Board Diversity as a Channel for Firm Resilience and Performance During Crises: Evidence from India

Abstract

This paper examines how the demographic diversity of directors, their educational background, nationality, and women representation above the mandated threshold improve firm resilience during economic crises.  Using a set of listed firms from 2010 to 2021 on the National Stock Exchange (NSE) NIFTY 500 index, we analyze the influence of these diversity attributes on firm outcomes, measured by Return on Assets (ROA) and Tobin’s Q during both stable and crisis periods with the COVID-19 pandemic as an illustrative crisis context.  We find a positive and statistically significant relationship between board diversity and firm outcomes during normal times; however, during crisis periods, the relationship is insignificant, suggesting that diversity alone may not enhance firm resilience under high-pressure scenarios.  The composite diversity index supports the results that show that board diversity influence diminishes during economic shocks.  The study contributes to the corporate governance literature by highlighting the contextual limitations of board diversity during crises and calls for policymakers to integrate board diversity into broader risk management frameworks