The Effect of Board Diversity on the Performance of Banks: Evidence from Turkey

Abstract

This study has primary two aims. The first is to determine the characteristics of boards of directors in the Turkish banking industry and the second is to investigate the effect of board diversity on performance of the banks. The analyses in this study are built on the banking industry of Turkey in the period from 2008 to 2012. The impact of the board diversity, as measured by the percentage of women and foreign directors on the board and the Blau index, on financial performance is investigated by conducting panel data analysis. The findings of the study provide evidence of a negative relationship between board diversity and financial performance. Hence, the findings do not support the economic case for board diversity, which implies that diverse directors will increase the financial performance of the banks. This study provides additional evidence to the sparse literature regarding the association between board diversity and financial performance in an emerging market context. Furthermore, most prior studies regarding the relationship between gender diversity and performance have excluded financial firms from their samples. In addition, there are few studies that examine the impact of foreign directors on the performance of banks.

Board Characteristics and Bank Performance: Evidence from Iraq

“…Ongore et al (2015), Shungu et al (2014), and Pathan et al (2013) found a positive correlation amongst the proportion of women directors and banks' performance. Conversely, Kilic (2015) found an adverse correlation between gender diversity and bank performance. Meanwhile, Liang, Xu, & Jiraporn (2013) show no significant association amongst the proportion of women on the board of directors and banks' performance.…”

“…Firms with non-executive directors are independent, works in stakeholder's best interest, have better control over management and have a positive influence on performance (Borokhovich et al, 1996;Hermalin & Weisbach, 1988). Recently, the composition of the board has become a key area of interest among governments, researchers, academicians, and debates in public forums because of the benefits associated with the availability of diversified board members in the organizations Kilic (2015). Agency theory argues that outside directors in the board hold the advantage of monitoring the management to keep their reputation as independent and efficient decision makers (Fama & Jensen, 1983).…”

“…In banks, the board has a more significant role as compared to non-financial institutions due to extended responsibilities of regulators and depositors along with stakeholders (Macey & O'Hara, 2003). Thus, the board of a bank plays a significant role in the execution of governance mechanism effectively (Kilic, 2015;Pathan et al, 2013). This paper is likely to expand research by its contribution towards a better understanding of the board characteristics and performance of banks in Iraq.…”

Pengaruh Ukuran Dewan, Kepemilikan Saham Oleh Direktur, Dan Jender Terhadap Kinerja Keuangan Perbankan

“…Francouer et al (2008) juga membenarkan bahwa keberadaan wanita pada wanita pada bisnis secara eksplisit hanya untuk meningkatkan kebijakan perusahaan. Berbeda halnya dengan beberapa peneliti terdahulu yang menyatakan bahwa keberadaan wanita memiliki pengaruh negatif dan signifikan, diantaranya Darmadi (2011), Adams dan Fereira (2009), dan Kilic (2015).…”

Pengaruh Frekuensi Rapat Dewan Direktur Dan Jumlah Direktur Perempuan Terhadap Kinerja Perbankan

“…Diversitas dewan berpengaruh terhadap kinerja perusahaan (Tu, et al, 2015;Kilic, 2015;Shafique, 2014;Van der Walt, et al, 2006). Ruigrok et al, (2007) …”