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- Title
Does Board Demographic Diversity Enhance Cognitive Diversity and Monitoring?
- Authors
Kang, Jun-Koo; Kim, Seil; Oh, Seungjoon
- Abstract
We examine whether board demographic diversity enhances cognitive diversity (measured as director dissent in the boardroom) and monitoring. At the director level, we find that individual directors who are dissimilar relative to other board members in terms of tenure and experience are more likely to dissent. At the board level, boards composed of directors who have heterogenous tenure, experience, and gender are more likely to dissent. We also find that stock market reactions to director resignation announcements are more negative for directors who have ever dissented than for other directors. Moreover, following dissent-driven proposal rejections, firms experience an improvement in value and internal governance and a decrease in risk. The results suggest that directors who have diverse qualifications and skillsets as well as the inclusion of female directors enhance cognitive diversity, and that this enhanced cognitive diversity helps increase firm value and monitoring effectiveness. JEL Classifications: G30; G32; G34.
- Subjects
SOUTH Korea; BOARDS of directors; DIVERSITY in the workplace; CORPORATE directors; SELECTION &; appointment of corporate directors
- Publication
Accounting Review, 2022, Vol 97, Issue 6, p385
- ISSN
0001-4826
- Publication type
Article
- DOI
10.2308/TAR-2020-0702