Performance and Board Diversity: A Practical AI Perspective

Abstract

The face of corporate governance is changing as new technologies in the scope of artificial intelligence and data analytics are used to make better future-oriented decisions on performance management. This study attempts to provide empirical results to analyze when the impact of diversity on the board of directors is most evident through the multi-breaks model and artificial neural networks. The input data for the simulation includes 853 electronic companies listed on the Taiwan Stock Exchange from 2000 to 2021. The empirical results show that the higher the percentage of female board members, the more influential the company’s performance is, which is only evident when the company is in good business condition. By integrating ANNs with multi-breakpoint regression, this study introduces a novel approach to management research, providing a detailed perspective on how board diversity impacts firm performance across different conditions. The ANN results show that using the number of business board members for predicting Return on Assets yields the highest accuracy, with female board members following closely in predictive effectiveness. The presence of women on the board contributes positively to ROA, particularly when the company is experiencing favorable business conditions and high profitability. Our analysis also reveals that a higher percentage of male board members improves company performance, but this benefit is observed only in highly favorable and unfavorable business conditions. Conversely, a higher percentage of business members tends to affect performance during periods of high profitability negatively. The power of the board of directors and significant shareholders is positively correlated with performance, whereas CEO power positively impacts performance only when it is not extremely low. Independent board members generally do not have a significant effect on profits. Additionally, the company’s asset value positively influences performance primarily when the return on assets is high, and increased financial leverage is associated with reduced profitability.