The impact of board ethnic diversity on firm performance: evidence from public listed firms in Malaysia Online publication date: Mon, 06-Aug-2018
by Shu Fen Chuah; Chee-Wooi Hooy
International Journal of Monetary Economics and Finance (IJMEF), Vol. 11, No. 3, 2018
Abstract: This paper examines the impact of board ethnic diversity on firm performance (FP) as well as the interacting effects of board independence and board meeting attendance. Unlike prior local research which mainly studied Bumiputera and non-Bumiputera (Malays and non-Malays) directors, this paper views the board from the perspective of diversity. We hand-collected the directors' details and identified them as Malay, Chinese, Indian or other ethnics directors. Using panel data analysis of public listed firms in Malaysia, this paper reveals that diverse ethnic directors in the board increase FP only if more than half of the board consists of independent directors. The finding suggests that when the board is independent, this effectively functioning board allows the diverse ethnic directors to participate in the board activities and make decision that ensure the benefits of all stakeholders, which ultimately increase FP.
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