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

The composition of board of directors’ characteristics is a pillar of a robust corporate governance (CG) framework, because the board guides and monitors managerial decision-making in order to help companies meet the grand challenges that contemporary society faces like sustainable development (Scherer & Voegtlin, 2020; Veldman et al., 2016). The governance principles and mechanisms that inform how a company is directed and controlled are designed both to solve shareholders’ control issues due to agency problem and contribute to value creation for all stakeholders, in line with stakeholder theory (Freeman, 1984). This implies that CG effectiveness is measured by its ability to guide the company in satisfying all stakeholders’ expectations regarding both financial and nonfinancial performance (Cardoni et al., 2020). However, the composition of the board may moderate the relationship between ESG and financial performance, as having a diverse board may better capture stakeholders’ need, and therefore, the board may opt for more adequate and successful ESG strategies (Paolone et al., 2024; Shakil et al., 2021). For example, more female directors may favor a greater sensitivity to environmental and social activities of banks (Aouadi & Marsat, 2018; Galletta et al., 2022), and directors with different cultural backgrounds and nationalities may positively impact on ESG scores (Paolone et al., 2024). Therefore, several authors call for more studies to better understand how board characteristics can increase banks’ board effectiveness in terms of both financial and sustainability performance (Arnaboldi et al., 2019; Fernandes et al., 2016, 2018). This paper aims to contribute to this stream of research by exploring how diversity of board members, in terms of gender, age and nationality, contributes to financial and sustainability performance in the banking sector. The main assumption is that heterogeneity in directors’ characteristics contributes to a better understanding of the complexities of the organizational environment and thus improves the board’s decision-making and monitoring processes and impact performance. The paper investigates how directors’ differences, in particular gender heterogeneity, can impact on the bank financial performance (expressed in terms of return on average assets (ROA)) and its risk (measured in terms of Z-SCORE) and how these differences impact on sustainability strategies measured through a cumulative ESG score. The empirical analysis includes 253 bank-year observations from Organisation for Economic Co-operation and Development (OECD) countries over the period 2008–2019. The raw data used in this study have been sourced from three different data service providers: Refinitiv for ESG information, BoardEx for board’s composition, and BankFocus for banks’ financial key performance metrics.