THE NEXUS BETWEEN THE GENDER DIVERSITY IN BOARDROOMS AND FINANCIAL SOUNDNESS: EVIDENCE FROM PAKISTAN’S BANKING SECTOR

Abstract

this study investigates the effect of gender diversity on the financial soundness (FS) of banks. More specifically, the study aims to assess how the presence of women in the boardroom affects the bank’s financial soundness. We also investigate the percentage of women (greater representation of women) impacting the FS of Islamic banks (IBs) and conventional banks (CBs) of Pakistan. We employed data from several sources, such as bank-level data obtained from financial statements and annual reports over the period of 2010 to 2022. Selection of banks is on the basis of full-fledged IBs and CBs. Moreover, on the basis of the Hausman test, random effects models are employed for the empirical analysis. Empirical results for the model suggest that having women as a board of directors (BOD) does represent a valuable resource for CBs. Our results imply that IBs face a possible explanation for the negative association between women's presence and FS of IBs, which is that the social role theory and the importance of social norms and religious values in either discouraging or upholding gender stereotypes contribute to the debate by studying women's board participation in IBs on religious doctrine. Moreover, in case of CBs, the presence of women can positively enhance the FS of the CBs; it also enhances creativity, innovation, and productivity. Our findings provide supporting evidence for recruiting women to serve on boards in the banking industry.

Keywords: Islamic bank; Conventional banks; Gender diversity