The Impact of Board Diversity on Corporate Profitability and Performance. A Comparison between Greek and German Companies

Abstract

As boards become more diverse, the discussion about how to leverage the benefits of this diversity is becoming increasingly important. Board diversity, particularly gender diversity, generally contributes to improved financial performance through improved decision-making, better governance, increased innovation, and improved access to capital. While the extent of this effect may vary depending on the specific company and industry context, the evidence supports the view that board diversity leads to stronger, more sustainable financial results. As diversity continues to be a strategic priority for both investors and businesses, the financial benefits of diverse boards are likely to become even more pronounced. In order to investigate the effect of BoD diversity on form profitability and performance, a dataset of 143 Greek and 1040 German enterprises was used. Correlation and panel analysis results showed that Greek companies have a higher percentage of women on their Boards of Directors (BoD), nearly three times more than their German counterparts, despite being smaller in size. Greek Board members are generally older and hold more master’s degrees, indicating a preference for formal qualifications. A positive and significant relationship between women’s presence on the BoD and profitability exists in German firms but not in Greek ones. Age differences among board members do not significantly relate to profitability or performance. Cultural diversity appears to enhance profitability in both regions, albeit with varied effects on performance. Overall, the findings highlight the contrasting dynamics of BoD effectiveness in Greek and German companies, particularly concerning gender representation and educational qualifications.