Gender, Age, and Nationality Diversity in Banks’ Board: Do They Affect Financial and Sustainability Performance?

Given recent emphasis on the role of company board composition in contributing to economic growth, financial stability, and sustainable development, we aim to explore how board diversity contributes to both financial, social, and environmental performance in the banking sector. We focus in particular on gender diversity, but we also consider nationality heterogeneity, age diversity, and the presence of independent directors as key drivers of performance. Previous studies have devoted limited attention to the banking industry and have mainly focused on the impact of gender on financial outcomes. The novelty of this study is that it considers several board features and assesses their impact on both financial performance and risk for banks. In addition, it explores whether gender diversity does play a role in moderating the relationship between environmental, social, and governance (ESG) performance and financial performance. By doing so, it contributes to existing literature that has not yet provided clear evidence of how ESG performance is associated with financial performance. Results indicate that the presence of female directors lead to more prudent (less hazardous) decisions but may reduce profitability (return on average assets (ROA) slows down). This negative impact on profitability is reversed when we consider ESG strategies: more gender heterogeneity provides a better guidance on decision-making related to environmental, social, and governance aspects which have a positive impact on ROA and risk. While ESG investments usually represent costs that lessen profitability, female-led ESG investments are able to sustain banks’ long-term competitiveness. Also, age diversity favors greater profitability and fewer risks, which confirms the higher capability of a diverse board to improve decision-making, monitoring, and performance. On the contrary, different nationalities have a negative impact on banks’ financial performance. This study offers interesting insights to regulators, policy makers, supervisory authorities, banks, and managers to achieve more sustainable and stable banking.