THE IMPACT OF FEMALE DIRECTORS ON FIRM EARNING WITH THE MODERATING ROLE OF BOARD EXPERIENCE: EMPIRICAL INSIGHT FROM PAKISTAN

Abstract

This study investigates the impact of female director representation on firm earnings in the context of an emerging market, with a specific focus on the moderating role of board experience. Using a panel dataset of 250 non-financial firms listed on the Pakistan Stock Exchange (PSX) from 2015 to 2024, the research employs fixed-effects regression models to analyze the relationships. The findings robustly confirm a positive and significant direct relationship between the percentage of female directors and firm performance, measured by both Return on Equity (ROE) and Tobin's Q, thereby supporting the theoretical propositions of resource dependence and agency theories. However, the analysis reveals a significant and counterintuitive moderating effect: board experience negatively moderates this relationship. The positive impact of female directors is strongest on boards with lower collective experience and diminishes even turning negative on boards with higher levels of experience. This substitution effect suggests that the value of demographic diversity is contingent upon the existing human capital of the board. The study concludes that while gender diversity enhances firm value in Pakistan, its efficacy is not uniform and is critically shaped by the board's experiential composition. These insights offer refined guidance for corporate governance practices and regulatory policies aimed at optimizing board effectiveness.