Ethnicity, politics and firm performance: Evidence from Malaysia

Ferdinand A. Gul, Sa'adiah Munir, Liang Zhang

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    10 Citations (Scopus)

    Abstract

    Motivated by the inconclusive evidence on the role of ethnic diversity of directors and the limited research, this study examines whether there is an association between board ethnic diversity in Malaysian firms and firm performance. We find that the association between ethnic diversity of boards and firm performance is non-linear; at low levels of ethnic diversity there is a positive association but at higher levels of ethnic diversity, the association is negative. However, when we split the sample into politically and non-politically connected firms, we find that this association only holds for non-politically firms. Further, when we split our politically connected sample into Malay and non-Malay dominant boards, we find generally, that in both groups of firms, board ethnic diversity does not influence firm performance. Overall, these results suggest that the presence of political connection could undermine the role of ethnic diversity in influencing firm performance.

    Original languageEnglish
    Pages (from-to)115-129
    Number of pages15
    JournalPacific Basin Finance Journal
    Volume40
    Issue numberPart A
    DOIs
    Publication statusPublished - Dec 2016

    Keywords

    • Corporate governance
    • Ethnicity
    • Firm performance
    • Malaysia
    • Politically connected firms

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