Board Gender Diversity and Investment Efficiency: The Mediating Role of Corporate Financialization in Pakistan

Abstract

This research explores whether board gender diversity has an effect on investment efficiency and through which mediation channel of seamless financial models, besides contemporary production avenue, is used for profitability and survival in non-financial firms by using data from the Pakistani market from 2014 to 2023. Existing studies provide limited evidence on the direct effect of board gender diversity on investment inefficiency and indirectly through the mechanism of corporate financialization. The study employed panel regression analysis. The study findings reveal that board gender diversity significantly improves investment efficiency, as it fosters better strategic decision-making, ultimately enhancing firm value by curtailing inefficient investments. Further, our mechanism analysis reveals that corporate financialization partially mediates the relationship by transcending traditional investment strategies and promoting corporate financialization. The findings remain robust after mitigating endogeneity concerns by deploying multiple robustness checks, analyses, and by utilizing the female quota as an instrumental variable. The stimulatory effect of corporate financialization, i.e., short-termism, is more evident in non-SOEs in heterogeneity analysis. Our findings have implications for policymakers, stakeholders, and practitioners, as this study provides insights into the role of board gender diversity in making investment choices and the need to align corporate financialization activities with production investment.