The Effect of Board Characteristics on Firm Performance in Japan

• Main Authors: Oona Cha, Taehun Jung
• Format: Article
• Language: English
• Published: Korea Institute for International Economic Policy 2009-06-01
• Series: East Asian Economic Review
• Subjects: Board of Directors; Similarity; Firm Performance
• Online Access: http://dx.doi.org/10.11644/KIEP.JEAI.2009.13.1.199

This paper analyzes the effect of similarity among board members on firm performance in Japanese manufacturing firms. The similarity measures regarding age and educational background of individual directors were used to predict firm performance. The analyses revealed that similarity of age among board members had adverse effects on firm performance. In addition, greater variation in educational background among board members predicted better firm performance. It seems that homogeneity among board members in terms of age and education can affect the firm negatively by impeding exchange of diverse ideas. These findings emphasize that promoting diversity in terms of age and education in the board of directors is crucial for firm performance.