Does gender diversity affect financial strength differently in conventional and Islamic banks? Evidence from MENA countries

Abstract

This study examines the effect of board gender diversity (i.e., the presence of female directors on the board) on the overall bank's financial strength. We also investigate the association on a dual-banking system consisting of conventional and Islamic banks internationally. We employ a scenario-based multi-criteria approach to measure the bank overall financial strength index conceptualizing five bank financial criteria that derived from the CAMEL framework (i.e., acronym stands for “Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity”). Using an international sample, we find that more gender diversity in the boardroom is associated with stronger financial health positions across both bank types. Our results imply that even though Islamic banks face additional agency costs, the role of female members in the boardroom is still similar. Our findings provide supporting evidence for recruiting females to serve on boards in the dual-banking industry.