Older boards are better boards, so beware of diversity targets

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Abstract

This study examined 130 Australian companies from the ASX 500 All Ordinaries between 2011 and 2015. We performed regression analysis on the effects of age of the board (mean age and age diversity) upon financial performance (measured by ROA and Tobin's Q). Controlling for board size, firm size and industry sector, we found that the average age of board members is positively associated with firm performance as measured by ROA. Boards with an older average age of directors perform better than boards with a younger average age. There was no significant relationship between age diversity as measured by the within-board standard deviation on the two performance measures. The primary focus of our study was age. However, an interesting concomitant finding is that the focus on increasing female representation on boards will lower the average age of a board (as female directors tend to be significantly younger than their male counterparts) and this may have an adverse impact on financial performance.

Original languageEnglish
Pages (from-to)15-28
Number of pages14
JournalJournal of Management and Organization
Volume26
Issue number1
DOIs
Publication statusPublished - Jan 2020

Keywords

  • age
  • corporate governance and financial performance
  • diversity

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