Board human capital diversity and firm performance: evidence from top listed Indian firms

Abstract

Purpose This study aims to examine the impact of board human capital diversity, measured by educational qualification diversity and gender diversity on the financial performance of Indian firms after controlling corporate governance (CG) and firm-specific variables. Design/methodology/approach This study is based on a panel data set of top 100 listed Indian firms for a period of five years. The authors use Blau index and Shannon index to compute qualification diversity. The authors use three-stage least square (3SLS) model to deal with the potential endogeneity issue in the association of human capital diversity variables and other CG variables with firm performance. Further, the authors adopt generalized estimating equation (GEE) model for robustness check. Findings The authors find a significant positive impact of board’s educational diversity as well as gender diversity on the financial performance of firms. Additionally, they extricate highly significant positive interaction impact of board’s educational diversity and gender diversity on the financial performance of firms. Further, the results indicate a significant positive impact of board size, board independence, ownership concentration, family ownership and audit committee independence on firm performance, while CEO duality exhibits a significant negative impact on firm performance. Originality/value This study fills the existing gap in literature by extending the performance implications of board’s human capital diversity for top listed Indian firms.

The impact of board-level female directors on firm performance: evidence from India

“…This finding ratifies the diverse theoretical benefits of female directors as accentuated under resource dependency, agency and human capital theories and also supports the empirical findings of Liu et al. (2014), Maji and Saha (2021) and Saha and Maji (2022). Apart from justifying the extant literature, this finding also extends support to the imposition of gender quota on corporate boards under the Companies Act, 2013.…”

“…The results of this study align with the hypothesis that women in monitoring positions can impose more robust control, thereby lowering agency costs, informational asymmetry, managerial opportunism (Saha and Maji, 2022) and improving firms' financial performance. In contrast, the analysis supports the assertion that female executives avoid risk-taking, thereby possibly forgoing profitable business opportunities (Adhikari, 2018).…”

“…, 2016; Cambrea et al. , 2019; Saha and Maji, 2022). Moreover, the correlation statistics amongst the explanatory variables under consideration are not high thus ensuring that multicollinearity is not a cause of concern in the present study.…”

“…Moreover, human capital literature also asserts that female directors possess relatively higher educational qualifications than men (Hillman et al. , 2007; Saha and Maji, 2022). This is a key directorial requirement for women as a minority group on boards, in their attempt to break the “glass ceiling” through investment in education.…”

“…, 2003; Campbell and Minguez-Vera, 2008; Adams and Ferreira, 2009; Ahern and Dittmar, 2012; Liu et al. , 2014; Saha and Maji, 2022). The lack of unequivocal evidence on the positive performance impact of female directors challenges the rationale for quota-based regulations aimed at promoting board gender diversity.…”