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Journal of Business Ethics

Erschienen in:

30.05.2015

Financial Management Effectiveness and Board Gender Diversity in Member-Governed, Community Financial Institutions

verfasst von: Anne Marie Ward, John Forker

Erschienen in: Journal of Business Ethics | Ausgabe 2/2017

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Abstract

Although non-profit organisations typically have high representation of females on their boards, relatively little is known about the effects of gender diversity in these organisations particularly in relation to financial management. In this archival study, resource dependency theory and agency analysis are combined to provide theoretical insight and empirical analysis of gender diversity on effective financial management in member-governed, community financial institutions. The investigation is possible due to the unique characteristics of the organisational form and region being examined—credit unions in Northern Ireland. The sector has not been subject to external regulation on board gender, yet a wide array of gender mix on boards ranging from 100 % male to 100 % female are in existence. In addition, effective financial management is crucial to their survival and their ability to meet member objectives. Boards with higher female representation exhibit superior financial management first, in respect of loan book quality in the period of austerity following the financial crisis and second when measured against return on assets.

Vorheriger Artikel Does Board Gender Diversity Influence Financial Performance? Evidence from Spain

Nächster Artikel The Territorial Dimension: The Component of Business Strategy that Prevents the Generation of Social Conflicts

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Proxies used to capture non-profit performance in prior empirical studies include objective and subjective measures. Objective measures are typically financial ratios that are proxies for the board’s ability to obtain resources; such as growth in budget (Bradshaw et al. 1992, 1996), size of budget deficit (Bradshaw et al. 1992, 1996), the efficient use of resources, such as an average administration to revenue ratio (Siciliano 1996), a total operating expenses to total revenue ratio (Reddy et al. 2013) or social spend, such as growth in contributions (Callen et al. 2010). Subjective measures of performance typically are third party assessments of the performance of the board (Cornforth 2012; Bradshaw et al. 1992).

Some empirical studies report a positive association between gender diversity and financial performance (Luckerath-Rovers 2013; Andrés-Alonso et al. 2009; Adams and Ferreira 2009; Carter et al. 2003), others a negative (Shrader et al. 1997) or no relation (Ali et al. 2014; Carter et al. 2010; Rose 2007; Farrell and Hersch 2005).

Reddy et al. (2013) do not disclose information on the %WOB, opting to report absolute numbers. The mean number of women on the board is 2.4 (mean board size is 7). The minimum is 0 woman and the greatest number of women present on any board is 11 (overall board size ranges from 2 to 25). Hartarska and Nadolnyak’s study covered a sample of 393 observations from 140 community development loan funds in the US. The mean %WOB was 37.5 %, the minimum was 0 and the maximum was 83 %.

Themudo (2009) reports that this pattern is only relevant in countries, such as the US, where women are more empowered to act in public affairs.

The World Council for Credit Unions provide guidance on good corporate governance and emphasise ‘Balance’. Consistent with RDT the guidance states that ‘credit unions should strive for a board that responds to the demands of the general membership. By creating a board in this manner, members are more likely to feel that they have a voice on the board and are more likely to feel a stronger connection with the credit union. … The composition of the board should aim to reflect the demographic makeup of its members and the financial needs of members. By creating a board that reflects the age, gender and ethnic background of the credit union, the desires of the general assembly can more easily be developed by directors’. The guidance goes on to state that ‘although diversity is an important component of board makeup, financial or strategic experience should also play a part. Members with a strong financial background have a great deal to contribute to the development of the institution’ (Niederkohr and Ikeda 2005, p. 7).

In some countries, such as Canada and Australia, the board of directors in the larger credit unions now receive payment.

In 19 of the 1490 observations the boards are all female. In 78 instances over 80 % of the directors on boards are female.

This finding is also reported for community banks (Kupiec and Lee 2012; Amel and Prager 2014).

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Titel: Financial Management Effectiveness and Board Gender Diversity in Member-Governed, Community Financial Institutions
verfasst von: Anne Marie Ward
John Forker
Publikationsdatum: 30.05.2015
Verlag: Springer Netherlands
Erschienen in: Journal of Business Ethics / Ausgabe 2/2017
Print ISSN: 0167-4544
Elektronische ISSN: 1573-0697
DOI: https://doi.org/10.1007/s10551-015-2699-9

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