Women on Bank Boards Lift Performance But Only If There Are Enough

(Bloomberg) -- Increasing the number of women on the boards of U.S. banks improves performance, according to a new study -- but only if there are enough of them.

While a greater gender mix has a positive impact on measures of performance, including revenue/expense ratio, return on assets and stock price growth, that only applies once a threshold level of diversity is achieved, research summarized in a post published on the Bank of England staff blog found.

It actually has a negative impact when the level is low, and the effects were also only found in banks that are well capitalized, the researchers said.

Ann Owen, a professor at Hamilton College in New York, and Judit Temesvary, a senior economist at the Federal Reserve Board of Governors in Washington, found diversity is associated with greater creativity and productivity.

But women are likely to speak more frequently as the percentage of females in the group increases, making it “possible that a positive impact of increasing gender diversity only occurs after a threshold share” is reached, they said.

The research, which is based on annual data from 87 U.S. bank holding companies from 1999-2015, shows that while women represent almost 57 percent of employees in commercial banking, they make up only 31 percent of executive or senior level managers.

The findings were presented as part of a joint conference between the BOE, Fed and European Central Bank on diversity in May. The central banks are under increasing pressure to lift the number of women on their own decision-making boards as well to encourage a greater mix at the financial institutions they help oversee.

©2018 Bloomberg L.P.