The influence of board’s human capital and social capital towards firm performance in Asian tourism industry

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Date
2014
Authors
Chai Aun, Ooi
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Abstract
This study examines the relationship between firm performance and board diversity in human capital and social capital in the context of the tourism industry. Human capital is represented by educational background and working experience of the board of directors; social capital is represented by external network ties via interlocking directorates of the board of directors. 85 tourism firms from the four economies in Asia, namely China, Hong Kong, Malaysia and Singapore are selected. This sample period of analysis is 2001-2011. The results show that only board diversity in external network ties and board diversity in educational background have significant positive relationship with firm performance. However, the relationships are also found to have significant nonlinear characteristics, of which the signs of the coefficients are changed from positive to negative after squaring the variables of the board diversity. It implies that over diversified of board capital could backfire firm performance significantly. Ultimately, this study finds that the relationship between firm performance and board diversity in working experience and external network ties are significantly moderated in a circumstance of crisis, such as terrorism, financial downturn and disease outbreaks, by which the crisis of terrorism is a sudden crisis while financial downturn and disease outbreaks are the gradual crisis. The crisis is proven to have significant negative impacts on tourism demand in the prior studies. The results show that gradual crisis has significant positive influence towards the relationship between firm performance and board diversity in external network ties, and both the gradual and sudden crisis have significant negative influence towards the relationship between firm performance and board diversity in working experience. In conclusion, the findings of this study show that board diversity in human capital and social capital should be regulated carefully in order to improve firm performance, especially during a crisis period.
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