5. Conclusion and discussion
This study examines the impact of board diversity on board performance in investment oversight. We categorize diversity attributes into two dimensions: relation-oriented diversity (i.e., gender, race, and age) and task-oriented diversity (i.e., tenure and expertise). We did not find an association between board relation-oriented diversity and board performance in investment oversight. However, we found that board task-related diversity is negatively associated with the deviation from the expected level of investment, suggesting that diverse experiential boards make better investment decisions than homogeneous ones. Our results are robust to the use of several alternative dependent and independent variables, standardized diversity indexes, different regression methods, and different subsamples.
Theories on the benefits of diversity are mixed. Some argue that workgroup diversity reduces groupthink and brings healthy debates and disagreements to decision making (Gruenfeld et al., 1996; Wittenbaum & Stasser, 1996), while others contend that workgroup heterogeneity makes reaching consensus difficult and damage group performance (Jehn, 1997; Riordan & Shore, 1997; Tsui et al., 1992). Our study highlights the importance of examining related-oriented and task-oriented diversity attributes separately as both types of diversity have different influence on group performance. Researchers are unlikely to find the impact of diversity on team performance when combining all types of diversity (Joshi & Roh, 2009). The reason that we did not find an association between board relation-oriented diversity and board performance in investment oversight is possibly because the beneficial and harmful effects of relation-oriented diversity cancel themselves out.
