Boardroom dynamics in Indian private banks: how nonexecutive and women directors affect financial performance

Purpose This study aims to investigate the influence of boardroom dynamics, particularly the presence of nonexecutive and women directors, on the financial performance of private banks in India. Design/methodology/approach Through a mixed-method approach encompassing descriptive analysis, correlation analysis and generalized method of moments regression, data from 21 banks for 10 years, from 2013 to 2023, are meticulously scrutinized for patterns and trends. Findings This study reveals that board size, gender diversity and nonexecutive directors affect the financial performance of private-sector banks in India. Larger boards and nonexecutive directors improve return on assets and Tobin’s Q, enhancing profitability and market valuation. In addition, the presence of women directors fosters better decision-making, highlighting the importance of governance structures in driving sustainable financial success. Research limitations/implications Theoretical implications of this research center on expanding the understanding of how specific corporate governance elements, such as board composition and independence, relate to financial performance, especially within the context of emerging economies like India. This study contributes to the development of corporate governance theory by emphasizing the significance of nonexecutive and women directors in enhancing firm value. Practical implications This study underscores the significance of improved governance practices in private banks, benefiting a substantial portion of the population and stimulating overall economic growth. It supports regulatory initiatives aimed at enhancing board diversity and transparency to fortify market stability. Theoretical contributions validate agency theory and critical mass theory, providing deeper insights into governance’s impact on financial performance. Practitioners can leverage these findings to refine decision-making and risk management strategies, ensuring long-term sustainability in the banking sector. Social implications Society stands to benefit from improved governance practices, as transparent and accountable banks are better positioned to serve the needs of their stakeholders and contribute to economic growth and stability. Originality/value This study validates agency and critical mass theories, demonstrating that diverse board compositions enhance financial outcomes. Its originality lies in empirically validating these concepts within the Indian banking sector. It emphasizes the importance of both return on assets and Tobin’s Q, offering valuable insights for effective governance and sustainable financial performance.