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

Abstract

PurposeThis study intends to test the relationship between banks’ board diversity, detected with age and gender characteristics, and banks’ social performance. The resource dependence theory posits that board diversity is a strategic tool able to enrich the board of directors by expanding skills and the number of links with stakeholders, which have a strategic role in achieving a competitive advantage and sustainable goals, especially in the banking sector.Design/methodology/approachThe research hypotheses are tested using a sample of 46 European banks observed from 2009 to 2017. The gender and age diversity data of bank board members are hand-collected from banks’ social reports.FindingsThe empirical results show that bank social performance is positively influenced by board gender and age diversity. Thus, the human capital determined by a higher bank’s board diversity constitutes an essential resource for adopting more sustainable business models.Originality/valueThis paper analyses the association between board diversity and social performance, providing empirical evidence for the European banking sector in the period after the 2008 global financial crisis. The banking literature provides scarce evidence on the topic; however, the empirical results claim the strategic importance of the appointment of directors to the banks’ boards to balance corporate strategy with social and environmental issues generating a positive impact on sustainable growth.