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Board demographic diversity, firm performance and strategic change

Board demographic diversity, firm performance and strategic change Purpose– The purpose of this study is to examine the effect of boards’ demographic diversity on firms’ strategic change and the interaction effect of firm performance. Design/methodology/approach– This paper used secondary data derived from publicly listed firms in Kenya during 2002-2010 and analyzed the data using fixed effects regression model to test the effect of board demographic and strategic change, while moderated regression analysis was used to test the moderating effect of firm performance. Findings– The results partially supported board demographic diversity–strategic change hypothesis. In particular, results indicate that age diversity produces less strategic change, while functional diversity is associated with greater levels of strategic change. The moderated regression results do not support our general logic that high firm performance enhances board demographic diversity–strategic change relationship. In effect, the results reveal that at high level of firm performance, board demographic diversity produces less strategic change. Originality/value– Despite few studies that have examined board demographic diversity and firm performance, this paper introduces strategic change as an outcome variable. This paper also explores the moderating role of firm performance in board demographic diversity–strategic change relationship, and finally, the study uses Kenyan dataset which in itself is unique because most governance and strategy research uses data from developed countries. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Management Research Review Emerald Publishing

Board demographic diversity, firm performance and strategic change

Kipkirong Tarus, Daniel; Aime, Federico
Management Research Review , Volume 37 (12): 27 – Nov 11, 2014
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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
2040-8269
DOI
10.1108/MRR-03-2013-0056
Publisher site
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Abstract

Purpose– The purpose of this study is to examine the effect of boards’ demographic diversity on firms’ strategic change and the interaction effect of firm performance. Design/methodology/approach– This paper used secondary data derived from publicly listed firms in Kenya during 2002-2010 and analyzed the data using fixed effects regression model to test the effect of board demographic and strategic change, while moderated regression analysis was used to test the moderating effect of firm performance. Findings– The results partially supported board demographic diversity–strategic change hypothesis. In particular, results indicate that age diversity produces less strategic change, while functional diversity is associated with greater levels of strategic change. The moderated regression results do not support our general logic that high firm performance enhances board demographic diversity–strategic change relationship. In effect, the results reveal that at high level of firm performance, board demographic diversity produces less strategic change. Originality/value– Despite few studies that have examined board demographic diversity and firm performance, this paper introduces strategic change as an outcome variable. This paper also explores the moderating role of firm performance in board demographic diversity–strategic change relationship, and finally, the study uses Kenyan dataset which in itself is unique because most governance and strategy research uses data from developed countries.

Journal

Management Research Review – Emerald Publishing

Published: Nov 11, 2014

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