The Effect of Board Diversity on Cost Stickiness

This study examines the relationship between board diversity and cost stickiness. The research is unique because we measure board diversity using three individual board composition characteristics: gender, background, and nationality. Using a sample of Korean firms from 2005 to 2020, we find that SG&A costs are less sticky for companies with greater board diversity. Furthermore, we find that the impact of board diversity on cost stickiness is more pronounced in firms with higher agency costs. Overall, our findings contribute to the existing literature by providing evidence that board diversity can enhance the monitoring functions of the company. In other words, the appropriate composition of board diversity may mitigate the agency problem, thereby reducing the degree of SG&A cost stickiness.