Unveiling Governance Mechanisms: How Board Characteristics Disclosure Moderates the Gender Diversity and Corporate Performance Nexus in Romania

Abstract

This study aims to explore the moderating role of corporate governance disclosures on the link between executive board gender diversity and financial performance. Governance disclosures were assessed based on executive managers’ information presented in the companies’ annual reports. The analysis was conducted on Romanian-listed companies from eight industries, covering a time range of ten years. Various robustness tests were used and examined the Blau index apart of the proportion of women managers, as well as different measures for financial performance. The endogeneity issue was solved by the Two-Stage Least Square method and the Generalized Method of Moments. The results revealed that a higher governance disclosure level on executive managers’ characteristics is reflected in increased financial performance. A positive influence was found for the composite financial performance indicator, return on assets, return on equity, and global solvency. Our findings led to the conclusion that the governance disclosure index moderates the relationship between board gender diversity and corporate business performance, and the effect of gender diversity on financial performance will be less positive with a higher level of disclosures on board characteristics. Therefore, managers can filter the quantity and quality of governance disclosure and can monitor the influence of the board’s composition on performance.