The Impact of Diversity-In-Board on Investment Efficiency Across the Stages of the Firm Life Cycle in The MENA Region

Abstract

This study investigates the dynamic impact of diversity-in-board on investment efficiency across different stages of the firm life cycle using the framework of firm life cycle theory as a guide. It explores the relationship between the diversity-in-board index measured by (board nationality, women representation, and board education level) and investment efficiency at different stages in the firm life cycle as measured by free cash flow. The analysis encompasses 332 non-financial firms listed in the Dow Jones MENA Index from 2010 to 2021, yielding 285, 795, 2241, 513, 150 firm-year observations in the introduction, growth, mature, shake-out, and decline stages, respectively. Data was gathered from the S&P Capital IQ database and analysed using STATA software, employing panel data techniques. The findings reveal the diversity-in-board index exhibits varying effects, being insignificant during the introduction stage, positive during growth and decline stages, and negative during mature and shake-out
stages on investment efficiency in the companies within the MENA region. These results endorse firm life cycle theory, emphasizing the dynamic role of diversity-in-board in investment efficiency. This research offers valuable insights for economists and policymakers, advancing our comprehension of how board attributes (board nationality, women representation, and board education level) impact a firm's investment efficiency in a dynamic context.