Board Cultural Diversity and Nonperforming Loans: What Role Does Boardroom Gender Diversity Play?

Abstract

In this paper, we examine the effect of board cultural diversity (BCD) on European banks nonperforming loans (NPLs) and whether boardroom gender diversity (BGD) moderates the BCD‐NPLs relationship. We used a sample of 75 banks in 20 European countries from 2011 to 2022. The System Generalized Method of Moment was performed as an econometric approach. We find that greater BCD increases NPLs and BGD moderates the BCD‐NPLs relationship. The sensitivity analysis results indicate that only large banks benefit from an interaction between BGD and BCD because it lowers the NPLs ratio. Our results are robust to alternative econometric methods.