Purpose Board subgroup dynamics play a crucial role in shaping firm performance. Drawing on the in-group projection model and social identity theory, this study aims to explore the impact of board subgroup imbalance (BSI) on firm performance and examines the moderating effects of environmental uncertainty and corporate reputation. Design/methodology/approach This study uses panel data from Chinese A-share listed companies for the period 2007–2024 and tests the hypotheses using an ordinary least squares model. Findings The results show that BSI is positively associated with firm performance. This positive relationship is strengthened by the environmental uncertainty, whereas it is weakened by corporate reputation. In addition, mechanism tests show that BSI influences firm performance by enhancing corporate risk-taking capacity and reducing abnormal director turnover. Notably, the positive effect of BSI is more pronounced in highly competitive industries, manufacturing firms and firms located in the eastern region. Originality/value These findings extend social identity theory by integrating the in-group projection model and shedding light on the dual motivational drivers behind subgroup dynamics, thereby enhancing social identity theory’s situational relevance and applicability in corporate governance.
Bin Feng (Tue,) studied this question.