Board nationality diversity and shareholder value creation

Abstract

The study examined the influence of board nationality diversity on shareholder value creation of non- financial companies listed on the JSE for a 10- year period from 2013 to 2022.The study used quantitative quasi-experimental research design. The study measured board nationality diversity using proportion of foreign directors on board, Blau index for board nationality diversity, dummy variables for one, two and three or foreign directors. The proxies of shareholder value creation included standard market value added, market- to book ratio and Tobin’s Q and fixed effects model based on linear and curvilinear models were used to test the hypotheses. Main findings of the study demonstrate that proportion of foreign directors on board has an insignificant negative impact on standardised market value added and Tobin’s Q, while significant negative impact on market to book ratio.  Blau index for board nationality diversity has insignificant negative impact on standardised market value added and market to book ratio, yet insignificant positive impact on Tobin’s Q. One foreign director on board has significant positive impact on standard market value added and market to book ratio, while insignificant positive impact on Tobin’s Q. Two and three foreign directors on board have insignificant positive impact on all shareholder value creation measures. In relation to curvilinear models, proportion of foreign directors on board and Blau in index for board nationality diversity have both positive and negative impact on all shareholder value creation measures highlighting an inverted U- shaped effects.