Does board diversity affect firm performance? Evidence from the Italian Financial Sector

The aim of the study is to examine the effect of diversity in the board of directors on the performance of the listed Italian financial institutions. The sample is a data set of 177 firm-year observations covering 2011 to 2014. The performance of the firm is measured by Tobin’s Q while board diversity is analysed considering the percentage of female and foreign directors on the board (or their conjoint presence as a proxy of overall demographic diversity) and task-diversity is measured by board interlocking directorship and busy directors. Findings suggest that female directors have no effect on firm performance. Foreign directors and interlocking directorship have, instead, a positive statistically significant relationship with performance while we find a negative statistically significant relationship between busy directors and performance. When we consider the overall demographic diversity on the board we observe that it is positively and significantly related to the performance of the financial firm.