["International Journal of Finance &Economics, Volume 31, Issue 3, Page 4034-4056, July 2026. ", "\nABSTRACT\nBased on the premises of the social role theory, we investigate whether board gender composition may influence firm‐level pay inequality by improving the ability of boards to oversee managers and counter their influence on the compensation‐setting process. Using the data of Chinese listed firms over the period 2007–2022, we investigate the relationship between female board directorships, the CEO–employee pay ratio (pay inequality) and firm performance. Consistent with social role theory, we find that firms with women directors on their boards have higher CEO–employee pay ratios, which have a positive impact on firm performance. We find these results to be robust by using different measures of female board directorships, alternative sample compositions and alternative estimation methods and by addressing any potential endogeneity concerns. Overall, our findings support that women directors are effective in deciding the level of pay inequality that is linked to improved firm performance.\n"]