CAN DEMOGRAPHIC DIVERSITY IN TOP MANAGEMENT TEAM CONTRIBUTE FOR GREATER FINANCIAL PERFORMANCE? AN EMPIRICAL DISCUSSION

Abstract

Author(s): Maran MARIMUTHU, Indraah KOLANDAISAMY

The purpose of this paper is to empirically examine the effect of demographic diversity on top management teams (TMTs) with regard to firm financial performance. This paper uses secondary data of listed companies in Malaysia. Relevant concepts, propositions, hypotheses and control variables are developed to suit the parametric statistical procedures. Demographic diversity is represented by ethnic diversity (the percentage of Non-Malay top managers) and gender diversity (the percentage of female top managers) and performance is measured by return on asset (ROA) and return on equity (ROE). A series of OLS regressions based on the cross-sectional data are also presented. The results fail to support our hypotheses. Hence, diversity does not seem to be relevant in TMTs with regard to financial performance.

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