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

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.

Board characteristics and credit‐union performance

“…Firstly, consistent with Ward and Forker (2015), we expect that credit-union performance benefits from having a greater number of female directors. Following the governance literature, we examine the effect of board gender diversity, board size and board meetings on credit-union performance.…”

“…Following the governance literature, we examine the effect of board gender diversity, board size and board meetings on credit-union performance. Firstly, consistent with Ward and Forker (2015), we expect that credit-union performance benefits from having a greater number of female directors. We argue that the democratic model is likely to encourage gender diversity because directors are better able to represent the credit-union membership.…”

“…As suggested by Ward and Forker (2015), the credit union's member benefit maximisation can be best achieved by generating surpluses. Since 1992, credit unions in Australia are required to meet the same capital-adequacy requirements as banks, without access to outside equity.…”

“…Consequently, credit unions are heavily reliant on retained earnings to generate reserves to fund future growth. As suggested by Ward and Forker (2015), the credit union's member benefit maximisation can be best achieved by generating surpluses. Surpluses are in fact needed for providing customer benefits (by offering better interest rates than bank counterparts), for offering financial services and for expenditure on local community initiatives and technology innovation.…”

Top Management Team Composition and Financial Performance: Examining the Role of Gender Diversity

“…Furthermore, previous empirical surveys and existing literature explore the link between gender diversity in top management teams and fi nancial outcomes predominantly in large organizations, while only a few studies are conducted in small-and medium-sized enterprises (Dale-Olsen, Schone, & Verner, 2013;Mínguez-Vera & Martin, 2011;Ward & Forker, 2015). However, small-and mediumsized enterprises are considered to be crucial engines for economic growth throughout the world.…”