Board of directors diversity and financial performance of listed companies in Pakistan : Moderating role of institutional ownership

Corporate governance research has increasingly emphasized the importance of board diversity in improving firm outcomes. However, in Pakistan, the relationship between board diversity and financial performance remains underexplored, particularly with respect to demographic, cognitive, and structural diversity, and prior studies have reported inconsistent findings. This lack of clarity creates uncertainty for investors, policymakers, and regulatory authorities regarding the actual impact of board diversity strategies. The present study aims to examine the influence of board diversity on non-financial listed firms in Pakistan, focusing on demographic, cognitive, and structural dimensions, while also considering the moderating role of institutional ownership. The study utilizes a sample of 270 non-financial firms listed on the Pakistan Stock Exchange (PSX) for the period 2016–2021. A non-probability judgmental sampling technique was employed to finalize the sample. Firm performance was assessed using Tobin’s Q as a market-based measure and the DuPont model as an accounting based measure. Multiple regression analysis was applied to test the study’s hypotheses and draw inferences. The findings indicate that gender, ethnicity, age, and educational diversity have significant and positive effects on both Tobin’s Q and DuPont performance measures. In contrast, diversity in foreign nationality, doctoral qualifications, technical knowledge, experience, tenure, and board independence produced inconsistent results across the two performance measures, with limited theoretical support. Moreover, institutional ownership demonstrated a conditional moderating effect on certain diversity–performance relationships, highlighting the importance of contextual governance frameworks in shaping board effectiveness. This study highlights the critical role of diverse board characteristics in improving corporate governance and firm performance in Pakistan. The findings provide actionable insights for the Securities and Exchange Commission of Pakistan (SECP), the Companies Act (2017, updated), and other stakeholders, while contributing to theory and practice by clarifying the conditional efficacy of institutional ownership in emerging markets.