Featured Research

from universities, journals, and other organizations

Diverse boards pay more dividends, take fewer risks, study finds

Date:
July 29, 2014
Source:
Dick Jones Communications
Summary:
A study of more than 2,000 companies that spanned over 13 years has found that board diversity curbs excessive risk taking and tend to pay more in dividends.

A new study finds that diversity on company boards curbs excessive risk taking and tend to pay more in dividends.
Credit: michaeljung / Fotolia

Corporations with more diverse boards of directors are more likely to pay dividends to stockholders and are less prone to take risks than firms whose boards are more homogenous.

Related Articles


That's what researchers at Wake Forest University found in a study of more than 2,000 companies over a 13-year span.

"We found strong evidence that board diversity significantly curbs excessive risk taking," says Ya-wen Yang, assistant professor of accounting at the Wake Forest University School of Business.

The paper, "Board Diversity and Corporate Risk Taking" is a research project with co-researchers Rini Laksmana, associate professor of accounting at Kent State University, and Agus Harjoto, associate professor of finance at Pepperdine University.

Most research on corporate boards has focused only on gender diversity. Yang's team, however, used a broader-than-normal definition encompassing gender, race, age, experience, tenure and expertise.

They looked at company records and used five variables to measure risk: capital expenditures, research and development expenses, acquisition spending, the volatility of stock returns, and the volatility of accounting returns.

"We find that firms with more diverse boards are more risk averse, spending less on capital expenditure, R&D, and acquisitions, and exhibiting lower volatilities of stock returns than those with less diverse boards," says Yang.

Additional analysis showed that companies with more diverse boards were more likely to pay dividends and to pay a greater amount of dividend per share than corporations with less diverse boards.

The study, which covered the years between 1998 and 2011, showed that most corporate boards are relatively homogenous in gender and race -- being mostly white and mostly male. They were, however, more diverse in age, experience, tenure, and expertise.

"Measuring diversity based only on gender misrepresents the actual diversity in corporate boardrooms," comments Yang. She says the research provides insights that company nominating and governance committees should consider when evaluating director candidates.

"One the one hand, diverse boards could reduce the level of corporate risk taking, discouraging innovative and risky projects. On the other hand, if firm management is overly aggressive in its use of corporate funds for investing in risky projects, our results suggest that more diverse boards could perform better oversight of corporate risk taking than less diverse boards."


Story Source:

The above story is based on materials provided by Dick Jones Communications. Note: Materials may be edited for content and length.


Cite This Page:

Dick Jones Communications. "Diverse boards pay more dividends, take fewer risks, study finds." ScienceDaily. ScienceDaily, 29 July 2014. <www.sciencedaily.com/releases/2014/07/140729092648.htm>.
Dick Jones Communications. (2014, July 29). Diverse boards pay more dividends, take fewer risks, study finds. ScienceDaily. Retrieved October 25, 2014 from www.sciencedaily.com/releases/2014/07/140729092648.htm
Dick Jones Communications. "Diverse boards pay more dividends, take fewer risks, study finds." ScienceDaily. www.sciencedaily.com/releases/2014/07/140729092648.htm (accessed October 25, 2014).

Share This



More Science & Society News

Saturday, October 25, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Ebola Protective Suits Being Made in China

Ebola Protective Suits Being Made in China

AFP (Oct. 24, 2014) A factory in China is busy making Ebola protective suits for healthcare workers and others fighting the spread of the virus. Duration: 00:38 Video provided by AFP
Powered by NewsLook.com
WHO: Millions of Ebola Vaccine Doses by 2015

WHO: Millions of Ebola Vaccine Doses by 2015

AP (Oct. 24, 2014) The World Health Organization said on Friday that millions of doses of two experimental Ebola vaccines could be ready for use in 2015 and five more experimental vaccines would start being tested in March. (Oct. 24) Video provided by AP
Powered by NewsLook.com
Microsoft Riding High On Strong Surface, Cloud Performance

Microsoft Riding High On Strong Surface, Cloud Performance

Newsy (Oct. 24, 2014) Microsoft's Q3 earnings showed its tablets and cloud services are really hitting their stride. Video provided by Newsy
Powered by NewsLook.com
EU Gets Climate Deal, UK PM Gets Knock

EU Gets Climate Deal, UK PM Gets Knock

Reuters - Business Video Online (Oct. 24, 2014) EU leaders achieve a show of unity by striking a compromise deal on carbon emissions. But David Cameron's bid to push back EU budget contributions gets a slap in the face as the European Commission demands an extra 2bn euros. David Pollard reports. Video provided by Reuters
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:

Strange & Offbeat Stories


Science & Society

Business & Industry

Education & Learning

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins