Advancing Gender Equality in Banking: The Role of Female Directors and Board Monitoring in Driving Financial Performance

Abstract

The purpose of this study is to examine the effect that female directors (FD) have on a banks’ financial performance (FP). Additionally, it looks at whether board monitoring (BMT) mediates this relationship. To address this gap, we examine a path model that shows board monitoring as a mediator in the relationship between female directors and bank financial performance using data from the banking sector of Pakistan spanning the years 2014–2022. Panel regression analysis, GMM, and the Hayes Process Macro model 4 are used in this study to investigate the suggested relationships. The findings show that improved bank financial performance is positively correlated with both female directors and board monitoring. Furthermore, as proposed, the association between female directors and banks' financial performance was partially mediated by board monitoring. The results show that female directors have a positive effect on banks’ financial performance because of their independent, critical, and proactive approach to board monitoring. The results of the research contribute by offering new explanations for the relationships between the financial performance of banks, board monitoring, and female directors. This study also demonstrates to managers the value of having a diverse and gender-inclusive board and the positive impact that strong board monitoring has on bank financial performance.