DIVERSITY OF THE BOARD AND CAPITAL STRUCTURE

ABSTRACT Board diversity has been a recurring theme for discussions in both the academic and corporate environments. The concept of diversity is broad and encompasses not only gender and ethnic variety but also cultural, social, and professional diversity. This research aims to contribute to the understanding of the influence of company boards on corporate policies, by analyzing the effects of board diversity on firms’ financial policy decisions. The results suggest that board diversity improves monitoring effectiveness and is positively related to firm leverage, in line with the effects of reducing managerial entrenchment by means of stronger monitoring.