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Gender diversity and financial performance of Islamic banks

Huthayfa Nabeel Jabari (Department of Accounting, University of Malaya, Kuala Lumpur, Malaysia)
Rusnah Muhamad (Department of Accounting, University of Malaya, Kuala Lumpur, Malaysia)

Journal of Financial Reporting and Accounting

ISSN: 1985-2517

Article publication date: 11 November 2020

Issue publication date: 11 August 2021

1170

Abstract

Purpose

The purpose of this paper is to examine the influence of gender diversity among the board of directors (BOD) and Shariah supervisory board (SSB) members on the financial performance of Islamic banks in Indonesia and Malaysia.

Design/methodology/approach

Data for a sample of 19 Islamic banks for the period 2010–2018 were collected to test the research hypotheses using pooled ordinary least squares estimation method. Generalized least squares estimation method was used to confirm that the results are robust. This study lagged the explanatory variables by one period to control for potential endogeneity.

Findings

The findings suggest that Islamic banks with more gender-diverse BOD and SSB are expected to have better financial performance. In addition, this paper finds that an increase in Islamic banks’ size may undermine the positive impact of gender diversity among SSB members on Islamic banks’ financial performance.

Research limitations/implications

This study was conducted only on Islamic banks in Indonesia and Malaysia owing to data constraints; thus, the results may not be generalizable to Islamic banks in other countries.

Practical implications

Improving financial performance is crucial for banks, especially for Islamic banks, to sustain their fast-growing share globally. Therefore, the findings of this study are expected to provide insight and understanding in the selection and appointment of BOD and SSB members at Islamic banks.

Social implications

By having women represented in the BOD and SSB, Islamic banks will benefit equally from valuable abilities across demographic groups in the society. Furthermore, if the members of the BOD and SSB are properly selected, Islamic banks with more gender-diverse boards can effectively contribute to enhancing social welfare of various segments in the society.

Originality/value

This is the first study, as far as is known to the authors, that provides empirical evidence on the influence of gender diversity among BOD and SSB members on the financial performance of Islamic banks. This paper is expected to be used as a reference by the shareholders and customers of Islamic banks in ensuring that the BOD and SSB have the best optimal composition that maximizes their profits.

Keywords

Citation

Jabari, H.N. and Muhamad, R. (2021), "Gender diversity and financial performance of Islamic banks", Journal of Financial Reporting and Accounting, Vol. 19 No. 3, pp. 412-433. https://doi.org/10.1108/JFRA-03-2020-0061

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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