Board Diversity, Independence and Firm Performance: A Review of Recent Literature and Future Research Perspectives

Description

Page: 512-520

Reetu Duhan and Mohammed Nizamuddin (School of Management and Commerce, K. R. Mangalam University, Sohna Road Gurugram)

This comprehensive literature review explores the relationship between board diversity and independence and their impact on firm performance, drawing from a range of theoretical and empirical studies. Board diversity including gender, ethnicity, age, and professional backgrounds has been found to enhance organizational outcomes by introducing a broader range of perspectives into decision-making processes. This diversity improves innovation and creativity, strengthens problem-solving, and improves stakeholder relations. Simultaneously, board independence is critical in strengthening corporate governance by offering impartial oversight, reducing conflicts of interest, and holding management accountable, thus leading to more transparent decision-making. The review highlights the potential for diversity and independence to work in synergy, creating a good governance framework. A well-balanced board composition, with the right mix of diversity and independence, is essential for fostering sound governance and achieving long-term business success. In conclusion, this review underscores the importance of board diversity and independence as fundamental elements of corporate governance. It calls for future research to focus on understanding the role of external events, and developing more precise measurement tools to fully capture the long-term effects of diversity and independence on firm performance. These insights provide practical guidance for improving corporate governance and driving sustainable business success.