Investigating board diversity in South Africa

Abstract

The issue of board diversity has been widely debated. Given the lack of conclusive empirical evidence, this study investigated the relationship between gender and race board diversity and the financial performance of South African companies. The sample covered 1 542 annual observations over the period 2002 to 2012. The percentage of female and black directors of companies listed on the Johannesburg Stock Exchange increased significantly over the research period. Board diversity differed considerably across industries. A statistically significant positive relationship existed between the percentage of both female and black directors and earnings per share. In contrast, a statistically significant negative relationship was found between the percentage of both female and black directors and total shareholder return. Given the lack of a clear business case, the question arises as to how board diversity on the JSE can be encouraged. The researchers recommend that more attention should be given to the development and mentoring of diverse board candidates.