Board Diversity and Corporate Investment Decisions

Evidence from China

Datos Bibliográficos

ID3486833
AutoresFarman Ali (0000-0002-9420-1588, Dongbei University of Finance and Economics), Muhammad Ullah (0000-0001-9919-8210, Dongbei University of Finance and Economics, autor de correspondencia), Sk Tarik Ali (0000-0001-7025-7694, Dongbei University of Finance and Economics), Z Yang (0000-0002-1223-0415, Dongbei University of Finance and Economics), Imran Ali (0000-0001-8154-4082, Dongbei University of Finance and Economics)
Año2022
Volumen12
Número2
Fecha de publicación2022-04-01
Peer ReviewedSí
Open AccessSí
TipoARTICLE
RevistaSAGE Open (JOURNAL)
Identificadores de la revistaISSN: 2158-2440 • E-ISSN: 2158-2440
EditorialSAGE Publications Inc (PUBLISHER)
DOI10.1177/21582440221104089
OpenAlexW4281684527
IdiomaEN
Citas recibidas2
Referencias citadas86

We investigate the relation between board diversity and corporate investment decisions. We select four diversity attributes namely, gender, age, tenure, and education diversity to find its impact of corporate investment. Further, we classify these four diversity attributes into surface-level and deep-level diversity to check its impact on investment. Analyzing Chinese non-financial firms over the period of 2003 to 2017, we employ fixed effect regression to test the formulated hypotheses. We deal with the endogeneity concerns and employ several robustness tests. We find that board gender, tenure, and education diversity reduce corporate investment level. Further, we find that gender and age diversity are negatively associated with sensitivity of investment to growth opportunities, while tenure and education diversity are positively related to investment-Q sensitivity. We find that surface-level diversity reduces the sensitivity of investment to growth opportunities, while deep-level diversity positively affects investment-Q sensitivity. Overall, our findings suggest that board's surface-level diversity is associated with inefficient investment policies, while deep-level diversity improve the corporate investment decisions. This study shows that board diversity play a decisive role in corporate investment decisions. Policies should be devised to mitigate the negative role of surface-level diversity. Furthermore, as deep-level diversity improves investment decisions, organizations and policy-makers should encourage it in order to get benefits of a diverse board. Majority of prior studies consider one dimension of diversity, such as gender, to test its impact on investment decisions. This study shows how surface-level diversity attributes (low job related) and deep-level diversity attributes (highly job related) affect board decisions. This study comprehensively analyzes the impact of board diversity on corporate investment decisions in an emerging economy

Behavioral economics · Business · Corporate governance · Demographic economics · Econometrics · Economics · Endogeneity · Gender diversity · Investment Decisions · Political science · Corporate Finance and Governance · Gender Diversity and Inequality · Gender Politics and Representation · Accounting · Finance