Performance Effects of Gender Diversity on Bank Boards
Previous literature shows varied effects of gender diversity on firm performance. This study examines 87 US banks over 1999-2015, finding a positive impact of greater gender diversity on bank financial performance. The presence of threshold effects suggests context specificity, with better-capitalized banks experiencing initial performance reductions before improvements. The results highlight gains from team diversity and the removal of discriminatory practices, emphasizing the importance of quality bank management and the financial crisis in shaping outcomes.
Download Presentation
Please find below an Image/Link to download the presentation.
The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author. Download presentation by click this link. If you encounter any issues during the download, it is possible that the publisher has removed the file from their server.
E N D
Presentation Transcript
Trondheim Gjvik lesund The Performance Effects of Gender Diversity on Bank Boards By Ann L. Owen and Judit Temesvary Discussant: Professor Colin P. Green Department of Economics / Institutt for Samfunns konomi Norwegian University of Science and Technology 14thMay, Gender and Career Progression Conference
Effect of Board Gender Diversity on Bank Financial Performance Previous literature on firm performance finds negative to positive effects Adams and Ferreira, 2009, JFE for the US; Gregory Smith et al, 2014, EJ for the UK Green and Homroy, 2018, EER for Europe find positive effects, but active board involvement important. Evidence for banking sector similar, maybe a little more positive Garcia-Meca et al, 2015, JBF positive effects; Pathan and Faff, 2013, JBF positive effects that decline 2000 s on Finance is an interesting and important setting Differences in the gender makeup of workforce and senior management are stark GFC led to calls for greater diversity in leadership, particularly in finance. Firm performance is an important metric. Negative effects highlight potential for shareholder resistance etc. 2
87 US banks over a long period (1999-2015) FE-IV estimation approach Banks with greater female representations may be different in important unobservable ways (FE) Within bank changes in board membership composition may reflect shocks/trends at a bank level (IV) Positive effect of greater gender diversity, but context specific Threshold effects (greater gender diversity initially reduces performance ) Only present in better capitalised banks Robust to a range of different approaches, measures of performance etc. 3
Two broad intepretations of results 1. Gains from team diversity 2. Gains from the removal of discriminatory practices Paper emphasises (1), w.r.t to threshold effects, quality of bank management and the financial crisis Are threshold effects inconsistent with discrimination based explanations? Could better-run banks be in more competitive settings? Are the costs of discriminatory hiring practices also higher during the financial crisis? The channel matters as appropriate policy responses may depend on this. 4
IV Strategy Multiple endogeous regressors diversity, diversity2, diversity/ diversity2 interacted with capital ratio Need (at least) 4 instruments, use: Share of independent directors Bank fixed effects so this is within bank changes in share Could changes to this and changes in female representation be due to common shocks? Variant of Ahern and Dittmar 2012 QJE approach Initial gender diversity and interaction with year fixed effects AD approach motivated by different costs of compliance to Norwegian quota Does this fit in this setting? Are weak instruments a concern? How different are the IV estimates to the FE estimates? 5
External validity To the whole of the banking sector: 87 banks out of 168 (40% of bank holding company assets) More could be shown/discussed about these two groups of banks LATE intepretation of IV estimates Multiple instruments makes the complier subpopulation less clear Is their any value in looking at which banks identify the IV estimates? Which banks have variation in % independent directors What does the initial distribution of diversity look like? Are these results generalisable to other sectors? 6
Smaller things Blau index versus female representation on the board (%) Results robust to either But is the former more difficult to interpret? Non-linearities one of the key points of the paper Quadratics, mfx at 10% and 90% We don t know the functional form Would more exploratory analysis be worthwhile? Magnitude of effects Are these big? Comparable to earlier research etc 7
