Do Women and Ethnic Minority Directors Influence Firm Value? Evidence from Post-Apartheid South Africa

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Gyapong, Ernest
Monem, Reza M
Hu, Fang
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2016
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Abstract

Previous studies on the value relevance of board gender and ethnic diversity have produced mixed results. This paper re‐examines this relationship using hand‐collected data of 245 South African listed firms over the period 2008–2013. We document a positive and significant effect of both board gender and ethnic diversity on firm value. We also find that the increase in firm value is greater when boards have three or more women directors. In contrast, ethnic minority directors contribute less to firm value when there are three or more on the board. Furthermore, we document that ethnicity has a concave relationship with firm value, but gender does not. We demonstrate that in better‐governed firms, ethnic diversity is more value relevant than gender diversity. Our results also suggest that financial crisis is associated with the propensity to restructure boards along gender and ethnicity. This paper sheds new light on the effect of board diversity in South African firms as the government increasingly pursues policies aimed at eradicating the effects of apartheid. Our results are robust after controlling for self‐selection and various forms of endogeneity.

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Journal of Business Finance & Accounting

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43

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3

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© 2016 John Wiley & Sons Ltd. This is the peer reviewed version of the following article: Do Women and Ethnic Minority Directors Influence Firm Value? Evidence from Post‐Apartheid South Africa, Journal of Business Finance & Accounting, Volume 43, Issue 3-4, Pages 370-413, 2016, which has been published in final form at https://doi.org/10.1111/jbfa.12175. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving (http://olabout.wiley.com/WileyCDA/Section/id-828039.html)

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Corporate governance

Financial accounting

Accounting, auditing and accountability

Banking, finance and investment

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