Board Gender Diversity and Firm Performance - The Moderating Role of Culture and Institutions

Abstract

Firms around the world are facing increasing pressure to address diversity issues. While the EU has adopted a directive to achieve greater gender balance on corporate boards by 2026, the newly elected Trump administration is demanding both local and foreign firms abandon all forms of Diversity, Equity and Inclusion (DEI) policies. Yet, the literature has offered very little guidance to firms on how to approach gender diversity on boards, as findings on its performance implications have been inconclusive. This study aims to shed light on the relationship by examining the moderating role of culture and diversity regulations, thereby addressing a significant gap in the literature. Based on a sample of publicly listed companies from 36 countries, we demonstrate that board gender diversity significantly improves firm performance, and that the effect is strongly influenced by cultural and institutional factors. Accordingly, our findings offer an explanation to the inconclusive results of previous studies, while providing guidance and evidence about appropriate board diversity policies to firms and regulators alike. Future studies are encouraged to examine the interrelation between cultural factors and board gender diversity regulations.