Board Ancestral Diversity and Firm Performance Volatility

Award Winner: 
Winner of the 2017 Standard Life Investments Finance Prize (Best paper in the Finance Working Paper series)

Board Ancestral Diversity and Firm Performance Volatility

Mariassunta Giannetti, Mengxin Zhao

Series number :

Serial Number: 

Date posted :

December 08 2015

Last revised :

March 27 2018
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  • board • 
  • diversity • 
  • culture • 
  • Genetics

We proxy for board members’ differences in opinions and values using directors’ ancestral origins and show that diversity has costs and benefits, which lead to high performance volatility. Consistent with the idea that diverse groups experiment more, firms with ancestrally diverse boards have more and more cited patents and their strategies conform less to those of the industry peers.

However, firms with greater ancestral diversity also have more board meetings, higher director turnover unrelated to performance, and make less predictable decisions. These findings suggest that diversity may lead to inefficiencies in the decision-making process and conflicts in the boardroom.

Published in

Published in: 
Swedish House of Finance Research Paper No. 16-01 | Journal of Financial and Quantitative Analysis (JFQA) | CEPR Discussion Paper No. DP11155


Real name:
Mengxin Zhao
Alberta School of Business, University of Alberta