Board Gender Diversity and the Performance of Family‐Owned Businesses: Panel Data Evidence From Saudi Arabia

ABSTRACT The role of women in family businesses and entrepreneurship is significant; however, the impact of female board members on the performance of family‐owned companies in Saudi Arabia remains underexplored. Moreover, Saudi family firms are primarily male‐dominated, and women face challenges such as limited access to leadership roles. This study presents a decision‐making framework explicitly designed for family‐owned businesses. It sets out to define grey female directors as non‐executive female directors who are not completely independent due to familial, ownership, business or social relationships with controlling family shareholders. We utilise an unbalanced panel data set comprising 481 firm‐year observations in Saudi Arabia as of 31 December 2022. The data for this research were collected from three distinct sources: corporate governance information was obtained from the firms' end‐of‐year reports, while firm‐level data were gathered from DataStream and the Saudi stock exchange website (Tadawul). We analysed the data using panel techniques to examine the effects. The empirical results suggest that a Saudi woman on the board positively impacts financial performance. Importantly, the involvement of independent female directors—rather than those who are less active—plays a crucial role in the success of family‐owned businesses. However, this positive effect diminishes when family members, such as the CEO or board chairperson, occupy key positions. On this basis, we urge family businesses, often characterised by concentrated ownership and male leadership, to embrace board diversity and improve women's professional qualifications.