Board Capital Diversity and Firm Value: Evidence from Latin-America

This paper analyzes the effects of diversity of boards of directors’ human and relational capital on the performance of firms in Latin America. Using a large database of 442 firms in 6 countries (Argentina, Brazil, Chile, Colombia, Mexico, and Peru) from 2001 to 2012, we construct a Board Capital Diversity Index that includes educational backgrounds and work experiences for each board member. We find a positive relationship between board capital diversity and firm performance, as measured by Tobin’s Q. In particular, we find that both human capital diversity (educational background) and relational capital diversity (experience in the private and public sector) increase the value of the company. Our results confirm the resource dependence theory, where the board, in addition to its monitoring role, is seen as a provider of resources.

Blogs Publicados