Board diversity and firm performance: evidence from the U.K. SMEs

This study examines the relationship between board diversity and firm performance in small- and medium-sized enterprises (SMEs) in the U.K. In particular, we investigate the role of gender and age as two dimensions of diversity. Using a large sample of SMEs (34,798 firms) located in the U.K. and foc...

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Bibliographic Details
Published in:Applied economics 2017-10, Vol.49 (48), p.4817-4832
Main Authors: Shehata, Nermeen, Salhin, Ahmed, El-Helaly, Moataz
Format: Article
Language:English
Subjects:
board composition
board diversity
Boards of directors
Corporate governance
Economic analysis
Economic theory
Entrepreneurs
Financial performance
firm performance
Gender
Multiculturalism & pluralism
Organizational performance
Policy making
Small & medium sized enterprises-SME
SMEs
women on board
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Summary:This study examines the relationship between board diversity and firm performance in small- and medium-sized enterprises (SMEs) in the U.K. In particular, we investigate the role of gender and age as two dimensions of diversity. Using a large sample of SMEs (34,798 firms) located in the U.K. and focusing on the period from 2005 to 2013, our results show a significant negative association between each of gender diversity and age diversity, and firm performance. Our evidence yields important insights on the association between board diversity and firm performance, and calls suggestions for increased board diversity into question. A possible explanation for our findings could be due to the fact that our sampled firms are SMEs, whereas those in previous studies have been large enterprises. This research provides insights to entrepreneurs on how to enhance their performance, and to governments and policymakers on the development of rules that would achieve better performance in the SME sector.
ISSN:0003-6846
1466-4283
DOI:10.1080/00036846.2017.1293796