Beyond the boardroom: impact of diversity, inclusion and people development on firm performance-empirical evidence from India

Purpose The study aims to go beyond the widely studied board-level diversity and examine the relationship between a firm’s holistic diversity and inclusion (D&I) practices and their impact on firm performance (FP) in the Indian context. Design/methodology/approach This study uses panel multivariate regression models, such as two-stage least squares and panel generalized methods of moments, with an instrumental variable approach to estimate the impact of D&I on market and accounting-based FP. To avoid the greenwashing effect, the study is based on a meticulously selected data sample of 52 Indian-listed companies consistently rated on D&I by Refinitiv for a five-year period from 2018 to 2022. Findings The study finds compelling evidence that D&I has a significant positive relationship with market-based FP measures. However, the relationship with accounting-based FP is mixed. The findings are consistent across different methods of estimation. Practical implications The study’s findings have significant implications for investors and management, emphasizing that D&I initiatives should extend beyond board-level diversity to encompass firm-wide policies. Investors can leverage these insights to make informed decisions, while managers are encouraged to prioritize D&I as a strategic asset. Drawing on resource-based and stakeholder theories, we find that inclusive practices and investment in employee development are significantly associated with improved financial outcomes. By empirically establishing these links in the Indian context, the study contributes to the literature on strategic performance management, offering evidence that human capital-oriented dimensions are critical drivers of FP. Our findings highlight the need for organizations to integrate people-centric inclusive strategies as a core component of performance management systems. Originality/value The study makes a significant contribution to the sparse literature in the Indian context, which has primarily focused on firms’ board-level D&I practices. The authors introduce a unique perspective by using a broader-level novel construct designed by the Refinitiv D&I rating. They argue that it is essential for firms in developing economies like India to appreciate and imbibe diversity, inclusion and people development measures for better performance.