The relationship between board diversity and firm performance in S&P 1500 companies

Abstract

This paper investigates the relationship of board diversity characteristics and firm performance within S&P 1500 companies. Drawing on upper echelon and resource dependency theories and analysing panel data from 2010 to 2022 using a fixed effects regression model, the findings reveal a significant positive effect of gender diversity on firm performance, measured by both return on assets and Tobin’s Q. Conversely, age diversity shows a non-statistically significant relationship with ROA and a statistically significant negative relationship with Tobin’s Q. Additionally, ethnic diversity shows a statistically significant positive effect on return on assets but is non-significant for Tobin’s Q. The results remain robust after accounting for endogeneity concerns. These findings provide new evidence on the validity of the homogeneous versus heterogeneous board structures and highlight a positive impact of gender diversity on the board for firm performance in U.S. companies. The mixed outcomes regarding overall board diversity underscore the need for further research to explore the unobservable aspects of diversity.

Date of Award	26 Jun 2024
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Rolf Brühl (Supervisor)