The Principles of Corporate Governance, as issued by the Organization for Economic Co-operation and Development (OECD), set out the OECD’s vision of the responsibilities of the board. The corporate governance framework should ensure the strategic direction of the company, the effective oversight of management and the accountability of the board to the company and shareholders. This means that the board is expected to provide both supervisory and advisory services. In terms of its supervisory role, the board is expected to supervise management and ensure that it acts in the interests of shareholders. Specifically, the board hires and dismisses the CEO, measures corporate performance, evaluates management’s contribution to performance, and awards appropriate compensation. In addition, it oversees legal and regulatory compliance, including auditing, reporting requirements for publicly traded companies, and industry-specific regulations ([30]).

In its advisory capacity, the board works with management on the strategic and operational direction of the company, with particular attention to risk management and the risk-return trade-off. For example, ([17]) analyzes the impact of failures and weaknesses in corporate governance during the global financial crisis, including risk management systems and executive compensation. The study concludes that the financial crisis can be largely attributed to failures and weaknesses in corporate governance arrangements that did not serve their purpose of protecting against excessive risk in some financial services companies. In addition, accounting standards and regulatory requirements proved inadequate in some areas, while remuneration systems in some cases were not related to the company’s strategy and risk-taking and its long-term interests. The remuneration of boards and senior management also remains a highly controversial issue in many OECD countries. Board members are selected on the basis of skills, expertise, and any prior experience in a relevant industry or function, with the aim of contributing to effective oversight and advisory services. In order to meet its obligations, the board of directors relies on the legal advice of an external partner and other relevant professionals, such as external auditors, executive recruitment firms, compensation consultants, investment bankers, and tax advisors ([18]).

A McKinsey & Company study on the gender gap in senior management was conducted in 2014 and updated in 2017 and 2019. The original study found that companies in the top quartile for gender diversity in their management teams were 15% more likely to experience above-average profitability than companies in the fourth quartile. Three years later, this rate had increased by +21%, and in 2019 it had increased by +25% ([12]). Furthermore, more diverse companies are more likely to outperform less diverse companies in terms of profitability. Regarding ethnic and cultural diversity, in 2019, top quartile companies outperformed the bottom quartile by 36% in profitability, up from 33% in 2017 and 35% in 2014 ([12]). Therefore, the probability of outperformance is still higher for ethnic diversity than for gender.

According to the same research, higher management ratios are positively correlated with the growth rate of enterprise value and free cash flow per share. In addition, high capitalization shows a clear and statistically significant correlation with financial indexes of prosperity. As a result, diverse and inclusive organizations outperform the competition on key human resource metrics. Companies with inclusive cultures have 22% lower turnover rates, 22% higher productivity scores, and 83% higher engagement scores ([12]). Similarly, [22] research for BlackRock found that companies that increase female representation in their workforces will see a 2.4% reduction in turnover rates in the same fiscal year, −3.6% in the next fiscal year, and −4.6% in two years. As the gender gap closes and greater diversity is achieved, companies’ portfolio returns will increase ([22]; [12]).

DDI research ([25]) highlights a slight decline in female leaders at top-performing companies, from 30% in 2020 to 29% in 2023. In particular, in low-performing companies, there was a greater decline in female leaders, from 27% to 23%. Also, high-potential teams continue to have lower representation of women and minorities than their general leadership population. In 2020, on average, 14% of high-potential leaders are women. In contrast, at companies with top financial performance, women make up an average of 21%. The relationship between female representation and company performance suggests that diversity on boards is crucial. Specifically, according to [22], companies with low workforce diversity have an average financial performance of 16%, while companies with a high representation of women in their workforce (60% on average) have delivered top performance over the past decade. In addition, investing in companies with a more female-friendly culture can help boost performance. The more balanced a company’s workforce is, the higher its Return on Assets (ROA). Among companies from the same industry group and the same country, the portfolio of the top quintile outperformed the portfolio of the bottom quintile (as ranked based on female representation) by 1.6 percentage points on average over the period 2013-2022. Over the period 2012-2021, female representation increased slightly in the top quintile portfolio, from 42% to 50%, and in the bottom quintile portfolio, from 23% to 25%.

Diversity on UK company boards has been a major area of focus over the past decade. This attention stems from the growing recognition that diverse leadership teams can lead to better decision-making, enhance innovation and more accurately reflect companies’ shareholders and customer bases. In 2001, the proportion of women on the boards of FTSE 350 companies with at least 1 woman was 24% and with at least 3 women was 2%. In 2019, the proportions increased to 99% and 44%, respectively. Similarly, in 2001, the proportion of women on the boards of FTSE 100 companies with at least 1 woman was 40% and with at least 3 women was 2%. In 2019, the proportions increased to 100% and 50%, respectively. Finally, in 2001, the proportion of women on the boards of FTSE 250 companies with at least 1 woman was 17% and with at least 3 women s was 2%. In 2019, the figures increased to 99% and 43%, respectively ([2]). [2] indicate that female representation, which stood at 14% in 2005, increased steadily to 27% in 2015, before falling to 25% in 2016. Thus, over the past 10 years, there has been a shift towards the inclusion of women in UK boardrooms. Similarly, it is reported that FTSE 350 companies with at least one woman on their board have, on average, 3 to 5 percentage points higher EBITDA margins over the next four years. Gender-diverse boards are more effective than those without women and support the “critical mass” theory, which states that benefits accrue once a minority group reaches a certain level of representation. For FTSE 350 companies, achieving critical mass can lead to 21% higher share prices, while for smaller FTSE 250 companies, the mass can be as small as one person, meaning that almost all FTSE companies benefit from increasing gender diversity. At the same time, the estimated potential negative impact associated with increasing gender diversity suggests that the challenges associated with having a gender-diverse board may have short-term and long-term implications. Long-term negative effects on stock returns. All companies therefore benefit from having at least one woman on the board, but further appointments require a change in board culture to yield additional benefits ([2]).

Gender diversity on corporate boards is developing slowly and has become increasingly stagnant over time. Over the entire period from 2004 to 2022, the proportion of women on German executive and supervisory boards increased by an average of around two to three percentage points per year. While the share of female board members in Germany was 10% in 2004, above the Western European average of 8%, it is now 30.8%, below the Western European average of 35.5%. In comparison, in France, the proportion of women increased from 6% in 2004 to 45.3% in 2022 ([20]). Secondly, gender inequality is decreasing faster on supervisory boards than on management boards in Germany. In most countries, the share of women on supervisory boards is significantly higher than on executive boards. In addition, in 2022, the share of female CFOs in Germany was 28.6%, 12 percentage points higher than the Western European average ([20]).

In Japan, the share of women in senior and middle management positions in 2019 was only 14.5%. Looking at other G7 countries, the share is usually close to or above 30% (40.7% in the United States, 36.8% in the United Kingdom, 35.1% in Canada, 34.6% in in France, 29.4% in Germany and 23.3% in Italy) ([16]). This shows that Japan’s 2025 targets are lagging even the current situation in most other G7 countries and may not be ambitious enough. Compared to the G7 and East Asia and the Pacific countries in terms of gender inequality, Japan ranks 120th ([23]). Furthermore, [23] argues that Japan has failed to achieve its most recent target of increasing the proportion of women in leadership positions in all sectors of society to at least 30% by 2020 (as set in 2003). This lack of progress shows the real difficulties Japan faces in expanding women’s representation in leadership ([23]).

Following the methodology of [8], we investigated the following research hypotheses:

H1: The relationship between the presence of women on BoD and profitability is positive.

H2: The relationship between the presence of women on BoD and performance is positive.

H3: There is a significant relationship between age diversity on BoD members and profitability.

H4: There is a significant relationship between educational level of BoD members and profitability.

H5: Cultural diversity is positively related to firm profitability.

H6: Cultural diversity is positively related to firm performance.

The original dataset consisted of Greek and German companies, based on data availability from 2013 to 2023 that are listed on the stock exchange. The source of this data was Datastream and the dataset contained observations for the years 2013 and 2023. No sampling technique was applied, thus all returned results from DataStream were included producing an unbalanced final dataset. Of the total of 18 variables included in the dataset, 5 describe companies’ financial data (Net Profit, Assets, Equity, ROA and ROE), 5 describe BoD size and composition, 5 describe company details and 3 variables are used as control variables (Table 1).

Activity sector is described in Table 2 and shows 1040 enterprises with their headquarters in Germany and 143 enterprises with their headquarters in Greece were included in the analysis. In total, there were 16,640 entries for Germany and 2288 for Greece. The sector of activity with the highest occurrence rate in Germany was the financial sector employing 51.06% of the total entries. This was followed by industry activities with a percentage equal to 21.06% and IT activities with a percentage of 6.92%, while all other activities had a lower occurrence rate. Regarding Greek businesses, the highest percentage was observed in industry equal to 30.07%, followed by sales (N% = 16.78%), finance (N% = 11.19%), IT (N% = 9.79%) and real estate (N% = 6.99%).

Table 1. Name and description of data variables.

Table 2. Sector of activity of the examined companies by country.

*Unique entries.

Although the first two hypotheses are common in this kind of research, we added age and educational level as part of board diversity. As regards to age, it is a measure of diversity which is used less frequently compared to inclusion of women to BoD and show mixed results which include positive (innovation, resources) and negative (conflict, differing values) effects, or no significant link, suggesting factors like industry and board dynamics matter more than age itself; however, many studies find a blend of younger and older directors can offer strategic benefits like new ideas and deep experience, though potential communication clashes exist ([14]; [33]).

Educational level is even less frequently used either focusing on CEO ([27]) or specializing on their studies i.e. level, field and place of education ([4]). As in the investigation of age the relationship between board education level and profitability is mixed, with studies showing both positive (more education, better performance) and negative (more education, lower performance/transparency) impacts, often depending on context, country, industry, and board diversity, suggesting neither high nor low education guarantees profit; instead, optimal board composition balancing diverse skills, experience, and strategic insight is key for performance. Therefore it is clear that the first 4 hypotheses are evaluated mainly with bivariate correlations since it is an introductorily step towards more robust relations described on H5 and H6.

The fifth research hypothesis originates from the study of [8] evolving Blau’s cultural variety index ([7]) calculated as

where

CULVAR_i denotes the cultural variety of board i.

N_j denotes the absolute frequency of directors in the j-th category.

N_i shows the total number of directors of boardi.

with N_i > 1, N_j ≥ 1 and N_i ≥ N_j.

CULVAR_i values are equal to zero when N_i = N_j, which shows zero diversity on the BoD, and is equal to one if N_i includes N_j by units. This index is used in its percent form, that is it is multiplied by 100, but we argue that this, useful, index needs a large number of different observations to achieve its goals since the integer values of N_i and N_j might result repetitive values similar to ordinal variables, thus reducing index’s statistical properties namely median and standard deviation, thus reducing the possibility of multi-pole or even precise calculations In addition, tt’s asymptotically behavior implies that if N_i >> N_j in some cases then CULVAR might result in underestimations.

In accordance with the methods of [8] we used ROA, considered as profitability, and ROA, considered as efficiency, acting as the dependent variables in the panel regression models

The control variables used were leverage calculated as Total debt over Total assets, R&D intensity measured as the ratio of research and development (R&D) expenditures to total revenues, and internationalization expressed by R&D expenses. STATA V14 was used to conduct descriptives and inferential analysis under 5% alpha value.

Missing cases in any case, that is primary or calculated data, did not participate in calculation i.e. descriptive, correlation, and regression analyses as default parameters of Stata actions.

Table 3 describes BoD related variables for Germany and Greece with the help of their mean and SD measures. As for German companies, an extremely high variability was noticed in the size of the enterprises with SD being 3 times greater than the average value (Mean = 10304.63, SD = 35729.43). The average size of their boards was equal to 12.59 with the standard deviation being approximately twice as large (SD = 23.89). The average value of men in the Board of Directors is equal to 2.15 ± 1.71 and of women 1.29 ± 0.74. However, this ratio of 2:1 is not representative of the percentage of women in the Board of Directors with the average percentage being equal to 9% ± 18% but it should be emphasized that there were cases where the Board of Directors consisted of 100% women. The average age of the directors on the Board of Directors was equal to 50.61 ± 17.55 and varied between 40 and 81 years of age. Finally, there were only 16 cases of consultants holding a doctorate and 24 cases with a master’s degree.

According to the same results, an extremely large variability in the size of the Greek enterprises was again found, with the standard deviation being again about 3 times greater than the average value (Mean = 1599.65, SD = 4285.69). The average size of the boards of directors examined was equal to 13.50 with the standard deviation being approximately equal (SD = 10.96). The average value of men in the Board of Directors is equal to 5.79 ± 3.04 and of women is equal to 2.06 ± 0.74. The ratio of men to women was 2.5:1, which is still not representative of the percentage of women on the Board of Directors, with the average percentage being equal to 21% ± 0.19 but unlike German companies the maximum percentage reached 84% and not 100%. The average age of the directors on the Board of Directors was equal to 53.85 ± 19.96 years and varied between 43 and 82 years. Finally, there were only 16 cases of consultants holding a doctoral degree but 288 cases with a master’s degree.

Table 3. BoD description.

The description of profitability and performance variables for German and Greek companies is shown in Table 4. According to these results, a very large standard deviation was found in the values of ROA (Mean = 2.14, SD = 15.28) and ROE (Mean = 3.49, SD = 55.97) for German companies. Similarly, R&D intensity had a standard deviation slightly more than 5 times higher than the mean (Mean = 6.99, SD = 39.22). The behavior of profitability and performance variables of Greek companies was similar compared to the aforementioned. Once again, a very large standard deviation was found in ROA (Mean = 1.48, SD = 9.59) and ROE (Mean = −1.34, SD = 49.47) as well as R&D intensity had a standard deviation 2.5 times higher than the mean (Mean = 3.54, SD = 8.25). In contrast to German firms, the standard deviations of assets (Mean = 1,4742,963, SD = 2.21E+07), net profits (Mean = 40471.42, SD = 158136.3) and equity (Mean = −1641.44, SD = 602319.4) were significantly higher than the mean.

Table 4.Profitability and performance for German and Greek companies.

Pearson’s correlations between BoD characteristics and profitability revealed the positive and weak influence of women on board both in Greek and German companies except ROE in Greek companies (r = −0.005). Still, only the percentage index was significant and only in German companies. Age difference revealed conflicting results between German and Greek companies. In specific, age distance had a negative and near zero relation on both ROA and ROE for Greek companies. German companies showed a positive relation, but the near zero strength of these correlations do not allow for clear interpretation or comparisons. Assuming that age difference expresses the conflict of ideas these results imply that German companies are more tolerant to new ideas compared to Greek ones. This notion is enhanced by the positive and significant, though weak, correlation of mean age to ROA implying the lead of more experienced executives, aided by younger ones. Interestingly, MSc holder in Greek companies showed a positive and significant association with ROA whereas German companies showed negative relations. This is the first innuendo of formalism in Greek businesses, something that will further analyzed again later in this research (Table 5).

Table 5. Pearson’s correlation between profitability variables and board characteristics.

Lower diagonal: German companies. Upper diagonal: Greek companies. The significance of the relationship is denoted as follows: *p < 0.05, **p < 0.01, ***p < 0.001. WoB: Women on Board. MSc: Number of MSc holders on BoD.

To investigate the relationship between cultural diversity on profitability and performance, the methodology of [8] was used. For this reason, Pooled OLS regression model was initially constructed with ROA as the dependent variable to investigate the relationship between profitability and cultural diversity and then with ROE as the dependent variable to examine performance without vlustering. The results for German companies are presented in table X and showed that the effect of cultural diversity has a positive effect on profitability (b = 1.88) but a negative effect on performance (b = −10.53) for German companies. The effect of internationalization on profitability was negative, indicating that in the presence of cultural distance, countries with high internationalization are expected to have lower profitability and lower performance. Sector of activity was not statistically significant, showing lack of effect when cultural variety is present.

The results for Greek companies showed that the effect of cultural variety has a positive effect on profitability (b = 29.41) and performance (b = 120.14). Both effects were statistically significant. The effect of internationalization on profitability was positive, which shows that in the presence of cultural distance, countries with high internationalization are expected to have greater profitability and performance. Sector of activity was not statistically significant, showing lack of effect when cultural variety is present (Table 6).

Table 6. The impact of cultural variety on profitability and performance.

Effect of cultural diversity (Culvar) on profitability (ROA) and efficiency (ROE) for companies based on Germany and Greece. Robust standard errors in parentheses. Significance of regression coefficients noted as: *p < 0.05, **p < 0.01, ***p < 0.001.