BOARD DIVERSITY, FIRM CHARACTERISTICS AND PERFORMANCE OF COMPANIES LISTED ON THE ZIMBABWE STOCK EXCHANGE (ZSE) (2009-2015)

BOARD DIVERSITY, FIRM CHARACTERISTICS AND PERFORMANCE OF COMPANIES LISTED ON THE ZIMBABWE STOCK EXCHANGE (ZSE) (2009-2015)

ZVINAIYE CHIMBADZWA

Many practitioners (Wilton, 2011; Abad et al., 2017; Arenas-Torres et al., 2021; Ali et al., 2022) now acknowledge that the diversity of a Board of Directors is a strength in corporate boards and the adoption of diversity in corporate boards is increasingly gaining steam as a best practice in corporate governance worldwide. Recent developments (Somathlike, 2018; Cha & Jung, 2009; Saidu, 2019; Osazuwa et al., 2016; Darmadi, 2011; Bathula, 2008, Khidmat et al, 2020; Ali et al., 2022; Dedunu & Anuradha, 2020) worldwide also demonstrate that the world is changing by legal writ and through moral imperatives that make boardroom diversity a critical component of sound corporate governance. The board of directors in organisations is responsible for making strategic decisions such as mergers, acquisitions, creating financial structures and executive hiring or firing. In the Zimbabwean situation, the existence of boards has not prevented scandals and economic meltdowns that remain the order of the day just like in other developing or underdeveloped countries. The response has been to institute board diversity policies that focus on independent directors who replace executive directors to reduce scandals. This study examines the impact of board diversity, firm characteristics, and performance of Zimbabwe Stock Exchange-listed companies for the period 2009-2015. The study employed the quantitative methodology to establish the impact of board diversity on the performance of thirty-five (35) firms listed on the Zimbabwe Stock Exchange using panel data collected over the period 2009 – 2015. The agency theory and the social categorisation and identification theory are the main theories that guided this study. The board diversity variables used were gender, education, and board executives. The level of board diversity was measured using the Blau (1977) index. Firm performance was measured using profitability, market share, efficiency, liquidity, and leverage. Firm size, board size, the number of years the firm has been listed on the ZSE, the firm sector such as food, financial, services, real estate and food and manufacturing were used as moderating variables in the study. The results show that gender and executive diversity were moderately diversified with mean diversity indexes of 0.32 and 0.36 respectively. Education was diversified with a mean index of 0.60. Using panel-corrected standard errors (PCSE) regression analysis, the study established that the level of board diversity has a significant relationship with firm performance. Board gender diversity was found to have a positive and significant impact on profitability as measured by returns per share and gross profit; efficiency as measured by asset turnover; market share as measured by Tobin's Q ratio and market value; and liquidity as measured by current ratio. Board gender diversity had no impact on leverage as measured by the debt-equity ratio. Board executive diversity was found to have a positive and significant impact on firm profitability and market share while it had a negative and significant relationship with market value, efficiency, liquidity, and leverage. Board education diversity was found to have a positive and significant impact on firm profitability, market share, and liquidity while it had a negative and significant impact on firm efficiency and leverage. Non-board diversity variables were also found to significantly affect firm performance. On the one hand, the major factors that promoted board diversity were firm size, liquidity, leverage, operating experience (years listed), market share (Tobin's Q), and being in the service sector. On the other hand, board size and being in the food, financial, real, industrial and manufacturing sectors negatively and significantly affected diversity. Based on the above results, the study recommended that firms should come up with board diversity-enabling policies to enhance firm performance. However, further studies could be undertaken on individual variables to validate the study

ZOU

2023