Board diversity and firm performance: An empirical analysis of Italian small-medium enterprises

Abstract

This paper aims to empirically verify if the board of directors’ (BoD) diversity (i.e., gender, age, and nationality) affects firm performance, which we calculate referring to ROE, ROA, and EBITDA margin. So far, scholars do not converge on a single answer about the effects of observable diversity in the boardrooms on corporate performance. Therefore, this study — referring to a significantly bigger sample — applies machine learning models following a data-driven approach based on a three-year (2017–2019) dataset composed of 59,229 Italian small-medium enterprises (SMEs). The analysis conducted shows that board diversity does not impact firm results, either positively or negatively. The lack of a correlation suggests that there is no reason to not appoint females, young people, and foreigners as directors. The involvement of these “minorities”, which, as shown, does not negatively impact economic-financial results, could on the opposite improve firm reputation as well as enhance the intellectual capital, solving in the meantime a social matter