The Impact of Board Diversity on Firm’s Financial Performance: Evidence from Pakistan Stock Exchange 100 Index

Abstract

The research paper examines the effects of board diversity (BD) on firm FP in Pakistan. It investigates the empirical relationship between gender and nationality diversity, and firm performance (FP). The study population was PSX-100 index firms. However, the final sample for this research paper was 41 companies of the 100 index firms of the PSX, this sample was selected by implementing different inclusion and exclusion criteria. The data collection period was from 2012 to 2022. In order to test the study’s hypotheses Panel data regression analysis (models) was employed to investigate the relationships between the study’s variables. Firm performance was estimated using both a market measure (Tobin's Q) and an accounting measure (ROA). The study findings show that gender and nationality diversity on boards do not significantly influence FP. The results show that BD has no influence on the firm FP of the PSX-listed non-financial 100 Index firms. This is likely due to Pakistan's unique cultural and institutional context. In addition to this, the study reveals no significant relationship between BD and FP. This could be attributed to weak enforcement mechanisms and the influence of personal connections in Pakistan.

Keywords: Board Diversity, Firm Performance, Pakistan Stock Exchange, ROA, National Diversity and Panel Data