Diversity in the board of directors and good governance practices

Abstract

Boards of directors must commit to balancing the interests of the stakeholders and not focusing exclusively on financial concerns. Motivated by the importance that diversity currently has in companies, we examine the effect that board diversity has on corporate governance performance in Spain, analysing gender diversity, diversity of director types and tenure diversity. The findings reveal that diverse boards of directors have a positive influence on good governance practices, improving the efficiency of corporate governance mechanisms. These results may have implications for practitioners, since it is shown that different types of diversity contribute to better corporate governance. They may also be of interest to regulators, who are rightly promoting laws and regulations aimed at achieving diversity in the knowledge, experiences, and gender of the board of directors.