Enhancing bank efficiency through board diversity: a MENA region study

Abstract

Purpose

This empirical research investigates the impact of board nationality diversity on the efficiency of banks. Additionally, our analysis examines the interacting impact of women's representation on bank boards in the correlation between nationality diversity on board and bank efficiency.

Design/methodology/approach

This research utilizes a dataset comprising banks operating in the MENA countries over an eight-year period. We apply diverse statistical methodologies, with Ordinary Least Squares (OLS) being the primary econometric analysis, alongside several robustness tests.

Findings

The research results offer important insights into the importance of board nationality diversity, as well as its interaction with the inclusion of women on boards. The findings indicate that having foreign directors on bank boards enhances efficiency. Furthermore, they suggest that increased women representation on boards improves the positive correlation between presence of foreign directors in boardrooms and efficiency of banks, thereby mitigating agency problems and enhancing governance practices.

Practical implications

These results carry substantial implications for legislators across the MENA countries. Advocating for diversity policies within banks to encourage the inclusion of foreign directors on their boards could lead to efficiency enhancements. Furthermore, policymakers might explore the implementation of quotas or directives to bolster gender heterogeneity within board appointments, ultimately fostering improved bank efficiency and bolstering competitiveness within the region.

Originality/value

This study breaks new ground by investigating how board nationality diversity affects efficiency of banking sector in the MENA countries. It stands out for examining the moderating role of women representation on boards, offering novel insights into how these factors interact.

Citation

Issa, A., Sahyouni, A. and Mateev, M. (2024), "Enhancing bank efficiency through board diversity: a MENA region study", EuroMed Journal of Business, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/EMJB-06-2023-0158