Board composition and diversification decisions of UK listed companies: a panel data analysis

This paper investigates the link between the board composition and the corporate diversification decisions of 50 large UK listed corporations over the period from 2005 to 2015. The panel data analysis integrates changes in board composition and its dynamic effect on the extent of diversification. We find that increased board independence influences the extent of both unrelated and related diversification. Neither institutional representatives nor extra-industry interlocking directors influence the extent of diversification in ways which promote shareholders' interests. The findings supports corporate governance policy promoting board independence. In contrast, these findings suggest extending the involvement of institutional investors to board representation may not mitigate agency problems in large companies