Female Directors and Firm Investment Efficiency: Moderating Role of Female Duality

Abstract

The study aims at examining the impact of female directors on firm investment efficiency of firms and investigates the moderating effect of female duality. The sample is selected from companies listed on the Pakistan Stock Exchange (PSX) from 2014 to 2023. The research employs a rigorous methodological framework and employs different estimation techniques such as pooled ordinary least square (OLS), fixed effects (FE), two steps systems generalized method of moment (GMM). Results provide evidence in favor of hypotheses that presence of female directors in board have investment efficiency consistent with resource based theory and moderating role of female duality strengthen the positive effect of female directors on firm investment efficiency consistent with resource dependence theory. The PSM (Propensity Score Matching) analysis is employed to address the endogeneity issues. The baseline findings are robust by using alternative definitions of female directors, investment efficiency and after incorporating the board level control variables. Further this study finds that the presence of three or more female directors show a more pronounced effect on investment efficiency as compared to one female director and support to the critical mass theory. To the best of researcher knowledge, this is the first study that extends literature by empirical association of the effect of board gender diversity on investment efficiency with moderating role of female duality in an underdeveloped market, Pakistan. This work additionally proposes possible directions for future researchers.