Board characteristics and firm financial performance: An empirical assessment of directors’ composition, diversity, and CEO attributes

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Abstract

This study examines the impact of board characteristics and chief executive officer (CEO) attributes on firm financial performance in an emerging economy. Drawing on agency theory (Jensen & Meckling, 1979), the study investigates whether board composition, diversity, and leadership traits function as effective internal governance mechanisms in mitigating agency problems and enhancing firm performance. Using panel data from 24 non-financial companies listed on the Indonesia Stock Exchange (IDX) over the period 2017–2024, financial performance is measured by return on assets (ROA). The empirical analysis employs panel regression techniques, with the common effect model (CEM) selected as the primary specification based on overall model fit, and robustness is further assessed using the two-step generalized method of moments (GMM). The results reveal that board size and board gender diversity have a positive and significant effect on firm financial performance, supporting the view that broader representation and diversity enhance monitoring and decision-making quality. In contrast, CEO tenure and CEO age exhibit a significant negative relationship with ROA, indicating potential managerial entrenchment and increased risk aversion associated with prolonged and senior leadership, consistent with prior governance research (Chowdhury & Fink, 2017). Other board attributes, such as average board age and meeting frequency, show no significant effect. Overall, this study contributes to the corporate governance literature by integrating CEO-specific characteristics into the agency framework and providing empirical evidence from Indonesia’s concentrated ownership environment.

Keywords: Board Characteristics, CEO Age, CEO Tenure, Financial Performance, Agency Theory

Authors’ individual contributions: Conceptualization — A.J.; Methodology — A.J.; Formal Analysis — A.J.; Data Curation — A.P.N.W.; Writing — Original Draft — S.N.A.; Writing — Review & Editing — S.N.A.; Supervision — A.J.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G30, G34, J16, M12

Received: 13.12.2025
Revised: 30.01.2026; 16.02.2026
Accepted: 25.02.2026
Published online: 27.02.2026

How to cite this paper: Azmi, S. N., Juanda, A., & Wicaksono, A. P. N. (2026). Board characteristics and firm financial performance: An empirical assessment of directors’ composition, diversity, and CEO attributes. Corporate Board: Role, Duties and Composition, 22(1), 62–73. https://doi.org/10.22495/cbv22i1art5