The Global Financial Crisis Impact on Ethnic Diversity of Sri Lanka Boards

Abstract

This study investigates the link between ethnic minority directors and agency conflict in Sri Lankan listed companies during a global financial crisis. Due to social and economic pressures in recent decades, ethnic minorities now make up a larger proportion of directors on corporate boards in Sri Lanka. In addition, the global financial crisis has increased demand for boards to strengthen their ethnic diversity in workplaces. This study shows that while Sri Lankan boards increased the number of ethnic minority directors during the global financial crisis, heterogeneous boards increased company agency costs. This evidence provides insights for governments and policy makers as they consider board ethnic diversification in an emerging and highly uncertain environment.