Women’s leadership impact on risks and financial performance in banking: evidence from the Southeast Asian Countries

Abstract

In this article we investigate the effect of the presence of women on the board of directors and in executive positions on the risk and profitability of75 banks in ten ASEAN countries during the period of 2002–2018.We find that banks with more women in executive positions show higher capital risk, i.e., Z-score and capital ratio. However, the women-led banks have higher market to book ratios and they are more profitable in terms of return on assets (ROA) and return on equity (ROE). Furthermore, our findings shed light on the relationship between gender diversity and financial decision-making in the company by highlighting that the Southeast Asian Nations (ASEAN) banks with more executives’ women are more risky and have higher profits than the men-led banks. We also find that the proportion of women on the board standing as a director or a chair reduces performance in ROA and ROE. Bank performance measured by market-to-book (PB), is the lowest when there are females on the board. This highlights the gender differences in investment behavior and the women’s needs in banks at Asian region. Given that bank performance has a direct effect on the stability of the financial system as well as on economic growth in the country, it is essential for the regulatory authorities to assess variety of sources which can improve performance and governance in (ASEAN) banks.