Boardroom diversity and firm performance: exploring the moderating role of strategic change in NIFTY 500 index companies

Purpose This paper aims to investigate the impact of boardroom diversity on firm performance and examine the moderating role of strategic change for Indian Listed Companies. Design/methodology/approach A subset of NIFTY 500 Index companies was analyzed over the period 2014–2023 using panel (fixed effects) regression and the system Generalized Methods of Moments technique to address endogeneity concerns. Findings This study finds that board demographic diversity (BOD_DEM) has no significant impact on ROA but negatively influences Tobin’s Q (TQ), suggesting investor skepticism toward diverse boards. Similarly, board structural diversity (BOD_STL) shows an insignificant relationship with both ROA and TQ, indicating that mere structural diversity without effective inclusion may not enhance firm performance. The board diversity index (BOD_INDEX) also exhibits no significant impact on ROA but negatively affects TQ, reinforcing concerns about diversity mandates lacking substantive engagement. These findings support the social identity theory highlighting the need for meaningful governance mechanisms to leverage board diversity effectively for improved corporate outcomes. However, strategic change played no role in moderating the relationship between boardroom diversity and firm performance. Research limitations/implications This study does not account for qualitative board attributes such as mandatory board committees, industry dynamism and director compensation, which could influence firm performance. Practical implications The findings of this study challenge the assumption that diversity inherently enhances performance, emphasizing the need for context-specific governance mechanisms rather than a uniform regulatory approach, underscoring the inadequacy of a “one-size-fits-all” approach to regulatory reform. Originality/value This study uniquely examines board diversity’s impact after the Companies Act 2013, within India’s weaker governance enforcement framework, offering valuable insights for academics, regulators and practitioners.