Does Board Demographic Diversity Enhance Cognitive Diversity and Monitoring?

We examine whether board demographic diversity enhances cognitive diversity (measured as director dissent in the boardroom) and monitoring. At the director level, we find that individual directors who are dissimilar relative to other board members in terms of tenure and experience are more likely to dissent. At the board level, boards composed of directors with heterogenous tenure, experience, and gender are more likely to dissent. We also find that stock market reactions to director resignation announcements are more negative for directors who have ever dissented than for other directors. Moreover, following dissent-driven proposal rejections, firms experience an improvement in value and internal governance and a decrease in risk. The results suggest that directors with diverse qualifications and skillsets and female directors enhance cognitive diversity and that this enhanced cognitive diversity helps increase firm value and monitoring effectiveness