Main Article Content
Abstract
This study explores the effect of Indonesia's good corporate governance code on board diversity: ethnicity, nationality, gender, qualification, experience, composition, and multiple directorship diversity. The revised corporate governance code provides guidelines for better corporate governance practices. Therefore, board attributes such as diversity are among the best corporate governance practices. Two hundred and three of Indonesia's listed companies (1,421 firm years) are research objects. The data was collected from company annual reports and other internet sources. The data was analyzed using a pair sample t-test and distribution frequency. Based on the pair sample t-test, Oversight board ethnicity diversity, nationality diversity, gender diversity, and board composition significantly differ between pre- and post-revised codes. In addition, management board nationality diversity and gender diversity are also differences between the pre-and post-revised code. In most cases, updating code improves diversity, except for the Oversight Board's ethnic diversity. This study also provides the detailed average number and percentage of board diversity pre- and post-the-updated code of good corporate governance. This study implies that the revised code of good corporate governance increases the board diversity of Indonesian-listed companies. Since the last revised code was released in 2006, a new updated code of good corporate governance has been demanded.
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References
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- Darmadi, S. (2013b). Corporate governance disclosure in the annual report: An exploratory study on Indonesian Islamic banks. Humanomics, 29(1), 4–23. https://doi.org/10.1108/08288661311299295
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- Nuryanah, S., & Islam, S. M. N. (2011). Corporate Governance and Performance : Evidence From an Emerging Market. Malaysian Accounting Review, 10(1), 17–42.
- Olthuis, B. R., & van den Oever, K. F. (2020). The board of directors and CSR: How does ideological diversity on the board impact CSR? Journal of Cleaner Production, 251(April), 119532. https://doi.org/10.1016/j.jclepro.2019.119532
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- Patrick, H. (2001). Corporate Governance and the Indonesian Financial System : A Comparative Perspective (Issue 16).
- Pelled, L. H. (1996). Demographic Diversity, Conflict, and Work Group Outcomes: An Intervening Process Theory. Organization Science, 7(6), 615–631. https://doi.org/10.1287/orsc.7.6.615
- Rose, C. (2007). Does female board representation influence firm performance ? The Danish evidence. Corporate Governance : An International Review, 15(2), 404–413.
- Ruigrok, W., Peck, S., & Tacheva, S. (2007). Nationality and gender diversity on Swiss corporate boards. Corporate Governance, 15(4), 546–557. https://doi.org/10.1111/j.1467-8683.2007.00587.x
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- Simons, T., & Pelled, L. H. (1998). Understanding Executive Diversity. Human Resource Planning, 49–51.
- Simpson, G. W., Carter, D. A., & D'Souza, F. (2010). What Do We Know About Women on Boards? Journal of Applied Finance, 20(2), 27–40.
- Ujunwa, A., Okoyeuzu, C., & Nwakoby, I. (2012). Corporate board diversity and firm performance: evidence from Nigeria. Review of International Comparative Management, 13(4), 605–620. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=85294714&site=bsi-live
- Van der Walt, N., Ingley, C., Shergill, G. S., & Townsend, A. (2006). Board configuration: are diverse boards better boards? Corporate Governance: The International Journal of Business in Society, 6(2), 129–147. https://doi.org/10.1108/14720700610655141
- Wang, Y., & Clift, B. (2009). Is there a "business case" for board diversity? Pacific Accounting Review, 21(2), 88–103.
- Wanous, J. P., & Youtz, M. A. (1986). Solution Diversity and The Quality of Group Decisions. Academy of Management Journal, 29(1), 149–159.
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- Yammeesri, J., & Kanthi Herath, S. (2010). Board characteristics and corporate value: evidence from Thailand. Corporate Governance: The International Journal of Business in Society, 10(3), 279–292. https://doi.org/10.1108/14720701011051910
- Zhang, L. (2012). Board demographic diversity, independence, and corporate social performance. Corporate Governance: The International Journal of Business in Society, 12(5), 686–700. https://doi.org/10.1108/14720701211275604
References
Ahmad‐Zaluki, N. A. (2012). The pre and post IPO gender composition of the board of directors in Malaysia. Gender in Management: An International Journal, 27(7), 449–462.
Ancona, D. G., & Caldwell, D. F. (1992). Demography and design: Predictors of New Product Team Performance. Organization Science, 3(9), 321–341.
Arfken, D. E., Bellar, S. L., & Helms, M. M. (2004). The ultimate glass ceiling the presence of revisited: Women boards. Journal of Business Ethics, 50(2), 177–186. https://doi.org/10.1023/B:BUSI.0000022125.95758.98
Blau, P. M. (1977). A macrosociological theory of social structure. American Journal of Sociology, 83(1), 26–54.
Bravo-Urquiza, F., & Moreno-Ureba, E. (2021). Does compliance with corporate governance codes help to mitigate financial distress? Research in International Business and Finance, 55(January), 101344. https://doi.org/10.1016/j.ribaf.2020.101344
Campbell, K., & Mínguez-Vera, A. (2008). Gender diversity in the boardroom and firm financial performance. Journal of Business Ethics, 83(3), 435–451. https://doi.org/10.1007/s10551-007-9630-y
Carter, D. A., D'Souza, F., Simkins, B. J., & Simpson, W. G. (2010). The gender and ethnic diversity of US boards and board committees and firm financial performance. Corporate Governance, 18(5), 396–414. https://doi.org/10.1111/j.1467-8683.2010.00809.x
Carter, D., Simkins, B., & Simpson, W. (2003). Corporate Governance, Board Diversity, and Firm Value. The Financial Review, Wiley Online Library, 38(1), 33–53. https://doi.org/10.1111/1540-6288.00034
Chen, Z., Cheung, Y.-L., Stouraitis, A., & Wong, A. W. S. (2005). Ownership concentration, firm performance, and dividend policy in Hong Kong. Pacific-Basin Finance Journal, 13(4), 431–449. https://doi.org/10.1016/j.pacfin.2004.12.001
Chuanrommanee, W., & Swierczek, F. W. (2007). Corporate governance in ASEAN financial corporations: Reality or illusion? Corporate Governance: An International Review, 15(2), 272–283. https://doi.org/10.1111/j.1467-8683.2007.00559.x
Coffey, B. S., & Wang, J. (1998). Board diversity and managerial control as predictors of corporate social performance. Journal of Business Ethics, 17(14), 1595–1603. https://doi.org/10.1023/a:1005748230228
Cooper, E., & Uzun, H. (2012). Directors with a full plate: the impact of busy directors on bank risk. Managerial Finance, 38(6), 571–586. https://doi.org/10.1108/03074351211226238
Darmadi, S. (2013a). Board members' education and firm performance: evidence from a developing economy. International Journal of Commerce and Management, 23(2), 113–135. https://doi.org/10.1108/10569211311324911
Darmadi, S. (2013b). Corporate governance disclosure in the annual report: An exploratory study on Indonesian Islamic banks. Humanomics, 29(1), 4–23. https://doi.org/10.1108/08288661311299295
Davies, M., & Schlitzer, B. (2008). The impracticality of an international "one size fits all" corporate governance code of best practice. Managerial Auditing Journal, 23(6), 532–544. https://doi.org/10.1108/02686900810882093
Erickson, J., Park, Y. W., Reising, J., & Shin, H. H. (2005). Board composition and firm value under concentrated ownership: The Canadian evidence. Pacific-Basin Finance Journal, 13(4), 387–410. https://doi.org/10.1016/j.pacfin.2004.11.002
Haniffa, R., & Hudaib, M. (2006). Corporate Governance Structure and Performance of Malaysian Listed Companies. Journal of Business Finance&Accounting, 33(7–8), 1034–1062. https://doi.org/10.1111/j.1468-5957.2006.00594.x
Hasan, T., Kadapakkam, P.-R., & Kumar, P. C. (2008). Firm Investments and Corporate Governance in Asian Emerging Markets. Multinational Finance Journal, 12(1), 21–44.
Jackson, S. E., & Joshi, A. (2004). Diversity in social context : a multi-attribute, multilevel analysis of team diversity and sales performance. Journal of Organizational Behavior, 25(April), 675–702. https://doi.org/10.1002/job.265
Kamardin, H., & Haron, H. (2011). Internal corporate governance and board performance in monitoring roles. Journal of Financial Reporting and Accounting, 9(2), 119–140. https://doi.org/10.1108/19852511111173095
Kiel, G. C., & Nicholson, G. J. (2006). Multiple directorships and corporate performance in Australian listed companies. An International Review, 14(6), 530–546. https://doi.org/DOI 10.1111/j.1467-8683.2006.00528.x
Koutoupis, A. G. (2012). Importing international corporate governance codes in Greek publicly listed enterprises: A case study analysis. International Journal of Organizational Analysis, 20(4), 447–463. https://doi.org/10.1108/19348831211268634
Krejcie, R. V., & Morgan, D. W. (1970). Determining Sample Size for Research Activities. Educational and Psychological Measurement, 30(3), 607–610. https://doi.org/10.1177/001316447003000308
Lobrij, M. F., Kaptein, M., & Lückerath-Rovers, M. (2020). What national governance codes say about corporate culture. Corporate Governance (Bingley), 20(5), 903–917. https://doi.org/10.1108/CG-08-2019-0254
Lukviarman, N. (2004). Etika Bisnis Tak Berjalan di Indonesia : Ada Apa Dalam Corporate Governance ? Jurnal Siasat Bisnis, 2(9), 139–156.
Miller, T., & Del Carmen Triana, M. (2009). Demographic diversity in the boardroom: Mediators of the board diversity-firm performance relationship. Journal of Management Studies, 46(5), 755–786. https://doi.org/10.1111/j.1467-6486.2009.00839.x
Milliken, F. J., & Martins, L. L. (1996). Searching for common threads: Understanding the multiple effects of organisational diversity. Academy of Management, 21(2), 402–433. https://doi.org/10.5465/AMR.1996.9605060217
NCG. (2006). Indonesia’s code of good corporate governance. Komite Nasional Kebijakan Governance.
Nuryanah, S., & Islam, S. M. N. (2011). Corporate Governance and Performance : Evidence From an Emerging Market. Malaysian Accounting Review, 10(1), 17–42.
Olthuis, B. R., & van den Oever, K. F. (2020). The board of directors and CSR: How does ideological diversity on the board impact CSR? Journal of Cleaner Production, 251(April), 119532. https://doi.org/10.1016/j.jclepro.2019.119532
Pass, C. (2006). The revised Combined Code and corporate governance: An empirical survey of 50 large UK companies. Managerial Law, 48(5), 467–478. https://doi.org/10.1108/03090550610715963
Patrick, H. (2001). Corporate Governance and the Indonesian Financial System : A Comparative Perspective (Issue 16).
Pelled, L. H. (1996). Demographic Diversity, Conflict, and Work Group Outcomes: An Intervening Process Theory. Organization Science, 7(6), 615–631. https://doi.org/10.1287/orsc.7.6.615
Rose, C. (2007). Does female board representation influence firm performance ? The Danish evidence. Corporate Governance : An International Review, 15(2), 404–413.
Ruigrok, W., Peck, S., & Tacheva, S. (2007). Nationality and gender diversity on Swiss corporate boards. Corporate Governance, 15(4), 546–557. https://doi.org/10.1111/j.1467-8683.2007.00587.x
Siciliano, J. I. (1996). The relationship of board member diversity to organisational performance. Journal of Business Ethics, 15(12), 1313–1320. https://doi.org/10.1007/BF00411816
Simons, T., & Pelled, L. H. (1998). Understanding Executive Diversity. Human Resource Planning, 49–51.
Simpson, G. W., Carter, D. A., & D'Souza, F. (2010). What Do We Know About Women on Boards? Journal of Applied Finance, 20(2), 27–40.
Ujunwa, A., Okoyeuzu, C., & Nwakoby, I. (2012). Corporate board diversity and firm performance: evidence from Nigeria. Review of International Comparative Management, 13(4), 605–620. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=85294714&site=bsi-live
Van der Walt, N., Ingley, C., Shergill, G. S., & Townsend, A. (2006). Board configuration: are diverse boards better boards? Corporate Governance: The International Journal of Business in Society, 6(2), 129–147. https://doi.org/10.1108/14720700610655141
Wang, Y., & Clift, B. (2009). Is there a "business case" for board diversity? Pacific Accounting Review, 21(2), 88–103.
Wanous, J. P., & Youtz, M. A. (1986). Solution Diversity and The Quality of Group Decisions. Academy of Management Journal, 29(1), 149–159.
Wellalage, N. H., Locke, S., & Scrimgeour, F. (2012). The Global Financial Crisis Impact on Ethnic Diversity of Sri Lanka Boards. Asian Journal of Finance & Accounting, 4(1), 52–69. https://doi.org/10.5296/ajfa.v4i1.1243
Yammeesri, J., & Kanthi Herath, S. (2010). Board characteristics and corporate value: evidence from Thailand. Corporate Governance: The International Journal of Business in Society, 10(3), 279–292. https://doi.org/10.1108/14720701011051910
Zhang, L. (2012). Board demographic diversity, independence, and corporate social performance. Corporate Governance: The International Journal of Business in Society, 12(5), 686–700. https://doi.org/10.1108/14720701211275604