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Board diversity, corporate governance, corporate performance and executive pay

Board diversity, corporate governance, corporate performance and executive pay
Board diversity, corporate governance, corporate performance and executive pay
Departing from previous studies, this paper investigates the impact of corporate board diversity on corporate performance and executive pay within the context of MENA countries. Our sample includes a balanced panel of 600 firm-year observations, consisting of 100 individual firms drawn from 5 Middle Eastern countries (Egypt, Jordan, Oman, Saudi Arabia and United Arab of Emirates) over the 2009–2014 period. The findings are three-fold. First, board diversity, as measured by director gender and nationality, has a positive effect on corporate financial performance. Second, the relationship between board diversity and corporate performance is stronger in better-governed firms than their poorly-governed counterparts. Finally, board diversity, as measured by director gender, ethnicity and nationality, enhances the pay-for-performance sensitivity, but not the actual executive pay. Our results suggest that decisions about board diversity are not merely influenced by moral values; they arise because of the cost-benefit considerations of what diversity can bring to the firm. The findings are robust to controlling for different alternatives of board diversity measures, corporate governance proxies, corporate outcomes and types of endogeneities.
economics and finance, financial and governance reforms, corporate governance, corporate board diversity, corporate performance, executive pay, MENA countries
1076-9307
761-786
Sarhan, Ahmed
c81ed023-28d0-4e5f-975c-a91f9695a163
Ntim, Collins
1f344edc-8005-4e96-8972-d56c4dade46b
Al-Najjar, Basil
40f4a747-0d65-4d40-b934-671cd0826b38
Sarhan, Ahmed
c81ed023-28d0-4e5f-975c-a91f9695a163
Ntim, Collins
1f344edc-8005-4e96-8972-d56c4dade46b
Al-Najjar, Basil
40f4a747-0d65-4d40-b934-671cd0826b38

Sarhan, Ahmed, Ntim, Collins and Al-Najjar, Basil (2019) Board diversity, corporate governance, corporate performance and executive pay. International Journal of Finance & Economics, 24 (2), 761-786. (doi:10.1002/ijfe.1690).

Record type: Article

Abstract

Departing from previous studies, this paper investigates the impact of corporate board diversity on corporate performance and executive pay within the context of MENA countries. Our sample includes a balanced panel of 600 firm-year observations, consisting of 100 individual firms drawn from 5 Middle Eastern countries (Egypt, Jordan, Oman, Saudi Arabia and United Arab of Emirates) over the 2009–2014 period. The findings are three-fold. First, board diversity, as measured by director gender and nationality, has a positive effect on corporate financial performance. Second, the relationship between board diversity and corporate performance is stronger in better-governed firms than their poorly-governed counterparts. Finally, board diversity, as measured by director gender, ethnicity and nationality, enhances the pay-for-performance sensitivity, but not the actual executive pay. Our results suggest that decisions about board diversity are not merely influenced by moral values; they arise because of the cost-benefit considerations of what diversity can bring to the firm. The findings are robust to controlling for different alternatives of board diversity measures, corporate governance proxies, corporate outcomes and types of endogeneities.

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Accepted Manuscript IJFE 11 September 2018 - Accepted Manuscript
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More information

Accepted/In Press date: 11 September 2018
e-pub ahead of print date: 15 October 2018
Published date: 24 April 2019
Keywords: economics and finance, financial and governance reforms, corporate governance, corporate board diversity, corporate performance, executive pay, MENA countries

Identifiers

Local EPrints ID: 424231
URI: http://eprints.soton.ac.uk/id/eprint/424231
ISSN: 1076-9307
PURE UUID: 420c7840-6b4e-4a3d-9cfb-0a06f5a9b1ff
ORCID for Collins Ntim: ORCID iD orcid.org/0000-0002-1042-4056

Catalogue record

Date deposited: 05 Oct 2018 11:35
Last modified: 09 Jan 2022 07:33

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Contributors

Author: Ahmed Sarhan
Author: Collins Ntim ORCID iD
Author: Basil Al-Najjar

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