The paper examines whether board diversity improves corporate performance by considering different parameters of diversity such as gender, age, tenure, nationality, educational background and experience of the directors. No significant link between board heterogeneity and financial performance in Indian firms is found. The possible explanation for this may be that diversity in teams often leads to conflicts, adversely affecting performance unless properly managed.

Board diversity refers to the heterogeneous composition of the board in terms of gender, age, race, education, experience, nationality, lifestyle, culture, religion and many other facets that make each of us unique as individuals. The parameters that have been considered to measure diversity are:

Gender Diversity: It refers to the proportion of females to males. Women are believed to be more intuitive in decision making, have the ability to multitask and are better at relation building. Men tend to be more task-focused and their decisions are based on information and procedures.

Age Diversity: Younger people are perceived to be more flexible, have a better understanding of new concepts and technologies and are higher risk takers. The board may on the other hand benefit with the wide experience of senior members. Senior members often have strong networks and clout that companies can leverage.

Regional Diversity: Companies are now a part of the global economy having business activities in different parts of the world. Having a board that understands how different countries operate, their business environment and people is a necessity. Further people from different countries have different lifestyles, culture and upbringing backgrounds that will bring new perspectives and solutions to the table.

Multidisciplinary: Multidisciplinary boards are expected to be useful in decisions that are high in complexity and have many interdependent subtasks. Members with complementary education, knowledge and skills can take a more comprehensive approach towards problem solving. Research indicates that teams that are multidisciplinary tend to be more innovative.

Cross-Functional: Members with varied experience look at problems differently and focus on different aspects of issues under consideration. This leads to creative problem solving and innovative decision making.

Tenure: Having reputed directors on boards for a long length of time improves corporate reputation. Directors who have been on the board for long have a good understanding of the company. This also puts the directors under pressure to keep up with changes needed in business and defend decisions that may not be applicable in the present situation. It can also affect the independence of directors.

Corporate Governance Journal, Board Diversity, Corporate Performance, The Indian Evidence, Gender, Age, Regional, Diversity, Multidisciplinary, Cross-Functional, Independent Gender Variables.