Global Finance Journal 28 (2015) 1023

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Global Finance Journal

journal homepage: www.elsevier.com/locate/gfj

Female directors in bank boardrooms and their

inuence on performance and risk-taking
Mohamed Azzim Gulamhussen a, Slvia Fonte Santa b,
a
Vlerick Business School, Belgium
b
Banco de Portugal Edifcio Adamastor Rua Castilho, 24-2., 1269-179, Lisbon, Portugal

a r t i c l e i n f o a b s t r a c t

Available online 17 November 2015 We assess the role of women in bank boardrooms in a sample of 461
large banks from OECD countries. After controlling for bank and country
JEL classication: specic effects, we nd that the presence and percentage of female
G20 directors in boardrooms have a positive inuence on performance. We
G30 also nd a negative relation between the presence of women in board-
G38 rooms and risk-taking. These relations hold for the supervisory board,
J16 and with some exceptions for the audit committee. For a sub-sample
of 134 listed banks we nd that markets positively value the presence
Keywords:
of women on the board, supervisory board and audit committee.
Banks
Board of directors 2015 Elsevier Inc. All rights reserved.
Government policy and regulation
Gender diversity

1. Introduction

The appointment of female directors to boardrooms is attracting considerable attention in the media (see
amongst others Manzoni, Strebel, & Barsoux, 2010; Tuhus-Dubrow, 2009; Kellaway, 2011; Light, 2011). It is
also signicantly inuencing policy debates: proposals advocating corporate governance reforms for example
recommend increasing the presence of women in boardrooms.1 A report in this vein by the Catalyst (2004), a
not-for-prot organization that seeks to promote women in business, analyzes 353 Fortune 500 companies

We acknowledge nancial support from Fundao para a Cincia e Tecnologia (PTDC/EGE-ECO/114977/2009). We benetted sig-
nicantly from the comments and suggestions made by the anonymous reviewers and the Editor. The views expressed in this paper are of
the authors and do not necessarily represent those of the institutions to which the authors are afliated.
Corresponding author. Tel.: +351 211 597 022; fax: +351 213 128 477.
E-mail address: ssantos@bportugal.pt (S.F. Santa)
1
Norway mandated a 40% quota for women in boardrooms in 2005. Subsequently Sweden also adopted this measure and Spain intro-
duced a quota of 40% to be reached by 2015. In January 2010 the lower house of parliament in France approved a law which will force
companies to have at least 40% of women in their boardrooms by 2016. The U.K. is the most recent addition to this list of countries. It
wants to see all boards of big companies composed of 25% female directors by 2015. Other countries are contemplating similar measures.

http://dx.doi.org/10.1016/j.gfj.2015.11.002
1044-0283/ 2015 Elsevier Inc. All rights reserved.
 M.A. Gulamhussen, S.F. Santa / Global Finance Journal 28 (2015) 1023 11

and concludes that rms with a higher representation of women on the board achieved a better average -
nancial performance from 1996 to 2000 than the group of companies with a smaller percentage of women
on the board. Nevertheless, this study does not demonstrate causality between the participation of women
in boardrooms and nancial performance. The Higgs (2003); Tyson (2003); EPWN (2004) and the Heidrick
and Struggles (2005) reports show that women hold few non-executive positions, leading to the recommen-
dation that boards draw more from professional groups with a higher representation of women so as to tap
into a wider talent pool and increase board diversity. However, the extent to which these recommendations
apply to the particular case of banking is not very clear.
Researchers across the accounting (Horngren, Bhimani, Foster, & Datar, 2005), economics (Tirole, 2001)
and management (Jensen & Meckling, 1976) disciplines agree that boards are critical to strategic and nancial
decision-making in rms. In accounting, boards not only play the classical role of monitoring, but they also
inuence rms' strategic orientation, cost and risk management (Bhimani, 2009). In economics, boards play
an important role both as inside monitors (non-independent) and through their advisory role as outsiders
(independent) (Adams & Ferreira, 2007). In management, boards monitor from the agency perspective but
also bring in resources through their advice, counseling and industry connections (Pfeffer, 1972). Across the
three disciplines, the main arguments for this dual role stem from the fact that information required in the
monitoring process can also be relevant for advising and counseling purposes. In addition, board composition
is pertinent because of the diversity of skills required to manage companies: directors' characteristics in terms
of education, experience, profession, gender and ethnicity can inuence the competence to monitor and
advise, counsel and provide outside connections and ultimately inuence shareholder value or protect the
interests of executives.
The empirical assessment of the participation of women in boardrooms in non-nancial rms is advancing
at a fast pace but the observed statistical link between the presence of women in boardrooms and perfor-
mance is mixed and weak. For example, on one hand, Adams and Ferreira (2009); Campbell and Mnguez-
Vera (2008); Carter, Simkins, and Simpson (2003) and Erhardt, Werbel, and Shrader (2003) document a pos-
itive relation between the presence of women in boardrooms and market perception proxied by Tobin's Q and
accounting performance (ROA, in the case of Adams and Ferreira (2009) and Erhardt et al. (2003)). Shrader,
Blackburn, and Iles (1997), on the other hand, document a negative relation between the presence of women
and accounting performance (ROA and ROE); and Farrell and Hersch (2005) and Rose (2007) nd no signif-
icant relation between the presence of women in boardrooms and market perception.
Not only are the ndings in sectors other than banking inconclusive, but Adams and Mehran (2003) argue
that banks differ from non-nancial rms, and that conclusions drawn for other sectors cannot be generalized
to banks. Unlike non-nancial rms, banks call for distinctive regulatory treatment and this generates novel
challenges for corporate governance that justify focused attention (see also Gulamhussen & Guerreiro,
2009). The Basel Committee on Banking Supervision (BCBS) for example argues that the need to safeguard
the correct functioning of the nancial system as a whole makes corporate governance in banking critical
and essential to achieving and maintaining public trust as well as condence in the nancial system (Basel
Committee on Banking Supervision, 2005: par 8). Since banks play a central role in the governance of other
rms, either as equity or debt holders, well-managed banks are likely to ensure that decision-making of the
rms in which they have a vested interest is of a high quality, thus complementing and facilitating regulation
and supervision; this justies the Committee's interest in enforcing reliable corporate governance mecha-
nisms (Basel Committee on Banking Supervision, 2006: par. 1).
Following the failures and lapses that triggered the nancial crisis, the BCBS revised the guidelines relating
to corporate governance. The qualication and composition of the board are one of the areas reinforced in the
revised set of principles. These principles indicate the need to promote diversity in boardrooms in order to
guarantee objective and independent judgment by directors (Basel Committee on Banking Supervision,
2010: par. 38). Women correspond closely to the notion of the independent director advocated in corporate
governance theory since they do not belong to the informal social networks that consist primarily of men (see,
among others, Mallin, 2010; Medland, 2004; Monks & Minow, 2008). Although women are associated with
board diversity and independence, the Committee's corporate governance principles do not set any specic
quantitative quota with regards to the participation of women in boardrooms, leaving banks to determine
the optimal composition of boards.
A focused study on banking can shed important light on the role of women in boardrooms and their
inuence on performance and risk-taking, a critical component in the nancial services industry due to
12 M.A. Gulamhussen, S.F. Santa / Global Finance Journal 28 (2015) 1023

its potential for promoting systemic risk and its ultimate implications for tax payers, and additionally
provide insights into the mixed ndings on the role of women and their inuence on performance.
From the academic perspective, banks should choose the composition of their boards on the basis of
their potential to increase shareholder value. The participation of women in bank boardrooms should
thus be assessed in terms of the benets and costs (see Lawler and Finegold (2005) for a similar perspec-
tive on board restructurings).
Women in bank boardrooms may bring benets in several ways: a) by tapping into dissimilar networks
and connections that can be useful for expanding banking business in previously neglected areas, many
banks for example now segment women as a special class of customers (Granovetter, 1973); b) by thinking
of problems and elaborating solutions in a manner that corrects biases in critical decisions especially related
to both strategic and risk oversight as women are often considered more conservative than men (Wiersema &
Bantel, 1992; Cabo, Gimeno, & Nieto, 2009); c) by monitoring more strictly than men (Watson, Kumar, &
Michaelsen, 1993); d) by improving group dynamics and consequently the quality and solidity of strategic
and risk management decisions which are particularly important in banks due to the ultimate implications
for nancial systems (Forbes & Milliken, 1999; McInerney-Lacombe, Bilimoria, & Salipante, 2008); e) by
participating in various monitoring-related committees (Adams & Ferreira, 2009).2
Whilst stronger governance achieved through the participation of women in bank boardrooms may
increase shareholder value, overmonitoring through the active participation of women in boardrooms may
decrease shareholder value. In particular, women in banks boardrooms may represent additional costs that
may arise mainly from: a) conicts emerging from divergent perspectives and opinions between them and
their male counterparts, the reverse effect of greater participation, ultimately hindering swiftness in the
decision-making process (Gratton, Voigt, & Erickson, 2007; Slaikeu & Hasson, 1998; Zander, 1979); b) noise
in communication between men and women, ultimately hindering effective strategic and risk oversight of
banks the ultimate cost of which may have to be borne by taxpayers (Lau & Murnighan, 1998); c) lack of
prior experience and network of contacts in the banking industry (Terjesen, Singh, & Vinnicombe, 2008);
and e) absenteeism (Adams & Ferreira, 2009).
We assess the potential benets and costs of having women in bank boardrooms. Specically, we examine
whether women in boardrooms (board, supervisory board and audit committee) inuence performance
(return on assets, return on average equity, net interest income, other operating income, non-interest
expenses and Tobin's Q ), and risk-taking (loan loss reserves, loan loss provisions, impaired loans and the Z-
SCORE). This question warrants focused attention for a number of reasons.
First, theoretical developments across several disciplines support the view that boards perform multiple
functions such as monitoring, advising on strategic issues, counseling and providing external resources in
terms of contacts and networks. If these multiple roles are to be balanced, close attention must be given to
board members' personal characteristics, including those of women. However, the statistical evidence ob-
served for the relation between the presence of women and performance in the context of non-nancial
rms remains inconclusive. In addition, these ndings cannot be generalized to the specic case of banks.
Second, the case for increasing the participation of women in boardrooms is having a signicant inuence
on public policy debates and is therefore at the center of media attention. The role played by banks in modern
nancial systems requires the benets and costs of bringing women to boardrooms to be carefully and
systematically assessed before it can be fully justied. Third, regulators and supervisors around the world
are going through the difcult role of legislating governance mechanisms that ensure the sound functioning
of nancial system and aid supervision. Our ndings should aid regulators and supervisors in setting and eval-
uating guidelines that ensure such sound governance systems.
Following the approach adopted by Dahya, Dimitrov, and McConnell (2008) of studying only the very
large rms for which data is available, we collect data on the 25 largest banks operating in 24 OECD countries
for which we could assemble data. Despite several attempts, we were unable to produce both governance and
nancial data on banks from Czech Republic, Finland, Hungary, New Zealand, Slovak Republic and Korea.
These banks exhibit the potential to precipitate a nancial crisis in the absence of sound corporate gover-
nance. Our analysis shows that the participation of women in boardrooms (presence and percentage) has a
positive inuence on the return on equity, return on assets and operating income ratio. We also nd a negative

2
Other benets may emerge from the positive signal it gives to other women to pursue similar careers and investor relations.
 M.A. Gulamhussen, S.F. Santa / Global Finance Journal 28 (2015) 1023 13

association between women in boardrooms (presence and percentage) and risk-taking measures namely
loan loss reserves, loan loss provisions, impaired loans ratio and the Z-SCORE. Similar ndings are also ob-
served for women's presence on the supervisory board and the audit committee, although to a limited extent
in the latter. In a sub-sample of listed banks we nd that markets positively value the presence of women in
boardrooms. We test the endogenous nature of board mechanisms with a standard instrumental variable that
captures the size of banking operations and a new instrumental variable which is the product of the percent-
age of female directors on boards and restrictions on banking activity. Our ndings are robust to both speci-
cations of the instrumental variables and they indicate that the participation of women brings benets to
bank boardrooms.
The structure of the paper is as follows. We describe the data collection process and method in Section 2.
Section 3 discusses the endogenous nature of our question and the method used to tackle this. Section 4 con-
tains the outcome of the proposed relations based on regressions that consider the reverse causal nature of
our question. Section 5 summarizes and concludes the paper.

2. Data and method

The main sources of our data are Bankscope from Bureau Van Dijk, bank websites and Reuters. As
mentioned earlier, we collected data on the Top 25 banks operating in 24 OECD countries. The countries
were selected on the basis of the availability of both nancial and governance information. Our sample
excludes Central Banks and other nancial intermediaries such as bank holding companies. Corporate
governance in bank holding companies is analyzed by Adams and Mehran (2003).

Table 1
Breakdown of board, supervisory board and audit committee.
This table provides statistics on the gender characteristics of bank boardrooms across the world, based on a cross-country dataset
comprising 24 OECD countries with data available on BankscopeBureau van Dijk database for the year 2006. The exception is the
gender diversity of the audit committee for which we had to make use of Reuters data. N-Banks comprises the size of the sample,
which varies due to missing data. Nwomen equals the average number of women represented on the board, supervisory board or
audit committee; %women equals the number of women on the board, supervisory board or audit committee divided by the
board size.

Board of directors Supervisory board Audit committee

Women Banks Women Banks Women Banks

N % N N % N N % N

Australia 1.15 13.47 13 1.17 15.03 12 0.64 21.82 11

Austria 1.84 8.05 19 1.39 8.14 18 0.22 2.50 9
Belgium 0.67 4.58 21 0.47 2.89 17 0.07 7.14 14
Canada 2.82 13.83 11 2.10 14.82 10 0.78 21.67 9
Denmark 0.94 8.77 17 0.94 9.39 16 0.14 2.86 7
France 1.05 6.11 19 0.50 3.49 14 0.09 4.55 11
Germany 1.64 8.12 25 1.17 7.20 23 0.19 9.90 16
Greece 0.36 4.40 11 0.36 6.13 11 0.00 0.00 9
Ireland 1.06 7.59 17 0.93 8.63 14 0.10 2.50 10
Island 0.70 9.93 10 0.44 7.90 9 0.00 0.00 6
Italy 0.62 2.55 21 0.35 2.15 20 0.00 0.00 16
Japan 0.00 0.00 21 0.00 0.00 21 0.00 0.00 21
Luxembourg 0.95 4.75 22 0.30 1.67 20 0.00 0.00 14
Mexico 0.33 4.26 21 0.05 1.32 19 0.06 5.56 18
Netherlands 0.67 4.46 21 0.48 4.31 21 0.00 0.00 12
Norway 1.95 23.38 19 1.64 22.35 11 0.60 15.00 5
Poland 1.55 11.48 22 0.77 10.46 22 0.13 2.08 16
Portugal 0.47 3.03 19 0.13 1.88 16 0.07 3.33 16
Spain 1.91 7.53 22 1.71 8.03 21 0.57 6.80 21
Sweden 2.61 21.17 18 0.67 12.67 9 0.00 77.67 3
Switzerland 1.04 8.68 24 0.89 9.37 18 0.15 6.41 13
Turkey 0.15 1.89 20 0.00 0.00 19 0.05 5.26 19
UK 1.17 6.84 23 0.90 8.45 21 0.24 7.25 17
United States 2.48 14.68 25 2.17 16.10 23 0.41 8.81 22
Total 1.18 8.10 461 0.80 7.02 405 0.19 6.19 315
14 M.A. Gulamhussen, S.F. Santa / Global Finance Journal 28 (2015) 1023

We collected the name of the director for each bank, her or his title, the position (director/president/
member) and the committee (supervisory/management board or non-executive/executive committee)
to which she or he belongs. We assembled data on the gender using the name, bank website and Reuters.
Similarly, our main data source only distinguishes the supervisory and management board or non-
executive and executive committees, although there are some references to audit committees. Conse-
quently, we used bank websites and Reuters as our main sources to determine the participation of
women on the audit committee.
Data on age, tenure, retirement status, remuneration, qualications and professional experience is cur-
rently not available on Bankscope. Complementing our main data source with other data sources is a promis-
ing avenue for future research on corporate governance. Our initial sample covered 571 banks and a total of
8274 directors that we characterized by gender, giving us a total of 690 female directors who were then
classied according to their board position and board committee. Following the qualitative evaluation of
the information under analysis and the exclusion of the outliers, our nal sample comprised 461 banks and
134 listed banks. We extracted nancial ratios considered relevant and the information needed to compute
Tobin's Q for the listed banks; 2006 was our year of reference as the corporate governance data available on
Bankscope dates from 2006 in most cases (February 2009 version).
Our data (summarized in Table 1) shows cross variation in the percentage of women in boardrooms
(8.10%), on the supervisory board (7.02%) and the audit committee (6.19%). On average, banks have one
woman in the boardroom (1.18), one on the supervisory board (0.80) and none (0.19) on the audit commit-
tee. The average number of women on the board ranges between 0 in Japan (0) and Turkey (0.15) and nearly
3 in Canada (2.82), Sweden (2.61) and the United States (2.48). As for the percentage of women, Norway
(23.38%) has the highest and Japan (0%) the lowest. The table also shows that that the percentage of
women in most European boardrooms (in a study of gender discrimination, Cabo et al. (2009) report an
average of 7% of women in bank boardrooms in 25 E.U. countries) remains lower than that of Anglo-Saxon
countries like the U.S. (14.68%), Canada (13.83%), and Australia (13.47%). The average number of women
on the supervisory board ranges between 0 in Japan (0) and Turkey (0) and about 2 in the U.S. (2.17) and

Table 2
(a): Description of variables.
This table gives a description of the dependent, independent, control and instrumental variables considered in this analysis.

Variable Description

Dependent variable
ROA Return on average assets
ROE Return on average equity
NIMRG Ratio of net interest income to total of earning assets
OOINC Ratio of other operating income to total average assets
NIEXP Ratio of non interest expenses plus provisions to total average assets
LLP Ratio of loan loss provisions to net interest revenue
LLR Ratio of loan loss reserves to gross loans
IMPL Ratio of impaired loans to bank equity
TQ Tobin's Q ratio = market value of assets over book value of assets
Bank's return on assets plus the capital asset ratio divided by the standard deviation of asset returns
Z-SCORE
over the period 20042006

Independent variable
Dummy variable that takes a value of 1 if there is at least one woman on the board of directors of the
DBOARD
bank and 0 otherwise
FBOARD Percentage of women on the board of directors
Dummy variable that takes a value of 1 if there is at least one woman on the supervisory board of the
DSUP
bank and 0 otherwise
FSUP Percentage of women on the supervisory board/non-executive board
Dummy variable that takes a value of 1 if there is at least one woman on the audit committee of the
DAUDIT
bank and 0 otherwise
FAUDIT Percentage of women on the audit committee

Governance controls
BS Number of directors on the board of directors
DBIN Dummy variable that takes a value of 1 if the bank has a two-tier structure and 0 otherwise
 M.A. Gulamhussen, S.F. Santa / Global Finance Journal 28 (2015) 1023 15

Table 2
(b): Description of variables.
This table gives a description of the dependent, independent, control and instrumental variables considered in this analysis.

Variable Description

Bank controls
CAPITAL Ratio of capital funds to total assets
LOANS Ratio of loans to total assets

Country controls
RESTRICT Summary index of four indicators of the regulatory restrictions imposed on banks
GOODGOV Summary index of the governance characteristics
CPI Consumer price index

Instruments
FBOARD_RESTRICT The product of FBOARD and RESTRICT
FSUP_RESTRICT The product of FSUP and RESTRICT
FAUDIT_RESTRICT The product of FAUDIT and RESTRICT
REVENUES Operating revenues

Canada (2.10). The situation for the percentage of women on the supervisory board is not very different from
that of boardrooms. In relation to the audit committee, the average number of women on the audit committee
ranges from 0 to 1. The percentage of women on most European audit committees continues to be lower than
that of Anglo-Saxon countries like Australia (21.82%), Canada (21.82%) and the U.S. (8.81%). Presumably
women are more prone to participating in audit committees in the U.S. (see also Adams & Ferreira, 2009)
than in Continental Europe.
The variables we use in this study are summarized in Table 2. We construct six independent variables: the
proportion of women on the board (FBOARD), on the supervisory boards (FSUP) and on the audit committee
(FAUDIT); a dummy that assumes the value of 1 if the bank has a female director on the board (DBOARD), on
the supervisory board (DSUP), and on the audit committee (DAUDIT). For FSUP, we consider the proportion of
non-executives that are female directors if there is a unitary board structure. This consideration is based on
the fact that the members of a supervisory board should be independent and the proxy regularly used in
the literature for an independent director is a non-executive director (Van Greuning & Brajovic-Bratanovic,
2003). We also include the number of directors on the board (BS) as an explanatory variable to capture the
effect of board size (Staikouras, Staikouras, & Agoraki, 2007).
We use a number of dependent variables commonly used in other studies assessing performance
and risk-taking in banking (see, among others, Saunders & Cornett, 2003; Waymond, 2007;
Staikouras et al., 2007): return on average assets (ROA) and return on average equity (ROE) to measure
protability; Tobin's Q (TQ) to measure market perception; and a group of bank-specic metrics
reecting earnings, costs and asset quality. Specically, we use the net interest income (NIMRG),
other operating income (OOINC) and non-interest expenses (NIEXP) to characterize banking opera-
tions (earnings and costs); and loan loss reserve (LLR), loan loss provision (LLP), impaired loans
(IMPL), and the Z-SCORE (Z-SCORE) to assess bank risk.3
We include two variables, namely capital to assets ratio (CAPITAL) and loans to assets ratio (LOAN), to
control for potential differences in the nancial strength and bank orientation across banks in the sample.
Corporate governance systems inuence how corporations function (Jeffers, 2005), ultimately impacting per-
formance and risk-taking. To deal with this, we created a dummy for the board structure of each bank (DBIN)
that assumes the value of 1 if the bank has a two-tier structure and 0 otherwise. This assessment was made in
light of the system generally adopted in each country, which led to a total of 346 banks with a two-tier system
and a total of 115 with a one-tier system.

3
LLR, LLP and IMPL are considered risk-taking measures as an increase in these measures can increase the likelihood of a reduction in
bank performance. However, it can be argued that these measures may reect more of a mismanagement of a bank's credit portfolio
(exposing the bank to bad loans) than risk-taking per se. Thus, the corresponding results may constitute more of a corroboration of the
ndings with respect to performance measures than a strict nding relating to risk-taking. We are grateful to an anoynymous reviewer
for pointing this out to us.
16 M.A. Gulamhussen, S.F. Santa / Global Finance Journal 28 (2015) 1023

Table 3
Descriptive statistics on selected variables.
This table reports the descriptive statistics for a sample comprising 461 banks from 24 OECD countries with data available on
BankscopeBureau van Dijk database for the year 2006. The gender diversity in the audit committee is the exception, for which we
had to make use of Reuters data. ROA = net income / total assets. ROE = net income / equity. NIMRG = net interest income / total
earning assets. OOINC = other operating income / total assets. NIEXP = (non-interest expenses + loan loss provisions) / total assets.
LLP = loan loss provisions / net interest revenue. LLR = loan loss reserve / (loans + loan loss reserve). IMPL = impaired
loans / (loans + loan loss reserve), since gross loans = loans + loan loss reserve. TQ = (book value of assets book value of
equity + market value of equity) / book value of assets. Z-SCORE is the bank's return on assets plus the capital asset ratio divided
by the standard deviation of asset returns over the period 20042006. FBOARD, FSUP and FAUDIT equals the number of women on
the board, supervisory board and audit committee, respectively, divided by the board size. BS = Number of board directors. RE-
STRICT equals the index created by Barth et al. (2001; 2004) on regulatory restrictiveness imposed on banks and GOODGOV cor-
responds to the index of La Porta et al. (1999) that assesses state performance, in terms of government intervention, public sector
efciency, public good provision, size of government, and political freedom. CAPITAL = (equity + hybrid capital + subordinated
debt) / total assets. LOANS = total loans / total assets. REVENUE = operating income + operating expenses. CPI is the consumer
price index. Note: Figures are expressed in percentages for all variables (except for REVENUE) and in $ millions for REVENUE.

N Mean Std. dev. Min Max

ROA 461 1.03 0.91 0.47 6.53

ROE 461 14.83 8.20 2.34 49.05
NIMRG 459 2.07 2.02 1.28 19.38
OOINC 461 1.62 2.08 0.93 21.55
NIEXP 461 2.27 2.25 0.03 17.70
LLP 413 10.18 11.91 22.49 64.43
LLR 450 1.78 1.21 0.01 7.83
IMPL 453 19.64 19.95 0.00 228.66
TQ 134 1.07 0.10 0.81 1.78
Z-SCORE 237 3.80 1.02 1.76 6.79
FBOARD 461 8.10 10.12 0.00 53.00
FSUP 405 7.02 10.07 0.00 50.00
FAUDIT 315 6.19 17.94 0.00 100.00
BS 461 14.80 8.88 1.00 51.00
CAPITAL 452 8.33 3.17 0.31 21.68
LOANS 456 55.45 23.62 0.00 99.55
RESTRICT 461 2.13 0.57 1.25 3.25
GOODGOV 461 18.78 4.70 1.98 22.00
REVENUE 456 6671 16200 0.00 150000
CPI 461 2.66 2.04 0.24 10.51

Bank regulations (such as capital requirements, activity restrictions, and deposit insurance) could
also affect the risk-taking incentives of managers. Therefore, we control for this through the
RESTRICT and GOODGOV variable. As each country has a different regulatory system as well as its
own government rules, we use the index created by Barth, Caprio, and Levine (2001) on regulatory
restrictiveness (RESTRICT) imposed on the banking activity, and the good government index of La
Porta, Lopez-de-Silanes, Shleifer, and Vishny (1999) (GOODGOV) that assesses state performance in
terms of government intervention, public sector efciency, public good provision, size of government,
and political freedom. RESTRICT (as dened by Barth et al. (2001)) relates each country's regulations
on the possibility of banks engaging in securities trading, insurance, real estate, and ownership of
non-nancial rms. It is rated from 1 to 4: 1unrestricted (full range of activities permitted and con-
ducted directly by the bank); 2permitted (full range of activities can be conducted, but some only
through subsidiaries); 3restricted (less than a full range of activities can be conducted in the bank
or through subsidiaries); 4prohibited (activities cannot be conducted either in bank or through sub-
sidiaries. For GOODGOV (as dened by La Porta et al. (1999)) larger values signify lower risk of expro-
priation, less ofcial corruption, and a stronger tradition of law and order. In order to control for
different economic conditions across countries we also consider ination as measured by the consumer
price index (CPI) from the International Monetary Fund.
We also considered controlling our results using total assets and the total assets to GDP. However, both
variables proved to be correlated with other control variables in the equation, specically with BS and
GOODGOV. We also considered nominal GDP per capita. Nevertheless, this variable turned out to be highly
 M.A. Gulamhussen, S.F. Santa / Global Finance Journal 28 (2015) 1023 17

Table 4
2-SLS regressions for the percentage of women on the board of directors.
This table reports the results of 2-SLS regressions comprising banks from 24 OECD countries with data available on BankscopeBureau
van Dijk database for the year 2006. The gender diversity in the audit committee is the exception, for which we had to make use of Reuters
data. ROA = net income / total assets. ROE = net income / equity. NIMRG = net interest income / total earning assets. OOINC = other
operating income / total assets. NIEXP = (non-interest expenses + loan loss provisions) / total assets. TQ = (book value of assets book
value of equity + market value of equity) / book value of assets. LLP = loan loss provisions / net interest revenue. LLR = loan loss
reserve / (loans + loan loss reserve). IMPL = impaired loans / (loans + loan loss reserve), since gross loans = loans + loan loss reserve.
Z-SCORE is the bank's return on assets plus the capital asset ratio divided by the standard deviation of asset returns over the period 2004
2006. FBOARD is the percentage of women on the board of directors. BS = number of board directors. RESTRICT equals the index created
by Barth et al. (2001; 2004) on regulatory restrictiveness imposed on banks and GOODGOV corresponds to the index of La Porta et al.
(1999) that assesses state performance, in terms of government intervention, public sector efciency, public good provision, size of govern-
ment, and political freedom. CAPITAL = (equity + hybrid capital + subordinated debt) / total assets. LOANS = total loans / total assets.
CPI is the consumer price index. The instrument used was the product of the percentage of women in each committee and the variable
RESTRICT.

Dependent variable: ROA ROE NIMRG OOINC NIEXP TQ LLP LLR IMPL Z-SCORE

Intercept 0.31 9.57a 0.14 0.27 0.32 1.11a 0.07 2.63a 41.76a 3.40a
(1.56) (3.57) (0.16) (0.42) (0.44) (22.39) (0.02) (5.60) (6.53) (6.91)
FBOARD 0.01b 0.08b 0.00 0.02b 0.01 0.00c 0.13b 0.03a 0.33a 0.02a
(2.37) (2.35) (0.43) (2.07) (0.61) (1.88) (2.34) (4.97) (4.07) (2.97)
BS 0.01b 0.02 0.02b 0.02a 0.02b 0.00c 0.24a 0.01 0.22c 0.00
(2.37) (0.54) (2.21) (2.77) (2.31) (1.81) (4.22) (1.17) (1.94) (0.37)
CAPITAL 0.15a 0.50a 0.17a 0.20a 0.18a 0.00 0.15 0.03 1.08 a
0.02
(10.20) (3.89) (5.66) (5.34) (5.38) (0.33) (0.78) (1.46) (3.86) (0.65)
LOANS 0.00b 0.05a 0.01a 0.02a 0.01 0.00 0.05b 0.00 0.09b 0.00c
(2.39) (2.88) (4.62) (5.44) (1.45) (0.68) (2.01) (0.44) (2.26) (1.72)c
RESTRICT 0.04 0.57 0.76a 0.62a 1.03a 0.01 3.32a 0.01 1.58 0.017
(0.70) (0.77) (4.05) (2.78) (4.09) (1.02) (2.74) (0.05) (1.15) (0.12)
GOODGOV 0.01 0.13 0.10a 0.02 0.07a 0.00b 0.15 0.06a 0.69 a
0.02
(1.03) (1.62) (2.94) (0.93) (2.75) (2.26) (1.17) (3.55) (3.78) (1.60)
CPI 0.08a 0.82a 0.18a 0.03 0.10b 0.00 0.53b 0.06c 0.93 a
0.033
(3.88) (3.51) (4.46) (0.96) (2.51) (0.17) (2.03) (1.69) (2.83) (0.91)
R2-adj 0.41 0.11 0.44 0.20 0.29 0.07 0.10 0.12 0.09 0.00
F-st 26.51a 5.79a 38.19a 14.22a 29.97a 2.69b 6.84a 7.70a 11.07a 2.08c
a
Signicant at 1% level.
b
Signicant at 5% level.
c
Signicant at 10% level.

correlated with the CPI causing multicollinearity problems. The descriptive statistics of the variables are set
out in Table 2 and reported in Table 3.
In unreported ndings, we also computed the descriptive statistics and conducted a t-test for equality of
means for banks with and without women in boardrooms, on the supervisory board, and on the audit com-
mittee. These non-parametric ndings show that there are statistically signicant differences across several
variables in the groups that have women in boardrooms (ROE, NIMRG, NIEXP, IMPL and CAPITAL) and in
the groups that have women on the supervisory board (ROE, NIMRG, NIEXP, LLR, IMPL and CAPITAL). Banks
also differ with respect to the inclusion of women on the audit committee (TQ, LLR, IMPL and CAPITAL). For
example, the statistically signicant difference (1%) for TQ for banks with women on the audit committee
(1.12) and for banks without women on the audit committee (1.04) shows that markets value positively
the participation of women on the audit committee (the nding for this variable in the case of women in
boardrooms and on the supervisory board showed statistically feeble differences, 11% and 13% respectively).
Banks with one-tier and two-tier boards differ in terms of ROA, NIMRG, OOINC, NIEXP, LLP, IMPL, Z-SCORE and
CAPITAL. Banks with a one-tier board exhibit larger values across all indicators.
Our main aim is to assess the inuence of female directors on bank performance (ROA, ROE, NIMRG,
OOINC, NIEXP and TQ), and risk-taking (LLP, LLR, IMPL and Z-SCORE). Therefore, we analyze the follow-
ing relation:

BPVi c 1  BGi 2  BSi 3  Cji 4  RESTRICTk 5  GOODGOVk CPIk i

18 M.A. Gulamhussen, S.F. Santa / Global Finance Journal 28 (2015) 1023

Table 5
2-SLS regressions for the percentage of women on the supervisory board.
This table reports the results of 2-SLS regressions comprising banks from 24 OECD countries with data available on BankscopeBureau
van Dijk database for the year 2006. The gender diversity in the audit committee is the exception, for which we had to make use of Reuters
data. ROA = net income / total assets. ROE = net income / equity. NIMRG = net interest income / total earning assets.
OOINC = other operating income / total assets. NIEXP = (non-interest expenses + loan loss provisions) / total assets.
TQ = (book value of assets book value of equity + market value of equity) / book value of assets. LLP = loan loss
provisions / net interest revenue. LLR = loan loss reserve / (loans + loan loss reserve). IMPL = impaired loans / (loans + loan loss re-
serve), since gross loans = loans + loan loss reserve. Z-SCORE is the bank's return on assets plus the capital asset ratio divided by the
standard deviation of asset returns over the period 20042006. FSUP is the percentage of women on the supervisory board. BS = number
of board directors. RESTRICT equals the index created by Barth et al. (2001; 2004) on regulatory restrictiveness imposed on banks and
GOODGOV corresponds to the index of La Porta et al. (1999) that assesses state performance, in terms of government intervention, public
sector efciency, public good provision, size of government, and political freedom. CAPITAL = (equity + hybrid capital + subordinated
debt) / total assets. LOANS = total loans / total assets.CPI is the consumer price index. The instrument used was the product of the per-
centage of women in each committee and the variable RESTRICT.

Dependent variable: ROA ROE NIMRG OOINC NIEXP TQ LLP LLR IMPL Z-SCORE

Intercept 0.21 8.22a 0.05 0.50 0.31 1.06a 0.83 2.46a 37.64a 3.28a
(0.69) (3.07) (0.06) (0.74) (0.42) (20.90) (0.19) (5.12) (5.89) (6.25)
FSUP 0.02b 0.12a 0.00 0.03b 0.02 0.00b 0.16a 0.02a 0.32a 0.01c
(2.45) (3.14) (0.30) (2.54) (1.16) (2.43) (2.99) (3.75) (4.22) (1.79)
BS 0.01b 0.03 0.02a 0.02a 0.02b 0.00c 0.25a 0.01 0.24b 0.00
(2.36) (0.73) (2.58) (2.81) (2.25) (1.82) (4.18) (0.82) (2.00) (0.35)
CAPITAL 0.15a 0.47a 0.15a 0.18a 0.15 a
0.00 0.25 0.02 1.06 a
0.02
(9.32) (3.44) (4.90) (4.99) (4.94) (0.27) (1.23) (1.16) (4.27) (0.67)
LOANS 0.00c 0.03c 0.01a 0.02a 0.00 0.00 0.07b 0.00 0.14a 0.00
(1.84) (1.90) (5.18) (5.02) (1.20) (0.16) (2.42) (0.47) (3.08) (1.46)
RESTRICT 0.08 0.24 0.75a 0.73a 1.09a 0.02c 3.67a 0.00 1.06 0.07
(1.28) (0.32) (4.00) (3.08) (4.10) (1.73) (2.91) (0.04) (0.73) (0.48)
GOODGOV 0.01 0.11 0.10a 0.01 0.08 a
0.00 b
0.12 0.05 a
0.70 a
0.02c
(1.33) (1.39) (2.99) (0.75) (3.12) (2.27) (1.00) (3.17) (3.65) (1.70)
a a a
CPI 0.09 0.87 0.22 0.03 0.12a 0.00 0.46c 0.05 0.92a 0.05
(4.28) (3.80) (6.27) (0.86) (2.99) (0.04) (1.68) (1.53) (2.71) (1.40)
R2-adj 0.45 0.12 0.47 0.22 0.32 0.25 0.11 0.11 0.12 0.04
F-st 25.59a 6.00a 52.39a 13.49a 27.62a 3.17a 6.63a 5.90a 9.30a 1.61
N 395 395 395 395 395 120 359 392 392 205
a
Signicant at 1% level.
b
Signicant at 5% level.
c
Signicant at 10% level.

where BPVi is the bank performance variable for bank i, BGi is the female director variable and comprises one
of the variables in Table 2, BSi stands for the board size for bank i, and Cji comprises the control variables j for
bank i. The same regression was applied for risk-taking.
We initially used OLS to estimate the model adjusting for potential heteroskedasticity and assessed
variance ination factors for eventual linear dependence of the independent variables. Following previous
literature on corporate governance we addressed reverse causality by estimating 2-SLS regressions.

3. Reverse causality

Drawing on previous research on corporate governance, our model for testing the hypotheses presented in
the preceding section was developed with a variety of independent variables to minimize specication bias.
We initially used cross-sectional OLS to estimate the model. Specically, we used several covariates to control
our ndings: bank characteristics (CAPITAL and LOANS) (Dalton, Daily, Johnson, & Ellstrand, 1999), corporate
bank governance variables (board size, BS) (Yermack, 1996), country governance variables (good governance,
GOODGOV; tier system, DBIN) (La Porta et al., 1999), regulation (RESTRICT) (Barth et al., 2001) and economic
conditions (CPI).
Previous research and in particular Baysinger and Butler (1985) advocate that past and expected future
performance may inuence the decision to have independent boards, i.e., the better performing rms may
be more willing to consider independent directors (in order to appear progressive). We disentangle causality
by estimating a two-stage least-squares (2SLS) regression where the gender variable is instrumented with
 M.A. Gulamhussen, S.F. Santa / Global Finance Journal 28 (2015) 1023 19

Table 6
2-SLS regressions for the percentage of women on the audit committee.
This table reports the results of 2-SLS regressions comprising banks from 24 OECD countries with data available on BankscopeBureau
van Dijk database for the year 2006. The gender diversity in the audit committee is the exception, for which we had to make use of Reuters
data. ROA = net income / total assets. ROE = net income / equity. NIMRG = net interest income / total earning assets. OOINC = other
operating income / total assets. NIEXP = (non-interest expenses + loan loss provisions) / total assets. TQ = (book value of assets -
book value of equity + market value of equity) / book value of assets. LLP = loan loss provisions / net interest revenue. LLR = loan loss
reserve / (loans + loan loss reserve). IMPL = impaired loans / (loans + loan loss reserve), since gross loans = loans + loan loss re-
serve. Z-SCORE is the bank's return on assets plus the capital asset ratio divided by the standard deviation of asset returns over the period
20042006. FAUDIT is the percentage of women on the audit committee. BS = number of board directors. RESTRICT equals the index cre-
ated by Barth et al. (2001; 2004) on regulatory restrictiveness imposed on banks and GOODGOV corresponds to the index of La Porta et al.
(1999) that assesses state performance, in terms of government intervention, public sector efciency, public good provision, size of gov-
ernment, and political freedom. CAPITAL = (equity + hybrid capital + subordinated debt) / total assets. LOANS = total loans / total
assets. CPI is the consumer price index. The instrument used was the product of the percentage of women in each committee and the var-
iable RESTRICT.

Dependent variable: ROA ROE NIMRG OOINC NIEXP TQ LLP LLR IMPL Z-SCORE

Intercept 0.41 7.73a 1.32a 0.66 0.67 1.06a 1.98 2.14a 39.45a 3.03a
(1.52) (2.65) (3.08) (0.88) (1.06) (26.34) (0.38) (3.84) (5.18) (4.71)
FAUDIT 0.01a 0.04b 0.01c 0.01 0.01 0.00b 0.05 0.01 0.14a 0.00
(2.63) (2.16) (1.88) (0.90) (1.07) (2.13) (1.61) (1.47) (3.32) (0.24)
BS 0.01b 0.03 0.03a 0.02b 0.03b 0.00b 0.16b 0.01 0.20 0.00
(2.37) (0.62) (3.38) (2.01) (2.41) (2.29) (2.51) (0.75) (1.40) (0.06)
a b a a a b a
CAPITAL 0.14 0.34 0.18 0.17 0.16 0.01 0.26 0.02 1.22 0.00
(9.09) (2.32) (5.18) (3.72) (4.65) (2.10) (1.14) (0.89) (3.91) (0.01)
LOANS 0.00 0.00 0.02a 0.02a 0.00 0.00 0.10a 0.00 0.14a 0.00
(0.25) (0.03) (5.65) (3.56) (0.21) (0.51) (2.83) (0.84) (2.74) (0.98)
RESTRICT 0.11 0.28 0.88a 0.69a 1.16a 0.01 3.60a 0.10 1.05 0.10
(1.62) (0.34) (4.79) (2.73) (4.13) (1.02) (2.64) (0.71) (0.65) (0.61)
a b b b a
GOODGOV 0.01 0.10 0.07 0.02 0.05 0.00 0.04 0.05 0.78 0.03c
(0.82) (1.14) (5.52) (0.86) (2.53) (2.16) (0.28) (2.54) (3.34) (1.85)
CPI 0.09a 0.85a 0.23a 0.03 0.14a 0.00 0.39 0.06 0.87b 0.06c
(4.07) (3.68) (7.15) (1.01) (3.54)a (1.01) (1.45) (1.60) (2.39) (1.65)
R2-adj 0.48 0.10 0.56 0.18 0.30 0.24 0.09 0.09 0.12 0.04
F-st 25.50a 4.68a 57.43a 10.48a 28.81a 4.39a 3.91a 4.02a 6.00a 1.14
N 308 308 308 308 308 105 281 307 308 159
a
Signicant at 1% level.
b
Signicant at 5% level.
c
Signicant at 10% level.

bank size proxied by operating revenues (see also Oxelheim & Randy, 2003). By using operating revenues as
an instrument, we were able to conrm our 2-SLS ndings with the OLS ndings for ROE and OOINC. As for the
inuence of female directors on the risk-taking measures, the results produced by the 2-SLS model are consis-
tent with the OLS model considering LLR and IMPL as the dependent variable.
We explored reverse causality further. In detecting causality, the selected instrument should be correlated
with the fraction of women on the board but uncorrelated with performance (accounting and market) and
risk-taking (except through control variables). It is difcult to nd an effective instrument because the vari-
ables most correlated with our endogenous variable are other governance variables (such as board size and
structure, our control variables) and these are already included in our performance and risk-taking
regressions.
The literature (and public policy debates discussed in see Section 1) justies the absence of women in
boardrooms on the grounds of their lack of connections; they are not part of the informal social networks
made up primarily of men (see, among others, Adams & Ferreira, 2009; Mallin, 2010; Medland, 2004;
Monks & Minow, 2008). These informal social networks are difcult to observe but it is very likely that the
larger the fraction of female directorships, the greater their propensity to attract other women to boardrooms
(in order to further increase their connections and networks). The literature (see Section 1) also identies the
need to intertwine governance and regulation to avoid systemic crisis in nancial systems. The Basel
Committee on Banking Supervision (2005, 2006) in particular recognizes the importance of implementing re-
liable governance mechanisms to aid the regulation (and supervision) of banks. Its revised set of guidelines
points towards the need to increase diversity and consequently independence in boardrooms. We thus
20 M.A. Gulamhussen, S.F. Santa / Global Finance Journal 28 (2015) 1023

build an instrument that considers both elements. It is measured as the product of the percentage of female
directors in bank boardrooms (FBOARD, FSUP or FAUDIT) and (our measure of) regulatory restrictiveness
(RESTRICT).4
We assessed the robustness of our instrument by conducting the under-identication test (Kleibergen
Paap rk LM statistic) and the weak identication test (KleibergenPaap rk Wald F statistic) (ivreg2 of
STATA). The rejection of the null hypothesis led to the conclusion that our equations are not underidentied
and that the chosen instruments are not weak. Following this, we also conrmed the signicance of our
female director coefcient based on the conditional likelihood ratio (CLR) test developed by Moreira
(2003). These tests do not question the validity of the instrument. We discuss our robust 2-SLS regression
results with this instrument in the next section.

4. 2-SLS ndings

In this section we report the ndings for the fraction of women in boardrooms.5 As expected, the 2-SLS
ndings indicate that the coefcients on the percentage of women in boardrooms (FBOARD, Table 4) are
positively related to our performance variables (ROA, ROE, OOINC and TQ) pointing towards the dominance
of benets associated with the ability to tap into dissimilar networks (Granovetter, 1973) and stricter moni-
toring (Watson et al., 1993) over additional costs associated with conicts (Gratton et al., 2007; Slaikeu &
Hasson, 1998; Zander, 1979), noise (Lau & Murnighan, 1998) and lack of experience (Terjesen et al., 2008).
The ndings also indicate that the coefcients on the percentage of women in boardrooms (FBOARD) are
negatively related to our risk-taking variables (LLP, LLR, IMPL and the Z-SCORE), again pointing towards the
dominance of benets associated with stricter monitoring (Watson et al., 1993), conservatism in strategic
and risk oversight (Wiersema & Bantel, 1992; Cabo et al., 2009) and quality and solidity of strategic and
risk oversight (Forbes & Milliken, 1999; McInerney-Lacombe et al., 2008) (Tables 5 and 6).
In terms of controls, nancial strength (CAPITAL) inuences accounting performance positively and risk-
taking (IMPL) negatively. LOANS improves performance but enhances risk-taking, except in the case of ROE
and OOINC. Regulatory restrictions imposed on banking activity (RESTRICT) improve performance (NIMRG,
OOINC and NIEXP) and reduce risk-taking (IMPL). Additionally, the ndings indicate that government inter-
vention (GOODGOV) decreases costs (NIEXP), loan loss reserves (LLR) and loan impairment (IMPL).
GOODGOV benets customers by lowering the interest margin (NIMRG). Ination (CPI) increases returns
(ROA and ROE) and income (NIMRG) and costs (NIEXP, LLR and LLP) but reduces IMPL.
Board size (BS) is negatively related to performance variables and positively related to risk-taking
variables. Our results indicate that banks with larger boards perform poorly and have lower asset quality;
this contrasts with the ndings of Adams and Mehran (2003) who in a sample of 35 publicly traded
bank holding companies in the U.S. over the period from 1986 to 1999 nd that bank holding companies
with larger boards did not underperform their peers with smaller boards in terms of TQ. Nevertheless,
our ndings for performance are consistent with Staikouras et al. (2007) who nd a statistically negative
relation between board size and ROE, ROA and TQ in a sample of 58 large European banks over the period
20022004.
Overall, the participation of women positively inuences both accounting and market related performance
measures. The participation of women in boardrooms is also associated with good loan quality, proper remu-
neration of risk through margins, suitable coverage of impaired loans via bank capital and lower earnings
variability. The ndings are similar for the supervisory board (FSUP); again pointing towards the dominance
of benets over additional costs (Table 5).

4
Adams and Ferreira (2009) develop an instrument of interest in corporate governance studies that is also the product of the percent-
age of female directors on boards of companies and the Gompers, Ishii, and Metrick (2003) index on the grounds that female directors
should add value in rms with otherwise weak governance. Our ndings showed that RESTRICT and GOODGOV are negatively correlated
which indicates that enforcement of regulatory restrictions is associated with poor governance practices within a country. Across coun-
tries, banks with a small fraction of female directorships but operating in a country with severe restrictions on banking activity obtain the
same score as banks with a large fraction of female directorships but operating in a country with weak restrictions on banking activity. In
this sense our instrument resembles the instrument developed by Adams and Ferreira (2009).
5
The ndings for the presence and fraction of women in boardrooms are similar. We do not report the ndings for the presence of
women in boardrooms in the paper in order to keep it succinct.
 M.A. Gulamhussen, S.F. Santa / Global Finance Journal 28 (2015) 1023 21

The ndings for the inuence of women in audit committees (FAUDIT) show a positive inuence on
ROA, ROE and NIMRG (Table 6). Consistent with our non-parametric tests (discussed in section 2), the
ndings also point towards the dominance of benets associated with active participation of female di-
rectors on the audit committee (Adams & Ferreira, 2009). The ndings also indicate that women in
audit committees (FAUDIT) reduce IMPL, again pointing towards the dominance of benets associated
with stricter monitoring (Watson et al., 1993), conservatism in strategic and risk oversight (Wiersema
& Bantel, 1992; Cabo et al., 2009) and the quality and solidity of strategic and risk oversight (Forbes &
Milliken, 1999; McInerney-Lacombe et al., 2008).
Our ndings also remained qualitatively unaltered after controlling for: the effect of a one-versus-two-tier
governance structure on performance and risk-taking; inuential countries such as Japan and the U.S. that are
home to banks that may be considered very large compared to the largest banks from other countries; and
after removing countries such as Norway and Sweden that mandate quotas for women in boardrooms.
In regressions considering Z-SCORE as an independent variable, the ndings showed a positive association
between risk and prots (ROA and ROE), income (OOINC), costs (NIEXP) and market value (TQ).6
We thus are unable to reject the hypotheses of the positive (negative) inuence of women's participation
in boardrooms, the supervisory boards and audit committees on performance (risk-taking).

5. Summary and concluding remarks

Corporate governance is taking center stage in public policy debates around the world. Proposals for
reform advocate that boards draw from professional groups in which women are better represented. They
defend that women behave differently in a variety of situations and their distinct behavior in boardrooms
enables boards to access untapped talent and transmit greater independence because women do not belong
to the informal social networks dominated by males.
Theoretical developments across the accounting, economics and management disciplines support the
view that boards perform a multitude of roles that span monitoring, advising, counseling and facilitating
external contacts. Board composition matters because of the diverse skills required to manage rms in com-
plex environments. Balancing these roles is a difcult task and requires an analysis of the benets and costs of
gender diversity in bank boardrooms.
The analysis of the inuence of female directorships in non-banking rms is advancing at a fast pace but
has produced mixed ndings. Moreover, the special features of banks mean that generalizations from other
sectors may not be readily applicable. Studies on corporate governance in banking are emerging at an appar-
ently slow pace due to the lack of available data. We draw on a new dataset on large banks operating across
the world collected from multiple sources to provide empirical evidence that women in boardrooms (board,
supervisory board and audit committee) have a positive inuence on accounting and market performance
and risk-taking after controlling for observable bank and country inuences. Our regressions on the inuence
of women on performance and risk-taking do not suffer from reverse causality effects with alternative instru-
ments. These ndings point towards the dominance of benets associated with the participation of women in
boardrooms over additional costs.
Data limitations did not allow us to assess whether additions of women to boardrooms inuence perfor-
mance and risk-taking, or if women foster greater participation in decision-making by improving attendance
levels or tougher monitoring through greater turnover-performance sensitivity. These issues, in addition to
the other personal characteristics of women such as education, ethnicity, experience, nationality and profes-
sion should shed more light on the role of women in bank boardrooms and be used to justify mandating
gender quotas advocated in the media and public policy debates.
In the context of the global banking industry, our study indicates that the participation of women in bank
boardrooms brings benets in terms of broad accounting and market performance, and risk-taking measures.
Monetary authorities around the world involved in ensuring sound governance systems can encourage justi-
ed gender diversity in boardrooms with the aim of improving performance and risk-taking in banks but
should not view this as a substitute for sound regulation and supervision.

6
These ndings are available from the corresponding author. They are not reported to keep the paper succinct.
22 M.A. Gulamhussen, S.F. Santa / Global Finance Journal 28 (2015) 1023

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