Abstract:

The board plays a key role in monitoring, advising and directing banks towards maximising shareholders’ value. This role is however nuanced in both the observable and cognitive activities that lead to performance. This paper therefore seeks to examine the influence of board diversity on firm performance, and the role of firm characteristics in moderating such association in Nigerian Deposit Money Banks. Using an 88 firm-year observation of eight banks that constitute about 70% of total market share, our findings show that ethnic homogeneity enhances performance - ROA, NIM and TBQ, while the presence of foreign directors on the board showed a positive and significant effect only on NIM. Conversely, female directors and age diversity both have a negative significant influence on performance. Similarly, results suggest that a board chairman sharing common origin with the dominant ethnic group affects performance (TBQ and NIM) negatively. Firm age and leverage significantly moderate the relationship between diversity and performance positively, while firm size revealed a negative influence. The paper recommends promotion of diversity-enhancing initiatives such as development of mentoring and sponsorship pipelines by women networks, affinity groups, specialised employment-retention strategies for women, and age-inclusive criteria for board appointments. It concludes that board diversity affects performance in Nigerian Deposit Money Banks.