THE IMPACT OF BOARD DIVERSITY ON THE PERFORMANCE OF BANKS

Abstract

This paper empirically investigated the impact of board diversity on the performance of 13 banks in Jordan during the period of 2005–2020. Panel data was collected from the Amman Stock Exchange (ASE) and the formal websites of the different banks. Fixed-effect and random-effect techniques have been applied to check the impact of board diversity on banks’ performance. The results found that the larger the size of the bank, the better their return since they hold more deposits, and this increase their investment opportunities. In addition, the larger the size of the board, the better the performance since more experienced directors would be included in the decision-making and higher added knowledge in the decision-making process. Including more board members should enrich the decision-making process with high experience and know-how characteristics. In addition, this paper confirmed that Jordanian banks should include more women in their boards since sharing their managerial skills and experience should enhance banks’ performance.