Board Diversity and Firm Performance: Evidence from Indonesia

Diajeng Fitri Wulan

Abstract


In today’s business entities, employees and top management teams become increasingly diverse in terms of age, ethnicity, and gender. Boards with diverse functional backgrounds are more likely to produce more strategic change that could lead to the good firm performance. This study aims to see the effect of board diversity towards firm performance. Board diversity in this research measured by age, gender, and also education. For the firm performance, writer use return on assets to measure the firm performance. The sample for this research is 317 companies listed in Indonesia Stock Exchange from 2018 to 2020. The data analysed by doing the descriptive statistic and regression analysis. The result shows that simultaneously the diversity of age, gender, and education in the board of directors effect the firm performance. However, partially; between the board diversity of age, gender, and education only the diversity of age that has a positive and significant effect towards firm performance. This condition leads to the assumption which said that board with younger directors could give new insights and point of view in taking financial and non-financial decision.  On the other hand, the diversity of gender and education do not give the significant effect towards firm performance. This condition caused by the condition in Indonesia, which still value men for the structural role than women and the majority of the directors only finished their education until bachelor degree.

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