Technical efficiency in the Ghanaian banking sector: does boardroom gender diversity matter?

• DOI: https://doi.org/10.1108/CG-04-2021-0144
• Published date: 10 February 2022
• Date: 10 February 2022
• Pages: 1133-1157
• Subject Matter: Strategy,Corporate governance
• Author: Isaac Boadi,Raymond Dziwornu,Daniel Osarfo

Technical efficiency in the Ghanaian

banking sector: does boardroom

gender diversity matter?

Isaac Boadi, Raymond Dziwornu and Daniel Osarfo

Abstract

Purpose –The marginalization of women on boards is a heavily discussed topic across the world,

especially in Ghana. Apart from estimatingthe link between boardroom gender diversity and technical

efficiency of banks, this study aims to test the presence of upper echelons theory in the Ghanaian

bankingsector.

Design/methodology/approach –The study examines data from 2000 to 2019 annual reports of 23

banks in Ghana. The stochastic frontier analysis is used to estimate the impact of boardroom gender

diversityon technical efficiency of banks in Ghana.

Findings –This study finds that greaterboardroom gender diversity generates technicalefficiencies for

banks. The results remain unchanged after accounting for banktypes (listed and non-listed). Thus, all

banks benefitin terms of technical efficiency from more boardroomgender diversity. The upper echelons

theory is validatedin the Ghanaian banking context. Overall, the studysupports pro-gender diversity on

boards.

Practical implications –The results have implications at corporate, social and national levels. It

supportsthe need for policies that improve greater boardroomgender diversity.

Originality/value –This study adds to a growing number of non-developed countries by investigating

the link between the boardroomgender diversity and technical efficiency of banksin Ghana, a country

which historicallyhas had minimal female participationin the workforce. New insight is, therefore,offered

into this relationshipby using data which examines the technical efficiency of banks periodsbefore and

after the Womenin Finance Charter in 2016.

Keywords Ghana, Efficiency, Banks, Stochastic frontier analysis,Boardroom gender diversity

Paper type Research paper

1. Introduction

Gender diversity, defined in this study as the presence of women on boards, has lately

become a crucial international matter of contention (Adams and Ferreira, 2009;Gyapong

et al., 2016;Mahadeo et al.,2012;Ullah et al.,2018). Despite the recent increase in female

presence on boards, figures from the BIS (2011) report shows that, in advanced

economies, female representation on boards is usually below 10%. The Scandinavian

countries (Finland, Norway and Sweden) only show figures above 20% women. Grant

Thornton’s (2011) report on corporate control in the UK reveals that women represent less

than 10% of the board directors of Financial Times Stock Exchange (FTSE) 350 firms, and

40% of these boards have exclusively male representation. Only 2 of these 350 firms were

chaired by women.

In March 2016, Women in Finance Charterwas launched to encourage the financial industry

to improve gender balance in senior management. In 2017, a year after the Women in

Finance Charter, the UK Government published the Hampton Alexander Report, which

Isaac Boadi and

Raymond Dziwornu are

both based at the

Department of Banking and

Finance, University of

Professional Studies Accra,

Ghana. Daniel Osarfo is

based at the University of

Ghana Accra, Ghana.

Received 15 April 2021

Revised 28 June 2021

24 October 2021

Accepted 6 January 2022

DOI 10.1108/CG-04-2021-0144 VOL. 22 NO. 5 2022, pp. 1133-1157, ©Emerald Publishing Limited, ISSN 1472-0701 jCORPORATE GOVERNANCE jPAGE 1133

recommends FTSE100 companies to have 33% women in FTSE100 leadership teams by

2020. Years after the introduction of Women in Finance Charter and Hampton Alexander

Report, the growing popularity of the board gender diversity concept is not limited to

Europe but other continents as well. For instance, in the USA, there is a wide campaign

requesting firms to voluntarily pledge a 20% female representation on their boards by 2020

confirms the increasing popularity of the board gender diversity agenda across continents.

Several empirical studies on diversity concept that have discussed its impact on firms and

risk-taking (Khaw et al.,2016;Lenard et al., 2014), bankruptcy (Wilson and Altanlar, 2011)

and internal weaknesses (Chen et al.,2016). In terms of sectors, boardroom gender

diversity has been tested on various industries and sectors such as green innovation (He

and Jiang, 2019), organizational performance in social enterprises (Cho et al. (2017),

Corporate Payout Policy (Byoun et al.,2016), electronic manufacturing services industry

(Chin and Tat, 2015), environmental, social and economic value creation (Nadeem et al.,

2020), activism in deinstitutionalizing old boys’ networks (Perrault, 2015), justice,

organizational benefits and policy (Fine et al.,2020), hospitality industry (Menicucci et al.,

2019), corporate cash holdings (Atif et al.,2019), corporate social responsibility disclosure

(Khan et al., 2019), Stock Portfolio Performance (Chapple and Humphrey, 2014) and

voluntary disclosure of intellectual capital in initial public offering prospectuses (Nadeem,

2020). Also, empirical studies reveal that board gender diversity and its impact on

performance have focused on profitability (Bennouri et al.,2018;Nguyen et al.,2015;Strøm

et al.,2014

;Mahadeo et al.,2012;Mori and Olomi, 2012) with little on technicalefficiency.

The departure of this study from the above-mentioned studies is as follows: first, although

relevant policies have been proffered fromthe above-mentioned studies; interestingly, none

of these studies considered the banking industry space. Years after the passage of the

Women in Finance Charter in 2016 and to the best of the author’s awareness, this study is

the first to examine the effect of female presence on board of directors on banks’ technical

efficiency in the Sub-Saharan countries, particularly Ghana for periods before and after

Women in Finance Charter in 2016. Second, in the aftermath of the global financial crisis,

policymakers and bank regulators have started raising questions about the effectiveness of

boards of financial institutions. This became apparent in postcrisis analysis. Among the

several shortcomings identifiedwas the composition of the board of directors. Key decision-

making body did not fulfill its major role to exert monitoring over senior management, and it

failed to identify, understand and challenge risk-taking practices. A key recommendation

was to increase the presence of women on the board. The motivation for this decision

stemmed from the fact that personal attributes and women’s ability allow the board to

approach problems and formulate strategies, unlike boards composed predominantly by

men. Hence, the need to estimate the influence of female presence on the board of

directors on efficiency of banks.

Farrell (1957) defined technical efficiency as the ability of the producer to eliminate waste of

resources by producing as much output asinput usage allows or by using as little inputs as

output production allows. Recent studies on whether board gender diversity significantly

promotes technical efficiency by Ramly et al. (2015) and Andries

,et al. (2017) have yielded

mixed results. The diverse institutional conditions and high percentage of female leaders’

(Strøm et al.,2014, p. 60) in the Ghanaian banking sector makes board gender diversity

and technical efficiency interesting and unhurried to be investigated. This study attempts to

answer the following question:

Q1. Does boardroomgender diversity affect the technical efficiency of banks?

The paper adopts a stochastic frontier analysis (SFA) approach to estimate the impact of

boardroom gender diversity on technical efficiency of banks in Ghana. The study examines

data from 2000 to 2019 annual reports of 23 banks in Ghana. SFA is chosen over other

estimation techniques such as ordinary least squares (OLS) and corrected OLS (COLS)

and data envelopment analysis (DEA) in computing measures of technical efficiency of

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