The Impact of Board Gender Diversity on European Firms’ Performance: The Moderating Role of Liquidity

Abstract

This study examines how board gender diversity affects listed non-financial European companies’ financial performance. Data from the Refinitiv Eikon Platform—LSEG and World Bank databases was used to complete the analysis. The total sample included 4257 companies for the period 2011–2023. This study examined board gender diversity and its interaction with liquidity while controlling for board characteristics such as board size, independence, and board meetings. Controlling for firm characteristics (firm size and leverage) and macroeconomic variables like inflation and GDP. This study estimated the connection using panel regression. Due to Hausman test significance, fixed effect estimation was used. The findings demonstrated a notable and favorable influence of board features, such as gender diversity, board independence, and board size, on European nonfinancial companies. Additionally, liquidity positively affects firm performance. Furthermore, the findings indicated that leverage had a significant negative impact on profitability. Finally, both the size and GDP have a significant beneficial impact on profitability. Our findings indicate that an increased representation of women on the board of directors is associated with greater independence among board members and a higher number of board members being hired. This, in turn, has a positive impact on profitability due to the extensive experience shared among board members. Additionally, this leads to improved governance, enabling better control over decisions and a greater focus on the long-term investment strategy of the company. Our results are robust, as are similar results reported by the GMM regression.