Board Diversity and Financial Distress
Shafira Mahdiyah Rachma S.M, Dr. Rahmat Setiawan, SE., MM., CFP

Faculty of Economics and Business, Airlangga University

Abstract

This study aims to determine the effect of board diversity that focuses on cognitive diversity, which consists of educational, expertise, and tenure diversity partially on financial distress. This study also examines the effect of board diversity simultaneously on financial distress. The sample of this study is non-financial companies listed on the Indonesia Stock Exchange during the period 2019-2021. The method used in this research is purposive sampling with multiple linear regression analysis model using SPSS 26 application. This study found that first, educational diversity have a significant positive effect on Z-Score, which implying that educational diversity reduces financial distress likelihood. Second, expertise diversity have a significant positive effect on Z-Score, which implying that expertise diversity reduces financial distress likelihood. Third, tenure diversity have a significant positive effect on Z-Score, which implying that tenure diversity reduces financial distress likelihood. Fourth, board diversity have a significant positive effect on Z-Score, which implying that board diversity reduces financial distress likelihood.

Keywords: Board diversity- Educational diversity- Expertise diversity- Tenure diversity- Financial distress

Topic: Financial management