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Impact of Diversity and Inclusion on Firm Performance: Moderating Role of Institutional Ownership

Author

Listed:
  • Rubel Saha

    (School of Business and Economics, North South University, Dhaka 1229, Bangladesh)

  • Md Nurul Kabir

    (School of Business and Economics, North South University, Dhaka 1229, Bangladesh)

  • Syed Asif Hossain

    (School of Business and Economics, North South University, Dhaka 1229, Bangladesh)

  • Sheikh Mohammad Rabby

    (School of Business and Economics, North South University, Dhaka 1229, Bangladesh)

Abstract

We investigate the impact of diversity and inclusion (D&I) on firm performance for the period 2017–2021. While the existing literature examines the relationship between diversity and firm performance, little is known about the combined effects of D&I on firm performance. This study aims to utilize the most widely used data source, the Global Diversity and Inclusion (D&I) Index, provided by the LSEG workspace. Using 8089 firm-year observations from a sample of globally listed firms and an OLS regression model, we find that firms with a higher D&I score have better firm performance, as measured by Tobin’s Q. Our moderating analysis shows that the impact of D&I on firm performance is more pronounced for firms with higher institutional ownership. We also split institutional ownership into domestic and foreign institutional ownership and show that the influence of D&I on firm performance differs between domestic and foreign institutional ownership. Our result is robust when we use an alternative proxy for firm performance and consider the findings without US firms in the sample. The overall findings indicate that considering a diverse and inclusive workforce is worthwhile for key stakeholders when making policy decisions.

Suggested Citation

  • Rubel Saha & Md Nurul Kabir & Syed Asif Hossain & Sheikh Mohammad Rabby, 2024. "Impact of Diversity and Inclusion on Firm Performance: Moderating Role of Institutional Ownership," JRFM, MDPI, vol. 17(8), pages 1-19, August.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:8:p:344-:d:1452308
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    References listed on IDEAS

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    2. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 461-488, June.
    3. Sila, Vathunyoo & Gonzalez, Angelica & Hagendorff, Jens, 2016. "Women on board: Does boardroom gender diversity affect firm risk?," Journal of Corporate Finance, Elsevier, vol. 36(C), pages 26-53.
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