Board diversity and firm performance: cases in sharia capital market of Indonesia

Abstract

The purpose of this study is to examine the effect of board diversity on corporate performance. In this paper, board diversity refers to the composition of board members consisting of women, foreign, ethnicity, size of the board of commissioner, and size board of directors. Whereas, corporate performance is measured by return on assets (ROA). The sample size of the study uses 48 publicly listed firms in the Sharia capital market of Indonesia for the observation period between 2015 and 2017. The results show that firms with women and foreigner in board had a significant and positive association with corporate performance. Similarly, the board of commissioners and the board of directors also had a significant and positive association with firm performance. However, the existence of the ethnic boards does not affect firm performance.

Director's Nationality Diversity and Company Performance: The Evidence From Emerging Market

“…The result of this study is in line with the prior work of EmadEldeen et al ( 2021), which examined 3961 non-financial companies listed on the London Stock Exchange for the 2000-2016 period. This finding is consistent with previous findings (Adams and Baker, 2021;Asad et al, 2023;Komala and Fuad, 2017;Putri and Danarsari, 2020;Sutrisno and Mohamad, 2019). The positive effect of the supervisory board's nationality diversity on performance is due to having international business experience, and they, therefore, deliver a better understanding of the contribution of these units to overall company performance.…”

“…Finally, Adams and Baker (2021) conclude that boardroom nationality influences the corporate outcomes of UK firms. Previous research using Indonesia's company (supervisory board) and non-Blau index as nationality diversity measurements concludes that diversity positively affects company performance (Komala and Fuad, 2017;Putri and Danarsari, 2020;Sutrisno and Mohamad, 2019). Therefore, the following hypotheses are developed below: H1 : Directors' nationality diversity is positively related to company performance.…”

“…The influence of director nationality diversity and company performance has been done in several countries, such as the UK (EmadEldeen et al, 2021;Metwally, 2021), Australia (Shatnawi et al, 2022), Marocco (Chebri and Bahoussa, 2020), India (Rafinda et al, 2018), Qatar (Mohd Idris and Ousama, 2021), Spain (Fernández-Temprano and Tejerina-Gaite, 2020), Nigeria (Ujunwa et al, 2012), UK (Adams and Baker, 2021), and Indonesia (Adams and Baker, 2021;Komala and Fuad, 2017;Mardiyati and Siregar, 2022;Putri and Danarsari, 2020;Sutrisno and Mohamad, 2019). Regarding the board governance system used, most prior research was documented in the countries adopting the Anglo-Saxon corporate governance system.…”

“…They analyzed the nationality diversity of the oversight board and ignored the management board or directors. Furthermore, previous studies in Indonesia applied one proxy for performance measurement: ROA (Sutrisno andMohamad, 2019), Tobin's Q (Putri andDanarsari, 2020), and value-added intellectual capital (Komala and Fuad, 2017). Therefore, no previous evidence exists on the board of directors or management board nationality diversity using the unique corporate governance system, such as in Indonesia.…”

The Effect of Political Connection and Women Directors on Company Value with Financial Performance as a Mediating Variable

“…Different results were obtained in the results of studies conducted by (Dewanti, 2019;Haryati, Rustiarini & Dewi 2021;R. Sari & Darmawati, 2021;Seftiana, Evana & Amelia 2022;Supatmi, 2022;Sutrisno & Mohamad, 2019;Sulastri & Sari, 2020) which found a negative influence of political connections on company value.…”