Human Resource Management Practices and Employee Retention: Mediating Role of Diversity & Inclusion and Moderating Effect of Corporate Governance

Abstract

Contemporary organizations are increasingly challenged by workforce globalization, evolving employee expectations, and heightened scrutiny of governance and inclusion practices. Within this context, human resource management (HRM) practices, diversity and inclusion (D&I) initiatives, and corporate governance have emerged as critical drivers of employee retention, yet their interrelationships remain underexplored. Guided by Social Exchange Theory, this study aims to examine the direct effect of HRM practices on employee retention, the mediating role of D&I, and the moderating influence of corporate governance. Adopting a quantitative, cross-sectional research design, data were collected from 375 full-time employees in medium-to-large private sector banking organizations in Pakistan using a structured questionnaire. Partial Least Squares Structural Equation Modeling (PLS-SEM) was employed to test the hypothesized relationships. The results reveal that HRM practices have a significant positive impact on employee retention, with D&I partially mediating this relationship. Interestingly, corporate governance was found to significantly moderate the HRM–retention link, but in a negative direction, suggesting that stronger governance frameworks may weaken the direct influence of HRM on retention. These findings contribute to the theoretical refinement of Social Exchange Theory by highlighting that institutional support mechanisms may not always operate synergistically. Practically, the study highlights the importance of embedding inclusive practices within HR strategies while ensuring governance frameworks remain enabling rather than overly procedural.

Keywords: Human Resource Management Practices, Employee Retention, Diversity & Inclusion and Corporate Governance