Examine the relationship between board diversity and financial performance of firms in the Johannesburg Stock Exchange

Abstract

Conventional wisdom in the business world suggests strongly that organisations or firms led, managed and controlled by directors from different or diverse backgrounds and orientations often obtain fruitful outcomes. A large number of researchers and authors strongly argue that diversified personnel within an organisation or a company’s board of directors (BoDs), tends to increase chances of success in that business. Such success is due, several researchers contend, to the diversity in the staff, especially those at the board level. Despite that widely held view and assertion, the question remains as to how companies with high diversity levels of among directors became better equipped to succeed in their fiduciary duty than those with low diversity boards. As such, this investigative study, aimed to analyse the correlation between board diversity and the achievement of favourable financial outcomes in companies listed on the Stock Exchange of Johannesburg. To ascertain the nature and extent of the influence of diversity as an important factor in company financial performance and success, the quantitative model of correlational research design was used. Five banking businesses that were chosen for the study's sample were listed on the JSE between 2018 and 2022. These banks were found to be extremely successful in doing their business. The conclusion the study could draw was that there is no correlation between board diversity (gender, race and profession) and financial performance (net profit).