Task‐Oriented Board Diversity and Managerial Ability: A Pathway to Firm Performance

ABSTRACT While board diversity has been extensively studied, the role of task‐oriented board diversity (TOBD), defined as diversity in expertise, education, and functional backgrounds, remains underexplored. Using data from Chinese‐listed firms between 2012 and 2019, we demonstrate that TOBD enhances firm performance by strengthening managerial ability. This positive relationship is, particularly, pronounced when firms exhibit high absorptive capacity or are subject to strong external governance mechanisms, such as media scrutiny and audit quality. Mediation analysis confirms that managerial ability is a key mechanism through which TOBD improves both financial and environmental performance. These findings shift the focus from traditional demographic diversity to TOBD as a strategic governance tool, while identifying important boundary conditions and practical pathways for enhancing firm outcomes.