Board Cultural Diversity and Firm Performance

Abstract

The contemporary belief that diversified boards perform better has prompted an investigation of board characteristics and how they influence firm performance. This study examines cultural diversity in boards and the performance of Nigerian firms. Specifically, it investigates the phenomenon of board culture as a “double-edged sword” with the aim of providing new evidence from the perspective of emerging markets. Board cultural diversity viewed the “foreignness” (the degree of a firm’s foreign orientation) of the board and firm, gender diversity, and board independence. Firm performance was measured by return on assets (ROA) and return on equity (ROE). A sample of 23 financial services firms from the Nigerian stock market over the period between 2006 and 2018 was used for the study, which applied a non-linear symmetric GARCH model for the analysis. The results revealed that board culture has a significant negative impact on performance. This result is sensitive to performance measures and is homogeneous to all firms because the control variables for firms’ heterogeneity were statistically insignificant.