Does diversity in top management and boards affect ESG performance? Evidence from Islamic and conventional banks in the MENA region

• Published in: International journal of Islamic and Middle Eastern finance and management 2024-10, Vol.17 (6), p.1244-1266
• Main Authors: Rabbani, Mustafa Raza, Kiran, Madiha, Bhuiyan, Abul Bashar, Al-Hiyari, Ahmad
• Format: Article
• Language: English
• Subjects: Accountability; Banking; Banking industry; Banks; Committees; Decision making; Females; Financial institutions; Financial services; Gender; Governance; Influence; Investment decision; Islam; Islamic financing; Legitimacy; Management teams; Robustness; Social responsibility; Sustainability; Top management; Transparency
• ISSN: 1753-8394; 1753-8394; 1753-8408
• DOI: 10.1108/IMEFM-06-2024-0281

Purpose This study aims to investigate the impact of gender diversity in top management teams and boards on environmental, social and governance (ESG) performance. The authors propose a corporate social responsibility (CSR) committee as a moderating variable in this relationship, drawing on resource dependence and legitimacy theories. This study is crucial in understanding the dynamics of gender diversity and its impact on ESG performance in the banking sector. Design/methodology/approach The study examines a sample of Islamic and conventional banks from 10 Middle Eastern and North African countries during 2008–2022. Initial analysis was conducted using fixed effects panel regression, whereas the robustness test used the generalized method of movement dynamic system. Findings The findings, which are significant for both conventional and Islamic banks, indicate that female directors are crucial in promoting ESG performance in conventional banks. In contrast, female executives do not appear to contribute significantly. However, for Islamic banks, neither board nor executive gender diversity significantly affects ESG performance. Moreover, the find that the positive moderating role of the CSR committee is significant only for the nexus between board gender diversity and conventional banks’ ESG performance and for the connection between executive gender diversity and Islamic banks’ ESG performance. Originality/value Despite the widespread belief that gender diversity in top management teams is pivotal in promoting ESG performance, empirical studies supporting these claims are scarce, particularly in the banking sector. The study, therefore, brings a novel perspective to this discourse. These findings have the potential to significantly assist stakeholders in evaluating how gender diversity in top management teams influences banks’ sustainability practices, thereby empowering them to make more informed and impactful investment decisions.