The impact of board gender diversity on firm performance: does critical mass matter?

Purpose - The study aims to investigate the impact of board gender diversity (BGD) on firm performance (FP) by testing two hypotheses – the existence of a positive relationship between BGD and FP, and the moderating role of a critical mass of female directors on FP. The study also explores whether the association varies across different industries. Design/methodology/approach - The authors collect data using Bloomberg and CMIE Prowess, from the Bombay Stock Exchange (BSE) 500 index for the period 2008–2018 and employ a robust statistical methodology (Dynamic Panel Data Model). Findings - A critical mass of female directors positively moderates and strengthens the relationship between BGD and FP. The study fails to find evidence of a direct association between BGD and FP. The study also finds evidence of industry effects. Research limitations/implications - Though we use a very robust statistical methodology, any modifications in the methodology or choice of a different methodology are likely to change the results. Moreover, some of the findings are statistically significant at the 10% level. Practical implications - The findings of our study hold particular significance for emerging economies like India where regulatory initiatives aim to enhance gender diversity within boardrooms. Originality/value - The study contributes to the critical mass literature by examining the association between a critical mass of female directors as a moderating variable of BGD and FP. Further, the study also identifies those industries which show a positive association between FP and BGD.