversity on dividend policy (Ain et al, 2021;Baker et al, 2020;Byoun et al, 2016;Chen et al, 2017;Hamzah and Zulkafli, 2014;McGuinness et al, 2015;Sharma, 2011;Ye et al, 2019). However, there are few studies investigating the effect of gender and nationality diversity on dividend policy in emerging markets and the results are mixed (Ararat et al, 2015;Kagzi and Guha, 2018;Setiawan and Aslam, 2018). In this sense,…”

“…They have mainly focused on gender diversity, although there are studies investigating the influence of nationality, age, and tenure diversity on dividend policy (Ain et al, 2021;Baker et al, 2020;Byoun et al, 2016;Chen et al, 2017;Hamzah and Zulkafli, 2014;McGuinness et al, 2015;Sharma, 2011;Ye et al, 2019). However, there are few studies investigating the effect of gender and nationality diversity on dividend policy in emerging markets and the results are mixed (Ararat et al, 2015;Kagzi and Guha, 2018;Setiawan and Aslam, 2018). In this sense, EMJB 19,2 276 it is pivotal to further consider the case of emerging markets, where there are many familyowned companies and high level of ownership concentration since these characteristics creates significant differences in dividend payout practices of companies in emerging versus developed markets (Al-Najjar and Kilincarslan, 2016).…”