Email this article Board Diversity Index on Performance of Indonesian Manufacturing Companies: Moderating Role of Family Ownership
Abstract
This study investigates the relationship between performance in Indonesian family-owned manufacturing firms and their board diversity and ownership. Previous studies about firm performance in Indonesia only focus on the individual diversity rather than considering the effect of collective diversity aspects (constructed as an index) on its board. Previous studies focus only on the individual elements of board diversity on its BOD, rarely on its BOC. Next, previous studies did not consider the moderating role of its ownership towards the effect of board diversity on firm performance, even though the family-owned firm is one of the most common forms of business in Indonesia. This study employs price-to-book value (PBV) as a proxy for firm performance and Blau Index to construct the board diversity index (BDI). The results show that the board diversity index positively influences firm performance. Family ownership positively affects firm performance, signaling the alignment effect. The results also show a linear relationship between family ownership and firm performance, contrary to several previous studies where family ownership has a non-linear relationship with firm performance. Lastly, the results also show the moderating role of family ownership positively influences the board diversity effect on firm performance.
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DOI: https://doi.org/10.26905/jkdp.v27i3.9848
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