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This study examines the relationship between board diversity, measured as cognitive (tenure, expertise, and education) and demographic (age, gender, and nationality) diversities, and idiosyncratic risk for 2000 Chinese non-financial firms from 2008 to 2020. This study highlights that cognitive board diversity has a more significant impact than demographic board diversity in mitigating idiosyncratic risk. After conducting sensitivity analysis and addressing endogeneity, the Capital Asset Pricing Model and Two-Stage-Least-Square findings confirm the robustness of results across different idiosyncratic risk measures, revealing a notable influence of board diversity on idiosyncratic risk. This study's findings provide valuable insights for practitioners that demographic and cognitive-oriented diversities should be perceived as an essential part of corporate governance in influencing overall corporate performance.
Ali et al. (Sun,) studied this question.