Does Board Cultural Diversity Contributed by Foreign Directors Improve Firm Performance? Evidence from Australia
Abstract
:1. Introduction
2. Methodology
2.1. Measuring Board Cultural Diversity
2.2. Measuring Firm Performance
2.3. Model
3. Data
3.1. Sample
3.2. Director-Level Data
3.3. Board Characteristics
3.4. Firm Characteristics
4. Results
4.1. Board Cultural Diversity and Firm Performance: Main Results
4.2. Addressing Endogeneity—Instrumental Variable Regressions
4.3. Additional Analyses
4.3.1. Board Cultural Diversity vs. Foreign Directors on Boards
4.3.2. Firm’s Foreign Presence and Operations
4.4. Alternative Cultural Frameworks
4.5. Individual Cultural Dimensions
5. Discussion and Conclusions
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
Appendix A
Individualism vs. Collectivism | Masculinity vs. Femininity | Power Distance | Uncertainty Avoidance | Long Term vs. Short-Term Orientation | Indulgence vs. Restraint | |
---|---|---|---|---|---|---|
Argentina | 46 | 56 | 49 | 86 | 20 | 62 |
Australia | 90 | 61 | 38 | 51 | 21 | 71 |
Austria | 55 | 79 | 11 | 70 | 60 | 63 |
Belgium | 75 | 54 | 65 | 94 | 82 | 57 |
Bermuda | 30 | 65 | 65 | 45 | 13 | 54 |
Brazil | 38 | 49 | 69 | 76 | 44 | 59 |
Canada | 80 | 52 | 39 | 48 | 36 | 68 |
China | 20 | 66 | 80 | 30 | 87 | 24 |
China (Taiwan) | 17 | 45 | 58 | 69 | 93 | 49 |
Colombia | 13 | 64 | 67 | 80 | 13 | 83 |
Czech Republic | 58 | 57 | 57 | 74 | 70 | 29 |
Denmark | 74 | 16 | 18 | 23 | 35 | 70 |
Dominican Republic | 30 | 65 | 65 | 45 | 13 | 54 |
Finland | 63 | 26 | 33 | 59 | 38 | 57 |
France | 71 | 43 | 68 | 86 | 63 | 48 |
Germany | 67 | 66 | 35 | 65 | 83 | 40 |
Hong Kong | 25 | 57 | 68 | 29 | 61 | 17 |
India | 48 | 56 | 77 | 40 | 51 | 26 |
Indonesia | 14 | 46 | 78 | 48 | 62 | 38 |
Ireland | 70 | 68 | 28 | 35 | 24 | 65 |
Italy | 76 | 70 | 50 | 75 | 61 | 30 |
Jamaica | 30 | 65 | 65 | 45 | 13 | 54 |
Japan | 46 | 95 | 54 | 92 | 88 | 42 |
Korea | 18 | 39 | 60 | 85 | 100 | 29 |
Malaysia | 26 | 50 | 100 | 36 | 41 | 57 |
Mexico | 30 | 69 | 81 | 82 | 24 | 97 |
New Zealand | 79 | 58 | 22 | 49 | 33 | 75 |
Pakistani | 14 | 50 | 55 | 70 | 50 | 0 |
Philippines | 32 | 64 | 94 | 44 | 27 | 42 |
Poland | 60 | 64 | 68 | 93 | 38 | 29 |
Romania | 30 | 42 | 90 | 90 | 52 | 20 |
Russia | 39 | 36 | 93 | 95 | 81 | 20 |
Singapore | 20 | 48 | 74 | 8 | 72 | 46 |
South Africa | 65 | 63 | 49 | 49 | 34 | 63 |
Spain | 51 | 42 | 57 | 86 | 48 | 44 |
Sweden | 71 | 5 | 31 | 29 | 53 | 78 |
Switzerland | 68 | 70 | 34 | 58 | 74 | 66 |
Thailand | 20 | 34 | 64 | 64 | 32 | 45 |
Trinidad and Tobago | 16 | 58 | 47 | 55 | 13 | 80 |
Turkey | 37 | 45 | 66 | 85 | 46 | 49 |
Ukraine | 25 | 27 | 92 | 95 | 86 | 14 |
United Kingdom | 89 | 66 | 35 | 35 | 51 | 69 |
United States | 91 | 62 | 40 | 46 | 26 | 68 |
Zimbabwe | 65 | 63 | 49 | 49 | 34 | 63 |
Variable | Definition |
---|---|
Gender diversity | The percentage of female directors on the board |
Age diversity | The natural log of the age difference (in years) between the oldest and youngest directors on the board |
Board independence | The proportion of independent directors on the board |
Director age | The natural log of the average age of directors on the board |
Board size | The natural log of the number of directors on the board |
Firm size | The natural log of the market capitalisation in AUD at the end of the year |
Leverage | The total debt divided by the total assets at the end of the year |
Firm age | The natural log of the number of years since the firm was established |
Firm complexity | The number of the business segment the company operates in |
Return volatility | The standard deviation of daily stock returns during the year |
Sales growth | The annual growth rate of the firm’s total sales |
Foreign directors % | The proportion of foreign (non-Australian) directors on the board |
Foreign nationalities % | The number of different nationalities represented on the board divided by the total number of directors |
Foreign sales | Firm’s foreign sales as a percentage of total sales |
Foreign assets | Firm’s foreign assets as a percentage of total assets |
NYSE listing | A dummy variable equal one if a firm is listed on the New York Stock Exchange (NYSE) and zero otherwise |
Foreign listing | A dummy variable equal one if a firm is listed on a foreign (outside of Australia) stock exchange and zero otherwise |
Country | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | Total | Total, % |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Argentina | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 0 | 0 | 0 | 0 | 0 | 10 | 0.07 |
Australia | 180 | 246 | 318 | 406 | 528 | 625 | 746 | 906 | 862 | 850 | 820 | 820 | 775 | 717 | 685 | 9484 | 67.64 |
Austria | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 23 | 0.16 |
Belgium | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 3 | 3 | 2 | 22 | 0.16 |
Bermuda | 1 | 2 | 4 | 4 | 4 | 4 | 7 | 8 | 5 | 2 | 2 | 1 | 1 | 0 | 0 | 45 | 0.32 |
Brazil | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 3 | 3 | 3 | 4 | 6 | 25 | 0.18 |
Canada | 3 | 4 | 7 | 8 | 12 | 14 | 17 | 23 | 20 | 19 | 20 | 22 | 21 | 22 | 25 | 237 | 1.69 |
China | 1 | 1 | 3 | 4 | 5 | 6 | 12 | 14 | 15 | 12 | 15 | 25 | 15 | 15 | 19 | 163 | 1.17 |
Colombia | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 3 | 0.02 |
Czech Rep | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 2 | 2 | 1 | 6 | 0.04 |
Demark | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 6 | 0.04 |
Dominican Rep | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 2 | 0.01 |
Finland | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 0 | 3 | 0.02 |
France | 1 | 2 | 3 | 4 | 4 | 4 | 5 | 5 | 5 | 5 | 7 | 7 | 6 | 8 | 8 | 74 | 0.53 |
Germany | 1 | 2 | 2 | 2 | 3 | 3 | 3 | 4 | 5 | 5 | 3 | 2 | 3 | 2 | 2 | 42 | 0.30 |
Hong Kong | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 18 | 0.13 |
India | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 3 | 5 | 23 | 0.16 |
Indonesia | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 0 | 0 | 0 | 0 | 0 | 3 | 9 | 0.06 |
Ireland | 5 | 6 | 7 | 7 | 8 | 10 | 11 | 14 | 13 | 13 | 9 | 8 | 8 | 9 | 8 | 136 | 0.97 |
Italy | 1 | 1 | 3 | 3 | 3 | 3 | 5 | 5 | 4 | 4 | 6 | 7 | 6 | 3 | 2 | 56 | 0.40 |
Jamaica | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 0 | 0 | 0 | 1 | 0.01 |
Japan | 0 | 0 | 0 | 0 | 0 | 3 | 4 | 4 | 5 | 2 | 3 | 1 | 1 | 3 | 6 | 32 | 0.23 |
Kenya | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 2 | 0.01 |
Korea | 0 | 0 | 0 | 0 | 1 | 2 | 2 | 3 | 3 | 2 | 2 | 1 | 1 | 0 | 0 | 17 | 0.12 |
Malaysia | 1 | 2 | 2 | 2 | 3 | 4 | 5 | 7 | 6 | 6 | 7 | 6 | 6 | 3 | 2 | 62 | 0.44 |
Mexico | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 0 | 0 | 0 | 8 | 0.06 |
New Zealand | 10 | 12 | 14 | 18 | 23 | 29 | 33 | 41 | 45 | 43 | 39 | 37 | 35 | 37 | 34 | 450 | 3.21 |
Pakistani | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 7 | 0.05 |
Philippines | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 16 | 0.11 |
PNG | 0 | 1 | 1 | 2 | 2 | 2 | 2 | 3 | 2 | 3 | 4 | 5 | 3 | 4 | 4 | 38 | 0.27 |
Poland | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 2 | 6 | 0.04 |
Romania | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 8 | 0.06 |
Russia | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 11 | 0.08 |
Singapore | 1 | 2 | 4 | 5 | 6 | 8 | 8 | 9 | 8 | 9 | 12 | 13 | 9 | 10 | 6 | 110 | 0.78 |
Solomon Islands | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 2 | 0.01 |
South Africa | 0 | 0 | 3 | 3 | 3 | 5 | 7 | 7 | 6 | 8 | 8 | 9 | 9 | 8 | 5 | 81 | 0.58 |
Spain | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 4 | 4 | 3 | 5 | 3 | 19 | 0.14 |
Sweden | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 2 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 14 | 0.10 |
Switzerland | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 13 | 0.09 |
Thailand | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 2 | 0 | 0 | 0 | 2 | 0 | 0 | 0 | 4 | 0.03 |
Trinidad and Tobago | 0 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 3 | 3 | 2 | 2 | 1 | 24 | 0.17 |
Turkey | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 2 | 0.01 |
Ukraine | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 0 | 0 | 0 | 1 | 6 | 0.04 |
United Kingdom | 26 | 40 | 44 | 59 | 73 | 86 | 99 | 123 | 120 | 125 | 126 | 138 | 141 | 138 | 146 | 1484 | 10.58 |
United States | 29 | 35 | 42 | 49 | 59 | 75 | 82 | 98 | 96 | 96 | 103 | 109 | 105 | 109 | 121 | 1208 | 8.62 |
Zimbabwe | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 10 | 0.07 |
Total | 264 | 362 | 464 | 584 | 749 | 896 | 1066 | 1,297 | 1239 | 1223 | 1214 | 1245 | 1177 | 1127 | 1115 | 14,022 | |
Foreign directors, % | 32% | 32% | 31% | 30% | 30% | 30% | 30% | 30% | 30% | 30% | 32% | 34% | 34% | 36% | 39% | 32% |
1 | For example, media reports “Australian boards are male and pale” https://www.afr.com/work-and-careers/leaders/australian-boards-are-male-and-pale-20200519-p54udk (accessed on 15 June 2022) and “Still stubbornly pale: Study finds ASX 300 boards are lagging on cultural diversity” https://www.minterellison.com/articles/summary-governance-institute-watermark-search-international-2021-board-diversity-index (accessed on 15 June 2022). |
2 | Australia is a Top 15 largest economy in the world in 2019. |
3 | For instance, the boards of similar size of two different Australian companies have one foreign director on the board, but one is from China and the other one is from New Zealand. Using the percentage of foreign directors on the board as a measure of nationality diversity will show that board nationality diversity of these two company as being at the same level, whereas a director from China is much more culturally distant from Australian directors than a director from New Zealand, making their board more culturally diverse. |
4 | The British Department of Trade and Industry published the Higgs Report in 2003, which suggested that demographic diversity increases board effectiveness and encourages including more female directors on boards. |
5 | For example, Bonn (2004), Kim and Starks (2016), Reguera-Alvarado et al. (2017) find a positive relationship between board gender diversity and corporate performance, and Rose (2007) and Carter et al. (2010) suggest that gender diversity has no effect on performance, while Darmadi (2011), Adams and Ferreira (2009), and Ahern and Dittmar (2012) find a negative relationship. Ararat et al. (2021) suggest that gender diversity has a contingent effect on firm performance. |
6 | Giannetti and Zhao (2019) estimate board cultural diversity based on directors’ ancestry. |
7 | Hofstede’s six dimensions include individualism–collectivism, masculinity–femininity, power distance, uncertainty avoidance, long-term orientation, and indulgence–restraint. |
8 | Low R-squared and Adjusted R-squared values are in line with other studies examining the relationship between board composition and firm, for example, Masulis et al. (2012) and Frijns et al. (2016). |
9 | The use of the metropolitan location as the instrument for board cultural diversity implies the assumption that the location of the firm’s headquarters has no impact on the firm’s performance in any way other than through board cultural diversity. This assumption is theoretically supported by the concept of spatial equilibrium, which states that firms are indifferent across geographic locations because higher productivity that may arise from various advantages of operating in dense urban areas would be offset by higher wages in urban areas and higher urban real estate costs (Glaeser and Gottlieb 2009; Jennen and Verwijmeren 2010). |
10 | Masulis et al. (2012) argue that any difficulty reaching the head office’s location will affect the number of foreign directors being employed. They refer to the geographic distance to a large US airport, arguing that locating within 100 km of a large US airport makes it easier to reach, and that it will therefore be more likely that the company will have more foreign directors. |
11 | The first-stage estimation results (not reported for brevity) show that a firm’s location in a metropolitan area is a significant determinant of its board’s cultural diversity. |
12 | Schwartz’s culture dimensions are embeddedness vs. autonomy (affective autonomy and intellectual autonomy), hierarchy vs. egalitarianism, and mastery vs. harmony. |
13 | In the finance literature, Hofstede’s uncertainty avoidance cultural dimension is often linked to risk-taking behaviour (see, for example, Li et al. 2013; Pan et al. 2020). |
14 | We use nationality as a proxy for cultural background of directors. We acknowledge that this proxy has limitations and that nationality does not always accurately capture the cultural background. We assume that nationality captures the cultural background of most directors in our sample. The inaccurate measurements of cultural background for foreign directors could bias the estimation results. However, the bias would take the estimation results away from statistical significance. The results could be stronger if we were able to identify directors’ cultural backgrounds more accurately. |
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Year | Total N Firms | Firms with Foreign Directors | N Firms with X Foreign Directors | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
N | % | X = 0 | X = 1 | X = 2 | X = 3 | X = 4 | X = 5 | X = 6 | X = 7 | X = 8 | ||
2004 | 92 | 46 | 50.0% | 46 | 37 | 8 | 1 | 0 | 0 | 0 | 0 | 0 |
2005 | 123 | 68 | 55.3% | 55 | 49 | 16 | 3 | 0 | 0 | 0 | 0 | 0 |
2006 | 141 | 80 | 56.7% | 61 | 49 | 26 | 4 | 1 | 0 | 0 | 0 | 0 |
2007 | 154 | 100 | 65.0% | 54 | 65 | 24 | 9 | 2 | 0 | 0 | 0 | 0 |
2008 | 166 | 111 | 66.9% | 55 | 59 | 35 | 15 | 0 | 2 | 0 | 0 | 0 |
2009 | 169 | 123 | 72.8% | 46 | 56 | 40 | 19 | 6 | 2 | 0 | 0 | 0 |
2010 | 171 | 135 | 79.0% | 36 | 56 | 46 | 20 | 7 | 6 | 0 | 0 | 0 |
2011 | 168 | 139 | 82.7% | 29 | 46 | 41 | 25 | 12 | 12 | 2 | 1 | 0 |
2012 | 167 | 135 | 80.8% | 32 | 48 | 38 | 24 | 13 | 9 | 3 | 0 | 0 |
2013 | 164 | 135 | 82.3% | 29 | 43 | 41 | 29 | 13 | 8 | 1 | 0 | 0 |
2014 | 162 | 134 | 82.7% | 28 | 37 | 44 | 27 | 16 | 8 | 1 | 1 | 0 |
2015 | 158 | 133 | 84.2% | 25 | 40 | 31 | 34 | 9 | 14 | 4 | 1 | 0 |
2016 | 149 | 132 | 88.6% | 17 | 43 | 41 | 23 | 12 | 10 | 2 | 1 | 0 |
2017 | 144 | 129 | 89.6% | 15 | 46 | 33 | 23 | 20 | 6 | 0 | 0 | 1 |
2018 | 140 | 127 | 90.7% | 13 | 39 | 44 | 15 | 18 | 9 | 1 | 0 | 1 |
Total | 2268 | 1727 | 76.1% | 541 | 713 | 508 | 271 | 129 | 86 | 14 | 4 | 2 |
Variables | Mean | SD | (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10) | (11) | (12) | (13) |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(1) Tobin’s q | 1.91 | 1.55 | 1.00 | ||||||||||||
(2) ROA | 0.078 | 0.127 | 0.34 | 1.00 | |||||||||||
(0.00) | |||||||||||||||
(3) Cultural diversity | 1.58 | 1.56 | −0.06 | −0.03 | 1.00 | ||||||||||
(0.004) | (0.21) | ||||||||||||||
(4) Gender diversity | 0.092 | 0.147 | 0.02 | 0.04 | 0.04 | 1.00 | |||||||||
(0.47) | (0.04) | (0.04) | |||||||||||||
(5) Age diversity | 14.60 | 10.42 | −0.08 | 0.001 | 0.35 | 0.22 | 1.00 | ||||||||
(0.00) | (0.95) | (0.00) | (0.00) | ||||||||||||
(6) Board independence | 0.685 | 0.237 | 0.10 | 0.06 | −0.05 | 0.21 | −0.01 | 1.00 | |||||||
(0.00) | (0.009) | (0.02) | (0.00) | (0.51) | |||||||||||
(7) Director age | 58.47 | 5.13 | −0.01 | 0.00 | 0.04 | 0.00 | 0.08 | 0.10 | 1.00 | ||||||
(0.63) | (0.99) | (0.07) | (0.98) | (0.00) | (0.00) | ||||||||||
(8) Board size | 4.84 | 2.81 | −0.15 | −0.03 | 0.40 | 0.26 | 0.82 | −0.04 | 0.16 | 1.00 | |||||
(0.00) | (0.18) | (0.00) | (0.00) | (0.00) | (0.09) | (0.00) | |||||||||
(9) Firm size ($ bln) | 3.69 | 7.38 | 0.02 | 0.30 | 0.08 | 0.02 | 0.19 | −0.05 | 0.03 | 0.24 | 1.00 | ||||
(0.45) | (0.00) | (0.00) | (0.29) | (0.00) | (0.01) | (0.20) | (0.00) | ||||||||
(10) Sales growth | 0.015 | 0.022 | −0.01 | −0.02 | −0.01 | −0.03 | −0.01 | 0.01 | −0.03 | −0.03 | −0.03 | 1.00 | |||
(0.73) | (0.27) | (0.50) | (0.21) | (0.77) | (0.77) | (0.17) | (0.10) | (0.22) | |||||||
(11) Leverage | 0.223 | 0.193 | −0.17 | −0.07 | 0.04 | 0.02 | 0.07 | −0.06 | 0.09 | 0.11 | 0.18 | 0.03 | 1.00 | ||
(0.00) | (0.002) | (0.08) | (0.44) | (0.001) | (0.003) | (0.00) | (0.00) | (0.00) | (0.15) | ||||||
(12) Firm age | 46.89 | 47.66 | −0.13 | 0.06 | 0.09 | 0.06 | 0.09 | −0.03 | −0.04 | 0.17 | 0.26 | −0.05 | 0.05 | 1.00 | |
(0.00) | (0.005) | (0.00) | (0.01) | (0.00) | (0.13) | (0.06) | (0.00) | (0.00) | (0.03) | (0.04) | |||||
(13) Firm complexity | 2.75 | 1.89 | −0.22 | 0.01 | 0.15 | 0.05 | 0.15 | −0.02 | 0.09 | 0.22 | 0.29 | −0.06 | 0.20 | 0.27 | 1.00 |
(0.00) | (0.49) | (0.00) | (0.02) | (0.00) | (0.21) | (0.00) | (0.00) | (0.00) | (0.009) | (0.00) | (0.00) | ||||
(14) Return volatility | 0.330 | 0.932 | 0.02 | 0.02 | −0.03 | 0.01 | −0.06 | 0.02 | −0.09 | −0.06 | 0.03 | −0.002 | 0.01 | 0.01 | 0.02 |
(0.35) | (0.32) | (0.21) | (0.76) | (0.004) | (0.37) | (0.00) | (0.004) | (0.17) | (0.94) | (0.74) | (0.81) | (0.42) |
N Foreign Directors | Cultural Diversity | Gender Diversity | Age Diversity | Board Independence | |
---|---|---|---|---|---|
2004 | 0.61 | 0.56 | 0.028 | 5.38 | 0.501 |
2005 | 0.73 | 0.81 | 0.031 | 7.05 | 0.505 |
2006 | 0.83 | 0.97 | 0.036 | 8.54 | 0.510 |
2007 | 0.97 | 1.20 | 0.049 | 10.94 | 0.597 |
2008 | 1.11 | 1.30 | 0.046 | 14.94 | 0.62 |
2009 | 1.34 | 1.42 | 0.052 | 17.24 | 0.581 |
2010 | 1.56 | 1.67 | 0.066 | 19.57 | 0.602 |
2011 | 1.96 | 1.83 | 0.092 | 32.17 | 0.597 |
2012 | 1.86 | 1.74 | 0.109 | 20.46 | 0.618 |
2013 | 1.89 | 1.77 | 0.121 | 19.82 | 0.627 |
2014 | 1.99 | 1.85 | 0.121 | 19.92 | 0.641 |
2015 | 2.16 | 1.93 | 0.140 | 20.23 | 0.651 |
2016 | 2.09 | 1.97 | 0.171 | 19.96 | 0.661 |
2017 | 2.08 | 2.00 | 0.187 | 19.87 | 0.688 |
2018 | 2.16 | 2.05 | 0.219 | 18.85 | 0.687 |
Tobin’s q | ROA | IV Regressions—Second Stage | |||||
---|---|---|---|---|---|---|---|
Tobin’s q | ROA | ROA (5%) | |||||
(1) | (2) | (3) | (4) | (5) | (6) | (7) | |
Cultural diversity | 0.041 ** | 0.044 ** | 0.004 ** | 0.004 ** | |||
(2.11) | (2.10) | (2.00) | (2.06) | ||||
0.627 ** | 0.018 | 0.023 * | |||||
(2.46) | (1.02) | (1.65) | |||||
Gender diversity | 0.077 | −0.015 | −0.812 *** | −0.029 | 0.001 | ||
(0.37) | (−0.78) | (−2.71) | (−1.37) | (0.04) | |||
Age diversity | −0.003 | −0.001 | −0.170 * | −0.003 | −0.006 | ||
(−0.09) | (−0.18) | (−1.79) | (−0.45) | (−1.22) | |||
Board independence | 0.145 | −0.015 * | 0.595 *** | 0.038 *** | 0.038 *** | ||
(1.55) | (−1.78) | (4.21) | (3.77) | (4.94) | |||
Director age | −0.047 | 0.005 | 0.280 | 0.031 | 0.0508 *** | ||
(−0.18) | (0.21) | (0.80) | (1.24) | (2.677) | |||
Board size | 0.002 | −0.001 | −0.158 *** | −0.008 *** | −0.007 *** | ||
(0.13) | (−0.89) | (−4.70) | (−3.42) | (−4.05) | |||
Firm size | 0.242 *** | 0.241 *** | 0.038 *** | 0.038 *** | 0.180 *** | 0.029 *** | 0.022 *** |
(9.36) | (9.27) | (16.02) | (15.94) | (7.44) | (17.01) | (17.06) | |
Sales growth | 0.014 | 0.011 | 0.003 | 0.003 | −0.001 | −0.0001 | −0.0001 |
(0.15) | (0.12) | (0.37) | (0.38) | (−0.75) | (−1.12) | (−1.62) | |
Leverage | 0.103 | 0.120 | −0.045 *** | −0.047 *** | −1.078 *** | −0.084 *** | −0.057 *** |
(0.65) | (0.75) | (−3.12) | (−3.21) | (−5.59) | (−6.12) | (−5.45) | |
Firm age | −0.212 ** | −0.210 ** | 0.024 *** | 0.024 *** | −0.003 *** | 0.00002 | 0.0001 |
(−2.25) | (−2.23) | (2.84) | (2.84) | (−3.82) | (0.42) | (1.26) | |
Firm complexity | −0.095 * | −0.095 * | −0.003 | −0.003 | −0.557 *** | −0.013 *** | −0.013 *** |
(−1.81) | (−1.81) | (−0.67) | (−0.67) | (−7.81) | (−2.62) | (−3.34) | |
Return volatility | −0.005 | −0.005 | −0.001 | −0.001 | 0.010 | 0.001 | 0.001 |
(−0.68) | (−0.68) | (−0.62) | (−0.64) | (0.75) | (0.91) | (1.50) | |
Constant | −2.116 *** | −2.063 * | −0.747 *** | −0.741 *** | −1.623 | −0.557 | −0.557 |
(−3.97) | (−1.78) | (−15.25) | (−6.97) | (−0.22) | (−0.22) | (−0.22) | |
Firm fixed effects | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
Year fixed effects | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
N companies | 184 | 184 | 184 | 184 | 184 | 184 | 184 |
N obs. | 2258 | 2258 | 2256 | 2256 | 2258 | 2258 | 2258 |
R-squared | 0.107 | 0.108 | 0.156 | 0.158 | 0.11 | 0.11 | 0.07 |
Adj. R-squared | 0.104 | 0.103 | 0.154 | 0.154 | 0.105 | 0.104 | 0.065 |
F-statistic | 20.47 | 12.43 | 50.62 | 29.84 | 19.87 | 16.13 | 30.12 |
Prob > F | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
Tobin’s q | ROA | |||||||
---|---|---|---|---|---|---|---|---|
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | |
Cultural diversity | 0.039 * | 0.037 | 0.004 * | 0.005 ** | ||||
(1.74) | (1.54) | (1.95) | (2.26) | |||||
Foreign directors % | 0.144 | 0.062 | 0.005 | −0.003 | ||||
(1.26) | (0.50) | (0.51) | (−0.27) | |||||
Foreign nationalities % | 0.224 | 0.087 | 0.002 | −0.017 | ||||
(1.51) | (0.51) | (0.12) | (−1.059) | |||||
Control variables | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
Firm fixed effects | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
Year fixed effects | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
N companies | 184 | 184 | 184 | 184 | 184 | 184 | 184 | 184 |
N obs. | 2267 | 2267 | 2267 | 2267 | 2265 | 2265 | 2265 | 2265 |
R-squared | 0.104 | 0.105 | 0.104 | 0.105 | 0.153 | 0.154 | 0.153 | 0.155 |
Adj. R-squared | 0.099 | 0.100 | 0.099 | 0.100 | 0.148 | 0.150 | 0.148 | 0.150 |
F-statistic | 9.16 | 8.95 | 9.19 | 8.95 | 14.25 | 13.89 | 14.24 | 13.93 |
Prob > F | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
Tobin’s q | ROA | |||||||
---|---|---|---|---|---|---|---|---|
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | |
Cultural diversity | 0.044 ** | 0.041 * | 0.040 ** | 0.040 * | 0.004 ** | 0.004 * | 0.003 * | 0.003 * |
(2.10) | (1.96) | (1.96) | (1.95) | (2.00) | (1.94) | (1.87) | (1.85) | |
Foreign sales | −0.003 ** | 0.0002 ** | ||||||
(−2.49) | (2.28) | |||||||
Foreign assets | −0.004 *** | −0.0002 * | ||||||
(−3.01) | (−1.71) | |||||||
NYSE listing | 1.126 | −0.004 | ||||||
(1.40) | (−0.07) | |||||||
Foreign listing | 0.520 *** | 0.012 | ||||||
(2.61) | (0.76) | |||||||
Control variables | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
Firm fixed effects | Yes | Yes | No | No | Yes | Yes | No | No |
Year fixed effects | Yes | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
N companies | 184 | 184 | 184 | 184 | 184 | 184 | 184 | 184 |
N obs. | 2267 | 2266 | 2267 | 2265 | 2265 | 2264 | 2265 | 2263 |
R-squared | 0.108 | 0.109 | 0.105 | 0.105 | 0.156 | 0.156 | 0.154 | 0.155 |
Adj. R-squared | 0.103 | 0.104 | 0.099 | 0.099 | 0.151 | 0.150 | 0.149 | 0.149 |
F-statistic | 9.19 | 9.28 | 9.29 | 9.28 | 14.11 | 14.02 | 14.42 | 14.46 |
Prob > F | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
Tang and Koveos | Schwartz | |||
---|---|---|---|---|
All Firms | Firms with Foreign Directors | All Firms | Firms with Foreign Directors | |
(1) | (2) | (3) | (4) | |
Panel A. Tobin’s q | ||||
Cultural diversity | 0.070 | 0.084 * | 0.007 ** | 0.006 * |
(1.62) | (1.71) | (2.18) | (1.87) | |
Control variables | Yes | Yes | Yes | Yes |
Firm fixed effects | Yes | Yes | Yes | Yes |
Year fixed effects | Yes | Yes | Yes | Yes |
N companies | 182 | 177 | 164 | 159 |
N obs. | 2237 | 1705 | 1810 | 1466 |
R-squared | 0.108 | 0.109 | 0.108 | 0.107 |
Panel B. ROA | ||||
Cultural diversity | 0.004 | 0.001 | 0.0004 | 0.0002 |
(1.08) | (0.24) | (1.32) | (0.79) | |
Control variables | Yes | Yes | Yes | Yes |
Firm fixed effects | Yes | Yes | Yes | Yes |
Year fixed effects | Yes | Yes | Yes | Yes |
N companies | 182 | 177 | 164 | 159 |
N obs. | 2237 | 1705 | 1810 | 1466 |
R-squared | 0.164 | 0.179 | 0.113 | 0.108 |
Individualism | Masculinity | Power Distance | Uncertainty Avoidance | Long-Term Orientation | Indulgence | |
---|---|---|---|---|---|---|
(1) | (2) | (3) | (4) | (5) | (6) | |
Panel A. Tobin’s q | ||||||
Cultural diversity | 0.028 | 0.188 ** | 0.036 | 0.176 *** | 0.094 ** | 0.082 |
(0.89) | (1.99) | (0.79) | (2.89) | (2.46) | (1.58) | |
Control variables | Yes | Yes | Yes | Yes | Yes | Yes |
Firm fixed effects | Yes | Yes | Yes | Yes | Yes | Yes |
Year fixed effects | Yes | Yes | Yes | Yes | Yes | Yes |
N companies | 184 | 184 | 184 | 184 | 184 | 184 |
N obs. | 2267 | 2267 | 2267 | 2267 | 2267 | 2267 |
R-squared | 0.104 | 0.105 | 0.104 | 0.107 | 0.106 | 0.104 |
Panel B. ROA | ||||||
Cultural diversity | 0.002 | 0.028 *** | 0.0004 | 0.015 *** | 0.005 | 0.004 |
(0.72) | (3.21) | (0.09) | (2.75) | (1.57) | (0.81) | |
Control variables | Yes | Yes | Yes | Yes | Yes | Yes |
Firm fixed effects | Yes | Yes | Yes | Yes | Yes | Yes |
Year fixed effects | Yes | Yes | Yes | Yes | Yes | Yes |
N companies | 184 | 184 | 184 | 184 | 184 | 184 |
N obs. | 2265 | 2265 | 2265 | 2265 | 2265 | 2265 |
R-squared | 0.153 | 0.157 | 0.153 | 0.156 | 0.154 | 0.153 |
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Dodd, O.; Zheng, B. Does Board Cultural Diversity Contributed by Foreign Directors Improve Firm Performance? Evidence from Australia. J. Risk Financial Manag. 2022, 15, 332. https://doi.org/10.3390/jrfm15080332
Dodd O, Zheng B. Does Board Cultural Diversity Contributed by Foreign Directors Improve Firm Performance? Evidence from Australia. Journal of Risk and Financial Management. 2022; 15(8):332. https://doi.org/10.3390/jrfm15080332
Chicago/Turabian StyleDodd, Olga, and Bowen Zheng. 2022. "Does Board Cultural Diversity Contributed by Foreign Directors Improve Firm Performance? Evidence from Australia" Journal of Risk and Financial Management 15, no. 8: 332. https://doi.org/10.3390/jrfm15080332