The Impact of Board Diversity on Financial Performance and Risk-Taking

Abstract

This thesis investigates the impact of board diversity on financial performance and risk-taking in Nordic publicly listed companies during the period 2019-2023. The study is grounded in a theoretical corporate governance framework that emphasizes board responsibilities and the role of diversity. A quantitative approach is applied to test eight hypotheses using linear regression models, firm fixed effects, and tests for non-linear relationships. Four dimensions of board diversity are examined: gender, financial and industry-specific skills, age, and tenure, in relations to financial performance, measured by annual stock returns, Tobin’s Q, and risk-taking measured by Z-Score and annual asset growth. The findings point to four main results. First, gender diversity shows a significant negative effect on financial performance, while no effect is observed in relation to risk-taking. Second, financial and industry-specific skills, as well as age diversity, do not appear to be significantly linked to either performance or risk-taking. Third, longer board tenure is associated with lower levels of risk-taking but shows no significant connection to financial performance. Fourth, weak U-shaped patterns emerge for both financial and industry-specific skills and age diversity, suggesting the existence of potential threshold effects. These findings carry two broader implications. First, in light of expanding regulatory frameworks and a growing ESG agenda, board diversity should be evaluated not solely on the basis of representation, but in terms of its actual influence and professional contribution. Second, the limited evidence of consistent effects across diversity dimensions suggests that board diversity does not automatically enhance performance or risk governance. This underscores the importance of context-specific board composition rather than standardized diversity benchmarks.