Political connections and remuneration of bank boards’ members: moderating effect of gender diversity

Abstract

This study investigates the impact of political connections of members of banks’ Boards of Directors on these boards’ remuneration, and the influence of gender diversity on this impact. Using a panel of observations on 69 eurozone banks supervised by the ECB for the period 2011 to 2019, and the generalized method of moments (GMM), our empirical results indicate that political connections negatively impact average remuneration. In our view, directors with political connections prefer other types of benefits, aiming at future political positions and not wanting to be associated with high remunerations. Meanwhile, gender diversity accentuates this negative effect, a finding that may be related to the fact that, by including female directors, shareholders try to reduce the level of opportunistic behavior associated with political connections. Overall, we find that our results are robust across different choices of measures of gender diversity.