Gender diversity in boardroom and its impact on firm performance

The study investigates the relationship between gender diversity within the board of directors and firm’s financial performance. The selected sample is chosen from Bombay Stock Exchange 500 companies from India. The relationship is examined using accounting and market-based financial performance measures and board diversity is defined in respect to gender of board members. It also examines the impact of different categories of female directors on board on firm performance. We have used dynamic panel data estimation technique for analysis purposes to overcome the possibility of endogeneity and simultaneity bias. The study also examines whether female directors are likely to impose higher dividend payouts. Collectively, the results suggest that inclusion of women directors on board has a significant relationship with firm performance. We found no evidence that women directors impose higher dividend payouts. Finally, the paper discusses implications for future research and suggests that diversity must be looked at using different board parameters such as experience, ethnicity, nationality, age, qualifications etc. The benefits of diversity can be best derived when women directors on board are hired with diverse skills, competencies, life experiences etc.