Different is Better: Does Difference in Age and Ethnicity of the Directors Matter for Corporate Performance in Malaysia?

Abstract

The prior diversity-related literature is mostly dominated by the boardroom gender diversity of the top or large companies of the developed countries. Consequently, this study investigates the impact of the rarely investigated boardroom diversity-related dimensions like directors’ age and ethnicity on the financial performance of 360 randomly selected non-financial listed companies from a developing country - Malaysia from 2010 to 2014. The findings revealed that ethnic equality (the presence of directors from all the three major ethnicities of the country) on the board has a significant positive relationship with ROA and share price. However, directors’ age has a significant positive association with share price but it has an insignificant effect on ROA. The findings of this study provide important insights for the regulators, policymakers, and all other key stakeholders of the developing countries, especially Malaysia, where the corporate boards are mostly dominated by men of middle age from Chinese ethnicity.