An Empirical Study on the Impact of Board Mechanisms and Diversity on Performance and Value: The Case of Publicly Listed Companies

Authors

  • Ali Zohaib Javed , Rodiel C. Ferrer

Abstract

A competent board is one of the essential features of corporate governance. A board structure is a
combination of several board attributes such as board size, independence, CEO duality, and multiple
directorship. Also, another key issue in board mechanisms is the diversity of the members of the board. The
focus of this study is to assess the impact of board mechanisms and diversity on firm performance and value.
This study used three measures for performance and value which include ROE, ROA, and Tobin’s Q. The
independent variables for this study are board mechanisms and diversity. Board Mechanisms were measured
by several board-related variables including Board Size, Board Independence, CEO duality, and Multiple
Directorship. For diversity, three proxies were used, namely, Gender, Age, and Nationality diversity.
Furthermore, several control variables were used, including firm’s capital structure, size, age and efficiency.
The results of the study revealed that Board Size is the only influential Board Mechanism variable that
impacts the financial performance and value of publicly listed companies in the Philippines. The results
suggested that an increase in the board size diminishes the performance and value of companies.

Published

2020-04-30

Issue

Section

Articles