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

Merve Kilic

doi:10.5539/ijbm.v10n9p182

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.

Highlights

Boards of directors control and monitor the top management of firms on behalf of the shareholders
The main objective of this study is to examine the relationship between board diversity and financial performance in an emerging country, Turkey
This study examined the relationship between board diversity and firm performance for additional evidence using the two dependent variables Return on assets (ROA) and return on equity (ROE)

Summary

Introduction

Boards of directors control and monitor the top management of firms on behalf of the shareholders. The boards of banks play a vital role in controlling the behavior and strategy identification, with inherent implications, of their managers (de Andrés & Vallelado, 2008). Many countries, including Norway, Spain, France, and Italy, have enacted laws on the presence of women on the boards of listed companies (Schwizer, Soana, & Cucinelli, 2012). All such legislations aim to increase the quality of the corporate governance system through the presence of women directors (Schwizer et al, 2012). Most company boards still have only one woman or a small minority of women directors, who can still be considered tokens (Torchia, Calabrò, & Huse, 2011)

Objectives

Methods

Results

Conclusion