Do Female Board Directors Contribute to Better Firm Performance? Exploring the Moderating Role of Firm Size

Abstract

The study investigates the moderating role of a firm’s size while assessing the level and direction of the association between female board directors and the firm’s performance in the pharmaceutical sector. The study applies a fixed effects model, suggested by the Hausman test, to control for unobserved firm heterogeneity. Robustness check of the model is ensured with the panel unit root test, followed by the generalized least squares model, which handles panel-specific heteroskedasticity and autocorrelation. The endogeneity concern is addressed using a two-step system generalized method of moments model. The quantile regression is also applied at different distribution levels to capture the relationship on different scales. The findings disclose that female board directors positively enhance the firm’s performance when the firm’s size plays a moderating role, and the relationship significantly reverses the direction of the relationship. The study offers a foundational strategy to regulators and investors to boost board composition and the inclusion of more females on the boards. This study employs a unique empirical approach to examine the relationship between female board directors and the firm’s performance, with a particular focus on the firm’s size as a moderator to achieve the mandated goals of governance bodies.