Gender diversity, board of director’s size and Islamic banks performance

Abstract

Purpose

This paper aims to empirically assess the impact of gender diversity and board of directors’ size on Islamic banks’ performance.

Design/methodology/approach

Hand-collected data set including 27 banks from 2005 to 2013 is used to investigate the effect of the above mechanisms on banks’ performance as measured by return on equities and return on assets. The study uses pooling regression, which requires estimating a single equation on different cross-sectional data. Specifically, ordinary least squares is used to estimate the model.

Findings

Obtained results suggest that the presence of women on the board of directors does not have a significant influence on banks’ performance. However, gender diversity in the management department is found to have a negative and significant impact. Besides, the findings prove that the board of directors’ size adversely affects banks’ performance.

Research limitations/implications

Findings of this study will enhance a better understanding of the interrelationships between performance measures and determinants, which can improve estimations of key inputs in the decision-making process. Such deeper understanding should provide policy and decision makers with an important part of the framework needed to provide quality outcomes. In addition, the results of this study provide some beneficial insights on performance determinants to the policymakers, industry leaders and bank managers. Accordingly, those parties could enhance the profitability of Sudanese Islamic banks by improving capitalisation and assets utilisation and by improving banks operation efficiency, leverage and by reducing the size of the board of directors. Industry leaders and bank managers could also benefit from the findings on bank age, which suggest that they can learn from the experience of newly established banks, as the latter are shown to be able to use their resources to generate more profits.

Practical implications

Results suggest that in the future, Islamic banks should focus on how to weaken the negative performance effect of female executives’ participation. Besides, banks should work to decrease labour market discrimination and increase long-term career commitment amongst women.

Originality/value

After reviewing the literature, the research objective was not accounted for by the existing empirical works. Indeed, the role of gender diversity and board of directors’ size on a bank’s performance was not examined in the case of Sudanese Islamic banks.

Citation

Elgadi, E. and Ghardallou, W. (2022), "Gender diversity, board of director’s size and Islamic banks performance", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 15 No. 3, pp. 664-680. https://doi.org/10.1108/IMEFM-09-2019-0397