The Impact of Board Diversity on Firms Financial Performance in Sri Lanka.

Abstract

This study’s purpose was to explore the impact of board diversity to the firm’s financial performance in Sri Lankan context. Specifically, the study aimed at determining the effect of board diversity on financial performance of public listed companies in Sri Lanka to ascertain whether there is a causal association between the specific board characteristics of age, gender, ethnicity, nationality, organizational membership, educational background and industrial experience of the company board members on the financial performance of listed companies in Sri Lanka. Thus, the research adopted an exploratory design. All listed companies in the country is the population of this study. There are 291 listed companies in the country. This study tries to identify the reasons behind low board diversity in Sri Lanka. The analysis of the semi structured interviews provides five reasons driving low board diversity in Sri Lanka; appoint family members as the board of directors, invite Allies to perform as a board member, male dominant culture in Sri Lanka, conflicts of interest in women, weak corporate governance codes can identify as the reasons behind low board diversity in the firms. According to the results of the study, diversity variables do not have significant impact on firms ROA. However, age diversity, ethnic diversity and academic qualification diversity variables shows significant impact on firms’ financial performance measured in terms of Tobin's Q.