Journal of Business Ethics

, Volume 105, Issue 3, pp 375–388 | Cite as

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

  • Jyoti D. MahadeoEmail author
  • Teerooven Soobaroyen
  • Vanisha Oogarah Hanuman


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.


Board diversity Financial performance Developing country Corporate governance 


  1. Adams, R. B., & Ferreira, D. (2008) Women in the board and their impact on governance and performance. Center for Economic Institutions Working Paper Series, No. 2008-7, Hitotsubashi University, Japan.Google Scholar
  2. Alves, C., & Mendes, V. (2004). Corporate governance policy and company performance: The Portuguese case. Corporate Governance: An International Review, 12(3), 290–301.CrossRefGoogle Scholar
  3. Arfken, D. E., Bellar, S. L., & Helms, M. M. (2004). The ultimate glass ceiling revisited: The presence of women on corporate boards. Journal of Business Ethics, 50(2), 177–186.CrossRefGoogle Scholar
  4. Argenti, J. (1976). Corporate collapse: The causes and symptoms. New York: McGraw-Hill.Google Scholar
  5. Bantel, K. (1993). Strategic clarity in banking: Role of top management-team demography. Psychological Reports, 73, 1187–1203.CrossRefGoogle Scholar
  6. Baysinger, B. D., & Butler, H. N. (1985). Corporate governance and the board of directors: Performance effects of changes in board composition. Journal of Law Economics and Organization, 1(1), 101–120.Google Scholar
  7. Beasley, M., Carcello, J., Hermanson, D., & Lapides, P. (2000). Fraudulent financial reporting: Consideration of industry traits and corporate governance mechanisms. Accounting Horizons, 14(4), 441–454.CrossRefGoogle Scholar
  8. Brancato, C. K., & Patterson, D. J. (1999) Board diversity in U.S. corporations: Best practices for broadening the profile of corporate boards. Research Report 1230-99-RR, The Conference Board, New York, NY.Google Scholar
  9. Brennan, N., & McDermott, M. (2004). Alternative perspectives on independence of directors. Corporate Governance: An International Review, 12, 325–336.CrossRefGoogle Scholar
  10. Burke, R. J. (1997). Women directors: Selection, acceptance and benefits of board membership. Corporate Governance, 5, 118–125.CrossRefGoogle Scholar
  11. Burke, R. J. (2003). Women on corporate boards of directors: The timing is right. Women in Management Review, 18(7), 346–348.CrossRefGoogle Scholar
  12. Burton, P. (2000). Antecedents and consequences of corporate governance structures. Corporate Governance: An International Review, 8(3), 194–203.CrossRefGoogle Scholar
  13. Cannella, A. A., Park, J., & Lee, H. (2008). Top management team functional background diversity and firm performance: Examining the roles of team member colocation and environmental uncertainty. Academy of Management Journal, 51(4), 768–784.CrossRefGoogle Scholar
  14. Carter, D. A., D’Souza, F., Simkins, B. J., & Simpson, W. G. (2008). The diversity of corporate board committees and financial performance. Working Paper, SSRN.Google Scholar
  15. Carter, D. A., Simkins, B. J., & Simpson, W. G. (2003). Corporate governance, board diversity and firm value. The Financial Review, 38, 33–53.CrossRefGoogle Scholar
  16. Catalyst. (2004). The bottom line: Connecting corporate performance and gender diversity. New York: Catalyst.Google Scholar
  17. Chandler, M. (1975, September–October). It’s time to clean up the boardroom. Harvard Business Review, pp. 73–82.Google Scholar
  18. Dunn, P. (2004). The impact of insider power on fraudulent financial reporting. Journal of Management, 30, 397–412.CrossRefGoogle Scholar
  19. Elsayed, K. K. (2007). Does CEO duality really affect corporate performance? Corporate Governance: An International Review, 15(6), 1203–1214.CrossRefGoogle Scholar
  20. Erhardt, N. L., Werbel, J. D., & Shrader, C. B. (2003). Board of director diversity and firm financial performance. Corporate Governance: An International Review, 11(2), 102–111.CrossRefGoogle Scholar
  21. Farrell, K. A., & Hersch, P. L. (2005). Additions to corporate boards: The effect of gender. Journal of Corporate Finance, 11(1–2), 85–106.CrossRefGoogle Scholar
  22. Gilpatrick, K. (2000). Invite youthful insight. Credit Union Management, 23, 28–29.Google Scholar
  23. Hambrick, D., Cho, T., & Chen, M. (1996). The influence of top management team heterogeneity on firm’s competitive moves. Administrative Science Quarterly, 41, 659–685.CrossRefGoogle Scholar
  24. Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9(2), 193–206.Google Scholar
  25. Higgs, D. (2003). Review of the role and effectiveness of non-executive directors.
  26. Houle, C. O. (1990). Who should be on your board? Nonprofit World, 8, 33–35.Google Scholar
  27. Kang, H., Cheng, M., & Gray, S. J. (2007). Corporate governance and board composition: Diversity and independence of Australian Boards. Corporate Governance: An International Review, 15(2), 194–207.CrossRefGoogle Scholar
  28. Knight, D., Pearce, C. L., Smith, K. G., Olian, J. D., Sims, H. P., Smith, K. A., et al. (1999). Top management team diversity, group process, and strategic consensus. Strategic Management Journal, 20, 445–465.CrossRefGoogle Scholar
  29. Krambia-Kapardis, M., & Psaros, J. (2006). The implementation of corporate governance principles in an emerging economy: A critique of the situation in Cyprus. Corporate Governance: An International Review, 14(2), 126–139.CrossRefGoogle Scholar
  30. Laing, D., & Weir, C. M. (1999). Governance structures, size and corporate performance in UK Firms. Management Decision, 37(5), 457–464.CrossRefGoogle Scholar
  31. Mallin, C. (2001). Corporate governance and the bottom line. Corporate Governance: An International Review, 9(2), 77–78.CrossRefGoogle Scholar
  32. Monks, R. A. G. (2001). Redesigning corporate governance structures and systems for the twenty first century. Corporate Governance: An International Review, 9(3), 142–147.CrossRefGoogle Scholar
  33. Mueller, D. C. (2006). The Anglo-Saxon approach to corporate governance and its applicability to emerging markets. Corporate Governance: An International Review, 14(4), 207–219.CrossRefGoogle Scholar
  34. Murray, A. I. (1989). Top management group heterogeneity and firm performance. Strategic Management Journal, 10, 125–141.CrossRefGoogle Scholar
  35. National Committee on Corporate Governance. (2004). Report and code on corporate governance for Mauritius. Ministry of Finance and Economic Development.Google Scholar
  36. OECD. (2004). OECD principles of corporate governance. Organization for Economic Cooperation and Development, France.Google Scholar
  37. Ouchi, W. G. (1980). Markets, bureaucracies and clans. Administrative Science Quarterly, 25, 129–141.CrossRefGoogle Scholar
  38. Ow-Yong, K., & Guan, C. K. (2000). Corporate governance codes: A comparison between Malaysia and UK. Corporate Governance: An International Review, 8(2), 125–132.CrossRefGoogle Scholar
  39. Ramgutty-Wong, A. (2000). CEO attitudes towards women managers in corporate Mauritius. Women in Management Review, 15(4), 184–196.CrossRefGoogle Scholar
  40. Samra-Fredericks, D. (2000). Doing ‘Boards-in-Action’ research—An ethnographic approach for the capture and analysis of directors’ and senior managers’ interactive routines. Corporate Governance: An International Review, 8(3), 244–257.CrossRefGoogle Scholar
  41. Siciliano, J. I. (1996). The relationship of board member diversity to organizational performance. Journal of Business Ethics, 14, 1313–1320.CrossRefGoogle Scholar
  42. Simons, T., & Pelled, L. (1999). Understanding executive diversity: More than meets the eye. Human Resource Planning, 22, 49–51.Google Scholar
  43. Solomon, J. F., Wei Lin, S., Norton, S. D., & Solomon, A. (2003). Corporate governance in Taiwan: empirical evidence from Taiwanese company directors. Corporate Governance: An International Review, 11(3), 235–248.CrossRefGoogle Scholar
  44. Soobaroyen, T., & Mahadeo, J. D. (2008). Selective compliance with the corporate governance code in Mauritius: Is legitimacy theory at work? Research in Accounting in Emerging Economies, 8, 239–272.CrossRefGoogle Scholar
  45. Stephenson, C. (2004). Leveraging diversity to maximum advantage: The business case for appointing more women to boards. Ivey Business Journal, 1–5.Google Scholar
  46. Thanacoody, P. R., Bartram, T., Barker, M., & Jacobs, K. (2006). Career progression among female academics: A comparative study of Australia and Mauritius. Women in Management Review, 21(7), 536–553.CrossRefGoogle Scholar
  47. Tsamenyi, M., & Uddin, S. (2008). Introduction to corporate governance in less developed and emerging economies. Research in Accounting in Emerging Economies, 8, 1–11.CrossRefGoogle Scholar
  48. Tuggle, C. S., Schnatterly, K., & Johnson, R. A. (2010). Attention patterns in the boardroom: How board composition and processes affect discussion of entrepreneurial Issues. Academy of Management Journal, 53(3), 550–571.CrossRefGoogle Scholar
  49. Uddin, S. (2008). Rationality, traditionalism and the state of corporate governance mechanisms: Illustrations from a less developed country. Accounting Auditing and Accountability Journal, 21(7), 1026–1105.CrossRefGoogle Scholar
  50. Wanyama, S., Burton, B., & Helliar, C. (2009). Frameworks underpinning corporate governance: Evidence on Ugandan perceptions. Corporate Governance: An International Review, 17(2), 159–175.CrossRefGoogle Scholar
  51. Wilkins, A. L., & Ouchi, W. G. (1983). Efficient cultures: Exploring the relationship between culture and organizational performance. Administrative Science Quarterly, 28, 466–481.CrossRefGoogle Scholar
  52. World Bank. (2002). Report on the Observance of Standards and Codes (ROSC). Corporate Governance Country Assessment, Mauritius.Google Scholar
  53. Zelechowski, D. D., & Bilimoria, D. (2004). Characteristics of women and men corporate inside directors in the US. Corporate Governance: An International Review, 12(3), 337–342.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media B.V. 2011

Authors and Affiliations

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

Personalised recommendations