Universitas Indonesia Conferences, International Accounting Conference - 2017

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An Analysis: The Effect of Board of Directors' Diversity on Firm Performance
Fabiola Cintantya Prakasita Bahari, Vera Diyanty

Last modified: 2017-07-06

Abstract


This study aims to analyze the effect of Board of Directors' diversity on firm performance. Diversity of the Board of Directors measured by nationality, age, gender, tenure, education specialization, experience, education level, and political connections. The result indicates that the presence of foreign director negatively affects firm performance. This is due to a low internationalization on observations. Thus, it tends to cause interpersonal gap within the team. In addition, the result also indicates that the presence of director with political connections negatively affects firm performance because political connections are utilized for expropriation of interests of several parties. This study encourages regulators, such as the Financial Services Authority (OJK), in setting minimum criteria to candidates for Board of Directors that can support firm sustainability.


Keywords


Board of Directors Diversity; Firm Performance; Corporate Governance; Blau Index

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