Why Diversity Pays – Diverse groups tend to make more sensible decisions

Tim Harford has an interesting article where he has collected together data from various sources indicating that groups that carve out space for different perspectives tend to make more sensible decisions.

Here are some excerpts from the article:

In the Journal of Financial Economics, Renée Adams and Daniel Ferreira found that female directors seemed to provide better oversight, and to inspire their male colleagues to do likewise. In the Financial Review, David Carter, Betty Simkins and W Gary Simpson found a correlation between firm value and diversity on the board.

and, according to a study, of trades by female company directors, that looked at tens of thousands of trades in UK companies from 1994 to 2006,

fund managers should be paying more attention to what female directors do.

Why? Because they make more money when they buy shares. On a medium-term timescale, from three months to a year, their trades outperform those of their male counterparts.

Read the full article

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