Impact of board diversity on firm risk: an Indian perspective

Purpose The purpose of this study is to examine the effect of board demographic diversity – specifically diversity in terms of gender, tenure, age, financial education and composite board diversity – on firm risk-taking. Design/methodology/approach The study utilises a sample of 261 non-financial firms listed on the Bombay Stock Exchange (BSE) for the period 2014–2023. The study employs the System Generalised Method of Moments model to tackle potential endogeneity concerns and ensure the reliability of the results. Findings The results reveal a significant positive impact of board gender diversity on firm risk-taking. On the other hand, financial education diversity shows a significant negative impact. However, board tenure, age and composite board diversity fail to exhibit any statistically significant influence on firm risk-taking. To ensure the robustness of these findings, alternative measures of diversity, specifically the Blau and Shannon indices, are employed. The results remain consistent across these alternative measures, confirming the robustness of the findings. Originality/value Within the ambit of the knowledge, this study is a maiden attempt to investigate the link between board diversity and firm risk-taking within the Indian context, contributing valuable insights to the literature on corporate governance and firm risk-taking.