The aim of this article is to develop an original framework that explores how the adoption of diversity and inclusion policies mediates the relationship between board composition and market value.
Using secondary data from the Refinitiv Eikon database, 413 Latin American publicly traded companies were analyzed from 2018 to 2021. Three independent variables related to board composition were used. Firstly, they were tested as antecedents of diversity in organizations. Secondly, diversity was tested as a driver of market capitalization. Multivariate analysis was applied, and discussions were anchored in upper echelons theory.
The empirical results presented evidence that board size and independence positively affect diversity policies and program development in organizations. On one hand, in our analyses, gender diversity lost significance. On the other hand, findings reveal that companies that develop more diversity and inclusion policies tend to have a higher value in terms of market capitalization.
We propose a hierarchy process for firms to reach value, starting with board composition’s influence on diversity and, in a second stage, the diversity as a driver for market capitalization. Furthermore, although prior research has examined the relationship between diversity and firm performance, there is a research gap regarding emerging countries.
