Wake Forest study finds diverse corporate boards rein in risk, good for shareholders

7.30.2014 Accounting, Article, Diversity, Faculty News, Leadership
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A board that is more diverse can help a company avoid risky projects and leads to greater dividends for shareholders.

A diverse corporate board isn’t just good public relations, it can be mean a bigger payoff for shareholders. That is the finding of a study by a team of university researchers who examined the performance of more than 2,000 companies from 1998 to 2011.

The researchers found that diverse corporate board of directors – in terms of gender, race, age experience, tenure and expertise – were more likely to pay dividends to stockholders and were less prone to take risk than those boards which are more homogenous.

“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,” said Ya-wen Yang, an assistant professor of accounting at Wake Forest University’s business school and the study’s co-author.

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