Board Diversity, Governance, and Firm Outcomes in MENA Countries

Board Diversity

Thu, 21 Apr 2016 14:23:00 BST

The Business School's Emerging Markets Research Group (EMERGE) heard Ahmed Sarhan, an Erasmus Mundus UNetBA scholarship holder from Egypt, present his research on Board Diversity, Corporate Governance, and Firm Outcomes: Evidence from MENA Countries.

Ahmed says about his research "Despite a large number of previous studies that examines the link between board diversity and firm outcomes, the evidence is mixed. Our paper investigates the impact of corporate board diversity based on gender and ethnic minorities on firm outcomes using data from five MENA countries. We document a positive and significant impact of board gender diversity on firm market performance and accounting returns. We also illustrate that the relationship between gender, ethnic minorities and firm accounting returns is stronger in better-governed firms. Furthermore, we document that appointment of female and ethnic minority directors in boardrooms enhance the pay-for-performance sensitivity (PPS). However, we do not find any evidence of a significant effect of board diversity on executive-pay-package. Our findings are robust across a number of firm outcomes measures and different types of endogeneities. Overall, our results imply that recommendations and regulations concerning the appointment of women and ethnic minorities to corporate boards should be based not only on moral implications but also on firm performance criteria in the MENA region and in developing countries more generally."

Professor John Anchor, Director of the Emerging Markets Research Group, says "It has been a pleasure for us to be able to listen to Ahmed’s presentation as his is an important topic and given the norms that govern MENA region an intriguing one as well. Ahmed’s research makes an important contribution to knowledge about corporate governance in emerging countries. It is purely speculation on my part but I suspect that diversity may do more to enhance board performance in the MENA region than in the West since there are greater barriers to the participation of women and ethnic minorities in that part off the world".

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