Board diversity and firm performance: An empirical investigation of the mediating effects of board processes and task performance

Empirical works on board diversity are still limited and the few existing studies provide mixed results as to whether board diversity has a positive or negative impact on firm level outcomes. This inconsistency of findings on the relationship between board diversity and organizational performance is due to the ambivalent nature of the concept and to the lack of studies investigating the intervening effects of board process and board effectiveness. Following calls for understanding the effects of intermediate variables, this article empirically investigates the mediating roles of board processes and board effectiveness in the relationship between board diversity and firm performance. We have collected primary survey data from corporate boards of large companies and tested our hypotheses applying structural equation modeling. Our findings show that (i) board diversity can be a valuable resource in enhancing board effectiveness; (ii) board open debate mediates the relationship between board diversity and task performance; (iii) board service performance has a positive effect on firm level performance. The paper contributes to the theoretical understanding of the effects of board characteristics on firm performance. It provides a partial explanation for mixed findings of previous research on the board composition - firm performance relationship by revealing the mediating effects of board processes and board effectiveness.