Female presence in corporate governance, firm performance, and the moderating role of family ownership

Abstract

Assessing the role of diversity in corporate governance has attracted growing interest. In addition, significant relationships are expected between diversity dimensions and firm performance. This research aims to analyze the relationships between female presence in corporate board-firm financial performance and the extent to which such influence is moderated by family ownership. The study’s sample, based on the listed firms on the Pakistan Stock Exchange (PSX), represents the nonfinancial sector from 2008 to 2019 with 2087 firm-year observations. Fixed-effect regression analysis was applied to examine the proposed hypothesis. The study’s findings indicate that the presence of women in corporate governance is positively associated with firm financial performance. Simultaneously, the mentioned relationship is less pronounced when family ownership is a moderator. The empirical findings of the study support the argument that the presence of women in corporate boards is positively associated with financial performance and supports the reforms made by codes of corporate governance (CCG) that make the presence of female directors’ mandatory on the corporate boards. Additionally, the study findings partially confirm that a higher proportion of women on the board increases firm performance. This study offers insights for policymakers to implement legislation for a diverse gender placement in the board of directors and exploit the potential benefits of the gender-balanced board, which generally improves firm performance.