Diversity in Diversity: The Demand for and Profitability of Sub-boards in Thai Listed Corporations

Abstract

This paper takes a more expansive approach by investigating the most appropriate diversity mix across sub-boards in Thai publicly listed corporations. We predict and find that industry based sub-boards strategically demand and supply directors that embody different attributes and skills, consistent with shareholder agency and stakeholder resource dependency theories. That is, in order to generate additional firm profitability, “diversity in diversity” is required. Diversity is more valuable in independent directors with regard to firm tenure and study majors. In contrast, non-diversity provides more value in having executive directors with direct industry experience. In particular, the value added from diversity mix is highly dependent on the counterbalancing skill attributes between executive and independent directors. The knowledge that differential sub-board diversity attributes is an important economic strategy, is useful for regulators and managers to target desirable board characteristics and investors to evaluate the potential profitability of board appointments.