Diversity Measures and Quality of Banks’ Boards: The Italian Case

Abstract

Most of the studies in corporate governance in banks and other types of¯rms investigate board diversity and quality separately, without considering the possible relationship between these two. To¯ll this gap, this study investigates through a new methodological approach the level of quality and diversity of the boards of a sample of Italian banks using a proprietary handcollected database; in addition, it examines the relationship between diversity and quality of boards to verify whether more diversity consistently relates to higher quality, in accordance with the regulatory approach. Evidence shows that especially small and mutual banks need to improve quality and diversity, as they probably su®er from their limited attractiveness to top pro¯le directors. Moreover, on analyzing interrelations we¯nd evidence of a positive association between board diversity and quality. In particular,¯nancial skills and experience of directors improve the qualitative level of banking boards.

Board diversity as a determinant of the social performance in the European banking sector

“…Therefore, the paper contributes to the literature that seeks to identify bank board diversity as a determinant of social performance. Finally, the paper provides empirical evidence of the association mentioned above for European banks in the period following the global financial crisis of 2008, an interesting period due to the increasing public attention toward bank corporate governance and sustainable issues (Locatelli et al, 2018).…”

“…Moreover, good corporate governance is necessary to ensure a healthy financial system and the economic development (De Andres and Vallelado, 2008;Garc ıa-Meca et al, 2015). The shortcomings in the corporate governance of banks, highlighted by the 2008 financial crisis, led the supervisory authorities to issue more prescriptive regulations regarding the requirements for the board, in terms of diversity, and individual directors, in terms of skills and competence (Locatelli et al, 2018). For instance, in Europe, these requirements have been introduced with the Directive 2013/36/EU, known as Capital Requirements Directive IV.…”

“…The literature on the relationship between the board of directors' composition and financial performance is vast (Locatelli et al, 2018). Despite many contributions, the measures used to quantify the phenomena related to the concept of diversity (Zahra and Pearce, 1989) and the related results are not univocal (Hafsi and Turgut, 2013).…”

“…Furthermore, studies that investigate the effects of professional and educational backgrounds on both social and financial performance are limited (Rao and Tilt, 2016). However, the literature in question seems to unanimously suggest a positive relationship between the heterogeneity of board members' professional experiences and the achievement of better performance in both financial (Antonelli et al, 2013;Locatelli et al, 2018) and social CSR (Van der Walt and Ingley, 2003;Zahra and Pearce, 1989).…”

“…The main purpose of this study is to test the effects of banks' board diversity, in terms of gender and age, on social performance in the European banking sector after the global financial crisis of 2008. The research hypotheses are developed based on the propositions of the resource-based theory, which states that as board members carry different experiences, characteristics and relationships with the stakeholders' groups should generate a more effective, innovative, and non-conventional decision-making process, which should result in a better social performance (Locatelli et al, 2018).…”