Board Structure, Diversity, and Corporate Innovation: Evidence from Australian-Listed Firms

Abstract

This study investigates the nexus between board structure diversity and corporate innovation. The gender, tenure, and nationality of directors in the boardroom are indicators of board structure diversity, also known as demographic and cognitive diversity. By using a sample of Australia's top 200 listed firms, the results endorsed that regional differences, particularly gender attributes, were positively linked with preference in the investment of intangible resources. The robustness of the results is proved with the help of an alternative proxy for intangible assets and the different most robust regression models. All study variable data was collected with the help of publicly available annual reports at their respective websites between 2008 and 2018. It is supported that the most recent updates to the principles and recommendations of the ASX Corporate Governance Council (referred to as "ASX CGC revisions") are effective economically. Innovation can be significantly boosted by increasing board structure diversity. Regulators and firms can use the findings to design rules and practices that promote the representation of women on corporate boards. The current study is the first of its kind to examine the connection between foreign director presence on the board and gender diversity in Australia, a country with a low percentage of women serving on corporate boards and in senior managerial roles. In addition, there are no statutory mandates on gender diversity and foreign director presence imposed by either legislation or governance policy. This paper provides new findings beyond confirming a positive association between board structure diversity and corporate innovation.