Governance mechanisms, gender diversity and banking performance: The case of French banks

Abstract

Today, there is a great deal of pressure on companies from public authorities, investors, and civil society to introduce more diversity. This criterion is the subject of binding regulations in various countries, to strengthen the presence of women in the management and governance of companies. Our study aims to investigate the results of governance mechanisms, especially board of directors ‘characteristics, on a bank’s performance. Specifically, we are examining how certain governance practices, such as gender diversity on the board and the CEO's dual role, affect a bank's performance. Indeed, these boards’ attributes are proven to reduce agency conflicts and enhance control mechanisms to serve in the best manner shareholders and contribute the better banks' performance. For our empirical methodology, we used panel data with a sample of 66 French banks observed during the period 2014-2018. The findings revealed a positive and statistically significant relationship between gender diversity and performance, as measured by the variable return on equity. We also discovered that director independence has a positive effect on performance. We observed a positive and significant effect on the bank's performance as a result of the CEO's duality. For control variables used: size and debt, the relationship with bank performance is positive with the size variable calculated as the log Book value of Total Assets. But the impact is negative between debt and banks' performance with low significance.