DOI: 10.5176/2251-1997_AF19.264
Authors: Dr. Truc (Peter) Do
Abstract: We examine how board diversity, namely ethnic and gender diversity, has an impact on executive pay-to-performance sensitivity. Using firm-year observations in Australia, we document that board ethnic diversity leads to higher executive pay-to-performance sensitivity, but we do not document that board gender diversity leads to higher executive pay-toperformance sensitivity. We further document that both board ethnic and gender diversity improve board monitoring, but only ethnic diversity has a weak impact on future firm performance. Lastly, we also document that the impact of board ethnic diversity on executive pay-to-performance sensitivity is more pronounced for firms suffering from high agency costs, but no such difference exists for the impact of board gender diversity on executive pay-to-performance sensitivity.
Keywords: Board diversity; CEO remuneration; Board monitoring
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