10/15/2018

Entrepreneurship
Impact of cultural diversity and
quality financial reporting on firms
performance

Submitted to: Sir Afkar Majeed

Submitted by: Habiba Kausar
Nayab Arif
Hafsa Khalid
Kainat Tahir
Department: BS-commerce 5th
Fatima Jinnah women university Rawalpindi
Positive impact of cultural diversity on firm’s performance:
Serial Author year Positive Results References
No. Name
1 Gomez- 1997 Cultural diversity positively effect on firm Gomez-Mejia, L. R., &Palich, L. E. (1997). Cultural
Mejia,L.R. performance because markets are not diversity and the performance of multinational
perfectly integrated, thus involvement in firms. Journal of International Business
more than one national market serves to Studies, 28(2), 309-335.
balance out regional macro-economic
trends that are less than perfectly
correlated.
2 Uzzi, B. 1997 Cultural diversity in boards positively Uzzi, B. (1997). Social structure and competition in
affects firm performance because groups interfere networks: The paradox of
composed of people from collectivist embeddedness. Administrative science quarterly, 35-
cultural traditions would display more 67.
cooperative behavior than groups
composed of people from individualistic
cultural traditions.
3 Hitt, M. A., 1997 Results shows that firm performance is Hitt, M. A., Hoskisson, R. E., & Kim, H. (1997).
Hoskisson, positive. Because Product diversification International diversification: Effects on innovation and
R. E moderates the relationship between firm performance in product-diversified
international diversification and firms. Academy of Management journal, 40(4), 767-
performance. 798.

4 Kochan, T., 2003 Research paper shows that the Kochan, T., Bezrukova, K., Ely, R., Jackson, S., Joshi,
Bezrukova, relationship of cultural diversity with firm A., Jehn, K. ... & Thomas, D. (2003). The effects of
K., Ely, R., performance is positive and cultural diversity on business performance: Report of the
Jackson, S., diversity increase the firm or business diversity research network. Human Resource
Joshi, A., effectiveness. Management: Published in Cooperation with the
 Jehn, K   School of Business Administration, The University of
5 Richard, O. 2004 The relationship between management
C., Barnett, group diversity and firm performance is
T., Dwyer, nonlinear. It revealed that innovativeness
S., & positively and risk taking negatively
Chadwick, K moderated.
6 Roberson, Q. 2007 The result shows that cultural diversity
M., & Park, positively impact on firm performance.
H. J Economic benefits generated from
diversity reputation may primarily derive
from capital rather than product markets.
7 McMahon, 2010 The studies conclude that there is a
A. M significant positive correlation between
diversity and subsidiary performance.
Because the similarities and differences of
individuals are valued, so that all can
reach their potential and maximize their
contributions to an organization’s
strategic goals and objectives. 
8 Simons, S. 2011 The researched conclude that success of
M., & an organization is achieved by bringing
Rowland, K. new ideas, adopting cultural diversity
N. positively affect the firm performance.
9 Simons, S. 2011 The results of study that diversity will
M., & positive for an organization if the
Rowland, K. organization effectively manage and
N. understand functional and social diversity. and outcomes. Journal of technology management &
Michigan and in alliance with the Society of Human
Resources Management, 42(1), 3-21.
Richard, O. C., Barnett, T., Dwyer, S., & Chadwick,
K. (2004). Cultural diversity in management, firm
performance, and the moderating role of
entrepreneurial orientation dimensions. Academy of
management journal, 47(2), 255-266.
Roberson, Q. M., & Park, H. J. (2007). Examining the
link between diversity and firm performance: The
effects of diversity reputation and leader racial
diversity. Group & Organization Management, 32(5),
548-568.
McMahon, A. M. (2010). Does workplace diversity
matter? A survey of empirical studies on diversity and
firm performance, 2000-09. Journal of Diversity
Management, 5(2), 37-48.
Simons, S. M., & Rowland, K. N. (2011). Diversity
and its impact on organizational performance: The
influence of diversity constructions on expectations
and outcomes. Journal of technology management &
innovation, 6(3), 171-183...
 Simons, S. M., & Rowland, K. N. (2011). Diversity
and its impact on organizational performance: The
influence of diversity constructions on expectations
innovation, 6(3), 171-183.
10 Elsaid, A. M 2012
The study clearly indicates that it is
important for any organization to
implement diversity in the organization.
Because Employee performance is
surprisingly when different work force
work together.
11 Brunow, S., 2012 Significant positive effects of cultural
& Nijkamp, diversity on performance. Because
P emerging productivity gains are not just
paid as dividend or factor rewards but are
also used to set lower prices in order to
achieve higher demand.
12 Umans, T 2012 Cultural diversity have a positive effect
on the firm’s performance. It has ability to
attract the best talent from a shrinking
labor pool, it will save time and money in
recruitment and turnover costs.
13 Choi, B. P., 2014 Cultural diversity have a positive
Jeong, J. G., influence on the Company’s performance.
& Lee, Y Because human skills and the knowledge
of individual employees are advantages
that firms adopting diversity possess.
14 Leng, C. Z., 2014 The study shows that firm with better
&Yazdanifar decision making by culturally diverse
d, R groups and increased problem-solving
capabilities, may achieve comparative
advantage over other peer groups.
15 Ayega, E. N., 2018 Cultural diversity influences
Elsaid, A. M. (2012). The effects of cross cultural
work force diversity on employee performance in
Egyptian pharmaceutical organizations. Business and
Management Research, 1(4), 162.
Brunow, S., & Nijkamp, P. (2012). The Impact of a
Culturally Diverse Workforce on Firms' Market Size:
An Empirical Investigation on Germany.
Umans, T. (2012). The bottom line of cultural
diversity at the top: the top management team's
cultural diversity and its influence on organizational
outcomes (Doctoral dissertation, Lund Institute of
Economic Research, School of Economics and
Management, Lund University).
Choi, B. P., Jeong, J. G., & Lee, Y. (2014). Diversity
and Firm Performance: An Analysis of Different
Workforce Level and Ethnic Groups. The Journal of
Business Diversity, 14(1), 48.
Leng, C. Z., &Yazdanifard, R. (2014). The
Relationship between Cultural Diversity and
Workplace Bullying in Multinational
Enterprises. Global Journal of Management And
Business Research.
Ayega, E. N., &Muathe, S. (2018). Critical Review of
 &Muathe, S organizational performance because Literature on Cultural Diversity in the Work Place and
cultural diversity in the workplace is a Organizational Performance: A Research
formidable competitive weapon in an Agenda. Journal of Human Resource
organization. Management, 6(1), 9.

Negative effect of cultural diversity on firm performance:

Serial Author year Negative results References

no name
1 Milliken, F. 1996 Cultural diversity is Milliken, F. J., & Martins, L. L. (1996). Searching for common
J., & negatively effect on firm threads: Understanding the multiple effects of diversity in
Martins, L. performance. Because organizational groups. Academy of management review, 21(2),
L. work culture does not 402-433.
support tolerance and
acceptance of differences
2 Jehn, K. A., 1999 Cultural diversity effect the Jehn, K. A., Northcraft, G. B., & Neale, M. A. (1999). Why
Northcraft, firm performance because differences make a difference: A field study of diversity, conflict
G. B., & diversity decreased and performance in workgroups. Administrative science
Neale, M. satisfaction, and quarterly, 44(4), 741-763.
A. commitment to the group
relationship conflict.
3 Kilduff, M., 2000 Greater TMT diversity leads Tibben, P. A. (2010). Top management team diversity and firm
Angelmar, to more conflicts on the performance (Master's thesis).
R., & TMT which results in a more   
Mehra, A. time-consuming and less
effective decision-making
process.  

4 Von Bergen, 2002 The research shows miss Von Bergen, C. W., Soper, B., & Foster, T. (2002). Unintended
 C. W., management of cultural negative effects of diversity management. Public personnel
Soper, B., & diversity negatively affect management, 31(2), 239-251.
Foster, T. the firm performance,
through bad relationship
among employees, increase
cost of operation, decrease
productivity of firm.
5 Kochan, T., 2003 Cultural diversity is Kochan, T., Bezrukova, K., Ely, R., Jackson, S., Joshi, A., Jehn,
Bezrukova, negatively related to K., ... & Thomas, D. (2003). The effects of diversity on business
K., Ely, R., performance in business performance: Report of the diversity research network. Human
Jackson, S., units with competitive Resource Management: Published in Cooperation with the
Joshi, A., organizational culture School of Business Administration, The University of Michigan
Jehn, K & growth oriented business and in alliance with the Society of Human Resources
Thomas, D. strategies Management, 42(1), 3-21.
6 Richard, O. 2004 It revealed that Richard, O. C., Barnett, T., Dwyer, S., & Chadwick, K. (2004).
C., Barnett, innovativeness positively Cultural diversity in management, firm performance, and the
T., Dwyer, and risk taking negatively moderating role of entrepreneurial orientation
S., & moderated nonlinear dimensions. Academy of management journal, 47(2), 255-266.
Chadwick, relationship patterns for both
K. racial and gender
heterogeneity.
7 Adams, R. 2009  The average effect of Adams, R. B., & Ferreira, D. (2009). Women in the boardroom
B.& diversity on firm and their impact on governance and performance. Journal of
Ferreira, D. performance is negative. financial economics, 94(2), 291-309.
This negative effect is driven
by companies with fewer
takeover defenses. The
results suggest that
mandating gender quotas for
directors can reduce firm
value for well-governed
firms.
8 Daunfeldt, 2012 The research paper shows Daunfeldt, S. O., & Rudholm, N. (2012). Does gender diversity
 S. O., & that diversity in the board in the boardroom improve firm performance. Departamento de
Rudholm, room found to have a Economía de la Universidad de Dalarna..
N. negative effect on the firm
performance the return on
total assets declined.
9 Leng, C. Z., 2014 The research conclude that, Leng, C. Z., & Yazdanifard, R. (2014). The Relationship
& cultural diversity negatively between Cultural Diversity and Workplace Bullying in
Yazdanifard affect the firm performance Multinational Enterprises. Global Journal of Management And
,R if diversity not manage Business Research.
efficiently.
10 Martin, G. 2014 Cultural diversity is Martin, G. C. (2014). The effects of cultural diversity in the
C. negatively effect on firm workplace. Journal of Diversity Management (Online), 9(2), 89.
performance by
miscommunication, creation
of barriers, and
dysfunctional adaptation
behaviors
11 Frijns, B., 2016 The article finding shows Frijns, B., Dodd, O., & Cimerova, H. (2016). The impact of
Dodd, O., & negative relationship cultural diversity in corporate boards on firm performance.
Cimerova, between cultural diversity Journal of Corporate Finance, 41, 521-541.
H. and firm performance
because group decision
making most disruptive
processes.

Positive Impact of financial reporting quality on firm’s performance

Seria Authors Year Findings References
l no name
1 Graham, J. 2001 It shows positive impact Graham, J. R., Harvey, C. R., & Rajgopal, S. (2005). The economic
R., Harvey, implications of corporate financial reporting. Journal of accounting and
C. R., & economics, 40(1-3), 3-73.
Rajgopal, S.
2 Kaynak, H. 2003 It shows positive impact Kaynak, H. (2003). The relationship between total quality management
practices and their effects on firm performance. Journal of operations
management, 21(4), 405-435.
3 Orlitzky, M., July 26 Financial reporting quality Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate social and
Schmidt, F. 2003 has a positive effect on financial performance: A meta-analysis. Organization studies, 24(3),
L., & Rynes, 403-441.
S. L.
firms performance
4 Beest, F. V., April It shows positive impact Beest, F. V., Braam, G. J. M., & Boelens, S. (2009). Quality of Financial
Braam, G. J. 2009 Reporting: measuring qualitative characteristics.
M., &
Boelens, S
5 Biddle, G.C., 2009 Higher financial reporting Biddle, G. C., Hilary, G., & Verdi, R. S. (2009). How does financial
Hilary, G., quality would have lower reporting quality relate to investment efficiency? Journal of Accounting
Verdi, R. S. info asymmetries lower and Economics, 48(2-3), 112–131. doi:10.1016/j.jacceco.2009.09.001
uncertainty,lower
estimation risk
6 Martínez- 2014 Companies that report Martínez-ferrero, j. (2014). Consecuencias de la calidad de la
ferrero, j. financial statement with informaciónfinanciera en el rendimientofinanciero: evidencia para
better info quality will el ámbitointernacional. Estudios de economía, 41(1), 49-88
enjoy higher FP
7 Jaballah, e., 2014 Shows that companies with Jaballah, e., yousfi, w., &ali, z. M. (2014). Quality of financial
yousfi, w., better quality of financial reports: evidence from the tunisian firms. E3 journal of business
&ali, z. M. information are associated management and economics, 5(2), 30-38.
with subsequent higher
performance

8 Chiang, h., 2015 Paper shows positive effect Chiang, h., he, l. J., &shiao, c. F. (2015). Financial reports quality
 he, l. J., and corporate social responsibility. Asian economic and financial
&shiao, c. review, 5(3), 453-467.
F.

9 Lin, z., 2015 This paper suggests that the Lin, z., jiang, y., tang, q., & he, x. (2014). Does high-quality
jiang, y., quality financial reporting financial reporting mitigate the negative impact of global financial
tang, q., & has a positive effect on crises on firm performance? Evidence from the united
he, x firms performance kingdom. Australasian accounting, business and finance journal.

10 SA Ojeka 2015 It shows positive effect Healy, P. M., & Palepu, K. G. (2001). Information asymmetry, corporate
disclosure, and the capital markets: A review of the empirical disclosure
literature. Journal of accounting and economics, 31(1-3), 405-440.

11 Onuorah, a. Positive effect of the quality Onuorah, a. C. C., &friday, i. O. (2016). Corporate governance
C. C., financial reporting is shown and financial reporting quality in selected nigerian
2016
&friday, i. in this paper company. International journal of management science and
O. business administration, 2(3), 7-16.

12 .2017 This paper shows that Herith,k.sss , alberqi,n. (2017).financial reporting quality.
quality financial International journal of business and commerce , 2(2) ,34-54
Herith,k.sss performance has a positive
, alberqi,n. effect on firms performance

13 Al-dmour, 2018 This paper suggest that the Al-dmour, a., abbod, m., & al-balqa, n. (2018). The impact of the
a., abbod, financial reporting quality is quality of financial reporting on non-financial business
m., & al- associated with non- performance and the role of organizations demographic'attributes
balqa, n. financial performance of a (type, size and experience).
firm and effects positively.
 14 Jimoh, 2018 Positively effects firms Jimoh, ibrahim. (2018). Financial reporting quality and its effect
ibrahim performance on investment decisions by nigerian deposit money banks
Quality of FR has an
attractive effect on investor.
15 Adeyemi A. 2013 This paper shows positive Adekunle, A. A., & Asaolu, T. (2013). AN EMPIRICAL INVESTIGATION OF
Adekunle , effects THE FINANCIAL REPORTING PRACTICES AND BANKS'STABILITY IN
Asaolu, NIGERIA. Kuwait Chapter of the Arabian Journal of Business and
Taiwo Management Review, 2(5), 157.

Negative impact of financial reporting on firm’s performance:

Serial Authors Year Findings References
no name
1 Cohen, D. A. 2003 This article shows negative Cohen, D. A. (2003). Quality of Financial Reporting Choice:
relation as no evidence is Determinants and Economic Consequences. SSRN Electronic Journal .
found that the firms giving doi:10.2139/ssrn.422581
high quality financial
reporting are enjoying lower
cost of capital equity. High
reporting also involves
potential costs.
2 Biddle, G. C., 2009 This study provides evidence Biddle, G. C., Hilary, G., & Verdi, R. S. (2009). How does financial
Hilary, G., & l negative (positive) reporting quality relate to investment efficiency? Journal of Accounting
Verdi, R. S. association These results and Economics, 48(2-3), 112–131. doi:10.1016/j.jacceco.2009.09.001
suggest that one mechanism
linking reporting quality and
 investment efficiency is a
reduction of frictions such as
moral hazard and adverse
selection that hamper
efficient investment.
3 Costello, A. 2010 Lender impose stringent Costello, A. M., & Wittenberg Moerman, R. (2010). The Impact of
M., & terms when financial Financial Reporting Quality on Debt Contracting: Evidence from
Wittenberg reporting quality is low. Internal Control Weakness Reports. SSRN Electronic Journal.
Moerman, R. Long terms become more doi:10.2139/ssrn.1455985
stronger.
4 Lopes, C. M. 2012 Poor accounting will make Lopes, C. M. F. P. (2011). FEP WORKING PAPERS Research(Doctoral
F. P. it harder to estimate firms dissertation, Universidade do Porto).
ability to pay dividend and
repay debts. income
decreasing abnormal
accruals will decrease
measure of performance
5 Mehmood.I 2015 The study found that the ‫ األرباح على القرار‬V‫ أثر توزيعات‬.)2015( .‫ إسحق محمود‬،‫ & الشعار‬,‫ نضال عمر‬،‫زلوم‬
Al-shahar, dividends have a negative ‫ =االستثماري في ضوء جودة التقارير المالية‬The Effect of Dividends on the
Investment Decision in the Light of the Financial Reporting
Umer.nadal effect on the investment
Quality. Jordan Journal of Economic Sciences, 200(3282), 1-19.
zalom decision. In addition, the
results showed that the
influence of dividends on the
investment decision varies,
depending on the financial
reporting quality. interaction
between the dividends and
the financial reporting quality
increases the negative effect
on the investment decision
6 Hamed 2015 Negative effect is shown the Sayyar, H., Rohaida, R., & Sidi Zaleha Abdul-Elhabib, M. A. (2015).
sayar the paper The Impact of Audit Quality on Firm Performance: Evidence from
Malaysia. International Business School, University Teknology
Malaysia, June,(1-19).
7 Gill de 2017 Gill de Albornoz Noguer, B., & Rusanescu, S. (2017). Foreign
 Albornoz ownership and financial reporting quality in private subsidiaries. Instituto
Noguer, B., & Valenciano de Investigaciones Económicas, SA (Ivie).
Rusanescu,
S.
8 Angela, W., 2017 financial reporting quality has Angela, W., & Aryancana, R. (2017). The Effect of Financial Reporting
& Aryancana, negative effect on financing. Quality on Financing and Investment. Etikonomi, 16(1).
R
It can directly effect
investments by decreasing
moral hazrds and discouraging
managers to over-invest.
9 Onyabe, J. 2018 The study reveals that audit Onyabe, J. M., Okpanachi, J., Nyor, T., Yahaya, O. A., & Ahmed, M.
M., committee tenure has a (2018). Effect of Audit Committee Tenure on Financial Reporting
Okpanachi, negative and insignificant Quality of Listed Deposit Money Banks in Nigeria. European Scientific
J., Nyor, T., effect on financial reporting Journal, ESJ, 14(4).
Yahaya, O. quality under the two
A., & Ahmed, models.
M.