Investigating the effect of the directors' board characteristics on financial performance through innovation activities

Several previous research studies have reported mixed results concerning the direct relationship between corporate governance and firm performance. Actually, the presence of innovation as a mediating variable within this relationship has not yet been fully established. Hence, this article's contribution to this area consists in proposing the establishment of both direct and indirect links between the directors' board features, as a governance mechanism, and financial performance through innovation. Noteworthy, this paper analyses empirical data derived from a sample consisting of 95 Tunisian manufacturing firms in a bid to test the central hypothesis that the directors' board features are positively associated with the firm's financial performance through the innovation level. The findings highly suggest the interrelatedness binding the strong association between the board of directors and financial performance is mediated by the firm level innovation. Thus, this article is intended to provide a further explanation to the previous studies' inconclusive findings on the impact of board of directors' major role on firm performance by advocating the need to include innovation as an intermediary step in understanding the board's effect on firm performance.