Journal of Business Ethics

, Volume 105, Issue 3, pp 375–388

Board Composition and Financial Performance: Uncovering the Effects of Diversity in an Emerging Economy

  • Jyoti D. Mahadeo
  • Teerooven Soobaroyen
  • Vanisha Oogarah Hanuman
Article

Abstract

We examine the key elements of board diversity (or heterogeneity) amongst listed companies operating in an emerging economy (Mauritius) and the extent to which these influence financial performance. Specifically, we ask whether there is evidence of tangible benefits in pursuing a strategy of board diversity in terms of gender-, age-, educational background and independence in a corporate context which has long been dominated by family-led and ‘closed’ boardrooms. In light of recent corporate governance developments which appear to foster greater diversity, we examine data from the 2007 annual reports of all 42 companies listed on the Stock Exchange of Mauritius. We find that (i) women remain poorly represented on boards (ii) there is a relatively satisfactory level of heterogeneity in terms of educational background, age and independence in relation to developed countries. We also find significant regression coefficients for all four variables in terms of their impact on short-term performance. However, these relationships are characterised by both negative and positive impacts thereby leading to discussions on the validity of a strict heterogeneous or homogeneous board composition in the context of a developing economy.

Keywords

Board diversity Financial performance Developing country Corporate governance 

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Copyright information

© Springer Science+Business Media B.V. 2011

Authors and Affiliations

  • Jyoti D. Mahadeo
    • 1
  • Teerooven Soobaroyen
    • 2
  • Vanisha Oogarah Hanuman
    • 1
  1. 1.Department of ManagementUniversity of MauritiusReduitMauritius
  2. 2.University of SouthamptonSouthamptonUK

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