Does Workforce Gender Diversity Influence Banks’ High-Level Decisions? Evidence on Credit Growth and Risk-Taking

Abstract

We investigate the impact of workforce gender diversity on the relationship between women’s representation in the board of directors and other decision-making bodies, and bank performance in credit growth. Using panel data on Turkish banks from 2006-2020, we find that while female directors and managers alone correlate negatively with credit growth, likely due to women being more risk-averse, there are positive synergies when the workforce composition is tilted towards women. The results suggest that female directors and managers are more effective in facilitating bank lending by lowering bank risk when there is greater workforce gender diversity, and higher representation of women in the workforce. This highlights the importance gender diversity and inclusion as an organizational value, manifested by the presence of women at all levels of the organization, in establishing a sound risk culture and compliance. Regulators may want to encourage diversity disclosure at all levels, not only in boards.