Corporate Governance, Board Diversity, and Firm Value: Examining Large Companies Using Panel Data Approach

Many governments seek to impose diversity in the boardroom, but the consequences of doing so are inconsistent and
could decrease firm performance and economies. This paper shed light on this diversity at board level topic by
conceptualizing the relationships as firm value and diverse board. Reasonable theoretical arguments drawn from
Upper-echelon theory and agency theory suggest that board characteristics (gender, ethnic and age diversity) may have
either a positive, negative, or neutral effect on the firm value. To investigate this phenomenon relevant hypotheses are
developed to test diversity at board level and its impact on firm value with the use of appropriate variables and
measures. A total sample of large 60 top Malaysian non-financial companies is selected on the basis of their market
capitalization from the population of 938 listed companies of Bursa, Malaysia. To investigate this empirical study, data
were collected from the Datastream (Thomson Reuters) database and manually, over the period 2009 to 2013 (5
years). This study incorporates econometrics methodology on panel data analysis, which is used rigorously for
hypothesis testing. The age profile of Directors has a significant positive impact on firm value. However, gender and
ethnic diversity have no significant impact on firm value. The results indicate that demographic diversity at board level
does have a relationship with market value.