International Journal of Management, Economics and Social Sciences
2026, Vol. 15(3), pp. 74 – 98.
e-ISSN 2304 – 1366
https://www.ijmess.com
DOI: 10.32327/IJMESS/15.3.2026.4
2026, Vol. 15(3), pp. 74 – 98.
e-ISSN 2304 – 1366
https://www.ijmess.com
DOI: 10.32327/IJMESS/15.3.2026.4
The Diversity-Performance Paradox: Evidence from S&P 500 Firms Before the COVID-19 Pandemic
Yunhan Li1
Linghan Huang2
1Edinburgh Business School, University of Edinburgh, Scotland, United Kingdom
2Linghan Huang, ISCTE Business School, Lisbon, Portugal
Linghan Huang2
1Edinburgh Business School, University of Edinburgh, Scotland, United Kingdom
2Linghan Huang, ISCTE Business School, Lisbon, Portugal
ABSTRACT
This study examines the relationship between board diversity and firm performance while evaluating the moderating role of innovation strategy. Using panel data from 487 S&P 500 firms spanning 2015–2019, the study reassessed the diversity–performance relationship by addressing endogeneity concerns that may bias prior findings in corporate governance research. Firm performance was measured using Tobin's q and return on assets, while board diversity was captured through gender and ethnic representation. Innovation strategy was measured using research and development intensity. The empirical analysis employed ordinary least squares, firm fixed-effects models, and dynamic panel estimations to distinguish cross-sectional associations from within-firm effects. The results indicated that board diversity is positively associated with firm performance under pooled regressions. However, these relationships disappeared after controlling for firm fixed-effects and dynamic endogeneity. The findings suggest that the apparent benefits of board diversity are largely driven by persistent firm characteristics rather than changes in board composition itself. Overall, the study contributes to the corporate governance literature by demonstrating the importance of addressing endogeneity when evaluating board diversity outcomes and by providing a pre-pandemic benchmark for future governance research.
Keywords: Board diversity, firm performance, innovation strategy, corporate governance, endogeneity
JEL: G34, M14, O31
Keywords: Board diversity, firm performance, innovation strategy, corporate governance, endogeneity
JEL: G34, M14, O31
