This paper examines whether gender diversity (GD) on corporate boards influences financial performance (FP) of Indian firms using System Generalized Methods of Moments (GMM) methods by considering panel data of 364 firms during 2017 to 2021, comprising of 1820 firm-year observations. The study reveals that the mere presence of a woman director (WD) on boards makes no difference in financial performance. Presence of WDs as a significant portion of the boards and their active roles in the functioning and governance of companies positively contribute to firms’ financial performances and economic value creation. Regarding other governance parameters, the study shows that larger boards do not necessarily improve firm performance. Also, independent directors do not necessarily add value to corporate performance and value creation. While a higher promoter's stake is an important factor for Indian companies to drive corporate performance, firms with separate CEO and chairperson outperform firms with CEO duality. The study also reveals that the covid 19 pandemic has negatively influenced the financial performance and economic profit generation of the Indian firms. This study is important for several reasons. First, this study considers the period (2017–2021) when Indian companies adopted new financial reporting practices (IND-AS) in line with International Financial Reporting System (IFRS), the mandatory quota system of women directors’ appointment is implemented and new corporate governance norms are implemented. Hence, our study contributes to the literature by proving meaningful insights on the role of gender diversity and other corporate governance parameters on financial performance of Indian firms in the light of newly adopted accounting and financial reporting practices. Second, few previous India based studies have mostly used pooled OLS or fixed effect models, and did not address the endogeneity problem in different forms like
Dynamic Endogeneity, Simultaneity,
and
Unobserved Heterogeneity.
This paper addresses the endogeneity problem appropriately by using the system generalized method of moments (GMM) while modelling the relation between WDs and firms’ FP. Therefore, the findings of this study are more reliable and unbiased and can be useful for effective policy making on gender diversity and corporate governance issues. Third, few prior studies which have looked into the role of WDs on FP of Indian firms, have mostly used return on assets (ROA), return on equity (ROE) and Tobin’s Q as performance parameters. Here, in addition to ROA, ROE and Tobin’s Q, we also use economic value added (EVA) as indicators of corporate performance to understand the role of WDs on economic value creation for companies. The EVA is considered as modern technique to measure the economic profit earned by a firm, and it has gained huge popularity among companies as an improved technique for measuring financial performance for companies. To the best of our knowledge, the role of WDs o...