Board Diversity and Firm Performance: The Role of Contextual Variables

British Journal of Management

Posted: 7 Dec 2022 Last revised: 8 Dec 2022

See all articles by Nitesh Pandey

Nitesh Pandey

Amrita School of Business; Malaviya National Institute of Technology

H. Kent Baker

American University - Kogod School of Business

Satish Kumar

Malaviya National Institute of Technology (MNIT), Jaipur

Prashant Gupta

Indian Institute of Management Tiruchirappalli

Searat Ali

University of Wollongong; University of Wollongong - School of Accounting, Economics & Finance

Date Written: November 23, 2022

Abstract

We examine the dynamic relationship between board diversity and firm performance in an Indian context using a systems generalized method of moments and control function approach. Our baseline analysis shows that board diversity positively influences accounting performance but negatively affects market performance. Additional analysis reveals that contextual variables, including board independence, firm size, firm age, promoter shareholdings, industry sector, women’s participation in STEM education and the workforce and gross domestic product moderate this relationship significantly. We also find improved market performance after enacting the Companies Act 2013. Overall, these results highlight the critical role of performance measurement and contextual variables in the diversity–performance nexus.

Keywords: Board Diversity, Firm Performance, Government Policy, Control Function, Systems GMM

JEL Classification: G28, G34

Suggested Citation

Pandey, Nitesh and Baker, H. Kent and Kumar, Satish and Gupta, Prashant and Ali, Searat and Ali, Searat, Board Diversity and Firm Performance: The Role of Contextual Variables (November 23, 2022). British Journal of Management, Available at SSRN: https://ssrn.com/abstract=4287041

Nitesh Pandey (Contact Author)

Amrita School of Business ( email )

Coimbatore, Tamil Nadu 641112
India

Malaviya National Institute of Technology ( email )

India

H. Kent Baker

American University - Kogod School of Business ( email )

4400 Massachusetts Avenue NW
Washington, DC 20816-8044
United States
202-885-1949 (Phone)
202-885-1992 (Fax)

Satish Kumar

Malaviya National Institute of Technology (MNIT), Jaipur ( email )

Jawaharlal Nehru Marg
Jaipur, Rajasthan 302017
India

HOME PAGE: http://mnit.ac.in

Prashant Gupta

Indian Institute of Management Tiruchirappalli ( email )

Searat Ali

University of Wollongong - School of Accounting, Economics & Finance ( email )

Northfields Avenue
Wollongong, NSW 2522
Australia
+61242392211 (Phone)

University of Wollongong ( email )

Northfields Avenue
Wollongong, NSW 2522
Australia
+61242392211 (Phone)

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