The IUP Journal of Bank Management
Does Gender Diversity of Boards Affect Performance? Evidence from Indian Banking Sector

Article Details
Pub. Date :May, 2019
Product Name : The IUP Journal of Bank Management
Product Type : Article
Product Code : IJIT41905
Author Name : Rekha Handa
Availability : YES
Subject/Domain : Finance
Download Format : PDF Format
No. of Pages : 17

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Abstract

The lack of women directors in the upper rungs of the corporate has been a cause for concern for the social reformers, policy makers and stakeholders. The ever sensitive issue of gender diversity has been revisited in the Indian context in the special case of banking sector. The paper investigates the impact of women directors on the Indian banks’ performance using Return on Assets (ROA) as a measure of performance. Using panel data analysis for 36 scheduled banks operating in India over a span of four years, the paper investigates the effect of women directors on bank’s performance. The results highlight a strong statistical negative association between female directorship and performance measured through ROA, which defies the theories of ethics and economics. The results, though pave way for further investigations, undoubtedly establish women as important influencers of performance of banks.


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Annihilative effects of the global financial crisis and the massive financial scandals have proved to be a trigger for renewed interest in effective corporate governance. The deficiencies in corporate governance, especially of financial firms, and regulatory lapses have led to public criticism and much attention has been drawn towards banks’ corporate governance. The Basel Committee on Banking Supervision (BCBS) pointed out that “effective corporate governance practices are essential to achieving and maintaining public trust and confidence in the banking system, which are critical to the proper functioning of the banking sector and economy as a whole” (BCBS, 2010). The steering group on corporate governance of OECD averred that board failures in financial firms are one of the primary reasons for the pervasive and devastating financial crisis, highlighting the failure of financial firms to devise appropriate risk strategies and suitable monitoring mechanisms for their implementation in an effective manner. With an aim to study and improve governance in banks, BCBS issued October 2010 principles for enhancing corporate governance in banks, taking lessons from global financial crisis. In the wake of the ongoing developments and changing business models, the Committee decided to revisit the 2010 principles and came up with revised and updated corporate governance principles for banks in 2015.


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