Does board demographic diversity influence firm performance? Evidence from Indian-knowledge intensive firms

Abstract

PurposeIn the wake of inconsistent findings between board diversity and firm performance, the purpose of this paper is to advance the research by examining the linear and non-linear nature of the relationship between board demographic diversity (gender, age, tenure, and education) and firm performance in Indian knowledge-intensive firms (KIFs).Design/methodology/approachThis study uses a panel data set of top KIFs in India that is listed in National Stock Exchange’s Top-200 list for the period 2010-2014.FindingsResults indicate that there exists a positive linear relationship between the overall board demographic diversity index (board gender, age, tenure, and education) and firm performance. Among the effects of individual board diversity variables, the authors have found that board age diversity positively whereas education diversity negatively influences firm performance. Furthermore, gender diversity and tenure diversity do not significantly influence the firm performance.Research limitations/implicationsThis study is based on the following demographic factors: gender, age, tenure, and level of education. The authors did not include other demographic variables such as nationality and language.Practical implicationsThis research would help knowledge-intensive companies in designing their corporate boards. The results indicate that companies should have more diverse boards to enhance firm performance.Originality/valueTo the best of the authors’ knowledge, this is the first research to examine the effect of the overall board diversity index and individual board demographic diversity indices (gender, age, education, and tenure) on firm performance in the context of KIFs in India.