The impact of board diversity on firm performance – The case of Germany

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Udo C. Braendle ORCID logo, Markus Stiglbauer, Khaldoun Ababneh ORCID logo, Evangelos Dedousis ORCID logo

DOI:10.22495/cocv17i2art15

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This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

Numerous mergers and acquisitions, and the rise of MNCs with global customer bases have exposed the German board of directors to a variety of cultures. Despite the obvious relevance for corporate governance, the effect that cultural diversity of boards exerts on firm performance, Germany has been a blank spot in this literature. Using a sample of 101 German publicly listed companies, this empirical study answers if the level of cultural variety and cultural distance in boards of directors have an influence on firm performance. The results of this study indicate that cultural variety in boards of directors has a linear, negative influence on operational firm performance (as measured by ROI and ROE). This reinforces the fundamental assertion that executives’ cultural values shape their mindsets and orientations, and thus influence their decision-making. The results of this study, therefore, indicate that cultural diversity is an important diversity dimension that further on should be given careful consideration in research. Based on the findings, we argue against the blindfold implementation of (political) regulations in the area of board diversity.

Keywords: Corporate Governance, Board of Directors, Firm Performance, Cultural Diversity, Cultural Variety, Cultural Distance, Internationalization

Authors’ individual contribution: Conceptualization – U.B., M.S., and K.A.; Methodology – U.B. and M.S.; Investigation – U.B. and M.S.; Data Curation – U.B., M.S. and K.A.; Writing – U.B., M.S., K.A., and E.D.

JEL Classification: G28, G34

Received: 08.01.2020
Accepted: 24.02.2020
Published online: 25.02.2020

How to cite this paper: Braendle, U., Stiglbauer, M., Ababneh, K., & Dedousis, E. (2020). The impact of board diversity on firm performance – The case of Germany. Corporate Ownership & Control, 17(2), 183-193. http://doi.org/10.22495/cocv17i2art15