Gender diversity, financial performance,

and the moderating effect of CSR:

empirical evidence from UK
financial institutions
Hanen Ben Fatma and Jamel Chouaibi

Hanen Ben Fatma is based Abstract

at the Faculty of Economics Purpose – This study aims to examine the direct relationship between board gender diversity (BGD) and
and Management of Sfax financial performance and the moderating role of corporate social responsibility (CSR) in the said
and Research Laboratory relationship.
of Information Technology, Design/methodology/approach – Using data collected from the Thomson Reuters Eikon ASSET4
Governance and database from 42 UK financial institutions listed in the ESG index for the period 2005–2019, this study
Entrepreneurship used multivariate regression analysis on panel data to test the effect of BGD on financial performance
“LARTIGE” at University of and estimate the moderating effect of CSR between them. Moreover, to control the endogeneity problem,
the authors conducted an additional analysis by testing the dynamic dimension of the data set through
Sfax, Sfax, Tunisia.
the generalized moment method.
Jamel Chouaibi is based at
the Department of Findings – The empirical results show that BGD is positively related to financial performance and that
BGD increases firm performance with the moderating effect of CSR. Regarding the endogeneity
Accounting, Faculty of
problem, the existence of continuity between financial institution performances over time is
Economics and
demonstrated.
Management of Sfax,
Research limitations/implications – The current paper sheds light on the importance of BGD in
University of Sfax, Sfax, improving firm performance and the moderating role of CSR in strengthening the relationship between
Tunisia and Research BGD and firm performance, thereby contributing to the agency theory, the resource dependency theory
Laboratory of Information and the stakeholder theory. Therefore, regulators and policymakers in the UK can use the outcomes of
Technologies, Governance this study to enforce the representation of female directors on boards to enhance the financial
and Entrepreneurship performance of financial institutions. Moreover, the findings could be useful for regulatory bodies to
(LARTIGE), University of encourage financial institutions to practice CSR activities and disclose them in their annual reports.
Sfax, Sfax, Tunisia. Originality/value – To the best of the authors’ knowledge, this is the first study investigating the
moderating role of CSR on the relationship between BGD and financial performance in the context of the
financial sector. It is also the first study documenting that CSR reinforces the relationship between
gender-diverse boards and financial institutions’ performance. This study fills a research gap as it
expands the existing literature that has generally focused on the impact of BGD on financial performance
Received 1 November 2022 and has not reached similar results.
Revised 14 February 2023 Keywords Corporate social responsibility (CSR), Financial performance,
Accepted 2 April 2023
Board gender diversity (BGD), UK financial institutions, Moderating effect
The authors would like to thank Paper type Research paper
the Editor and the two
anonymous referees of the
“Corporate Governance: The
International Journal of 1. Introduction
Business in Society” for their
insightful comments that have
greatly benefitted the paper.
Good corporate governance practices play a crucial role in assisting management in
The author(s) received no monitoring and controlling the use of company resources in a better way. One of the central
financial support for the
research, authorship, and/or
internal governance mechanisms that is likely to monitor organizational management
publication of this article. among managers and protect stakeholders’ interests is the board of directors. It is

PAGE 1506 j CORPORATE GOVERNANCE j VOL. 23 NO. 7 2023, pp. 1506-1525, © Emerald Publishing Limited, ISSN 1472-0701 DOI 10.1108/CG-11-2022-0445
designated to ensure the alignment of a firm’s activities and specific objectives (Coles et al.,
2001). In this regard, the board has to ensure that top managers behave in a way that
improves the firm performance and overall value to the shareholders. Over the past two
decades, the question of gender diversity on the board has gained momentum (Adams and
Ferreira, 2009; Lee et al., 2015). As such, several prior studies have focused on gender
diversity as a characteristic of the board to determine how it can affect the performance of
firms. However, most of these studies have empirically examined the effect of BGD using
non-financial companies. Therefore, this study fills the literature gaps by focusing on BGD,
specifically in financial companies: a topic that has not been sufficiently explored.
To increase women’s representation in boardrooms, countries such as Germany, Norway,
Spain, France, Iceland, Italy, Belgium, Finland and Kenya have passed a legislative quota
requiring firms to appoint between 30% and 40% of women to corporate boards (Brahma
et al., 2022; Arvanitis et al., 2022). In contrast, the UK has adopted a voluntary approach
against the quota-based approach. The reason behind the voluntary approach is to
authorize a fundamental change in the culture of the board internally and by the
organizations themselves rather than imposing it from outside, which may result in just
increasing the number of females in the boardroom (Brahma et al., 2022). Despite the
voluntary approach in the UK, the proportion of women on corporate boards is on the rise.
In this context, a work by Brahma et al. (2022) showed that, for FTSE 100 firms, female
representation on the board increased from 14% to 25% between 2005 and 2016.
Unlike other sectors, financial institutions are more regulated by the government and
international bodies due to their high-capital structure and immense economic contribution
to national development. Consequently, they should maximize their firm value and
performance as the overall economy’s health depends on them. We chose to work on
financial institutions because this sector plays a central role in a country’s economic
development process; therefore, these institutions are increasingly required to provide more
information about their financial structure to promote credibility to investors and increase
shareholders’ confidence by maximizing their prosperity. We selected UK financial
institutions because the UK financial sector is the second-biggest financial center after the
USA and offers a variety of financial service products, such as banking, insurance,
mortgages, asset management and mutual funds, to all stakeholders (Mintah and
Schadewitz, 2018).
Previous empirical studies yielded inconclusive results on the relationship between BGD
and firm performance in the financial sector. Some studies established that women
directors would add value, suggesting that more women directors tend to positively impact
the firm performance in financial institutions in the UK, Kenya and the USA (Mintah and
Schadewitz, 2019; Ibrahim et al., 2019; Noguera, 2020). However, other studies suggest
that women directors have a negative effect on firm performance, indicating that financial
institutions with more women directors tend to have a low firm value in Turkey and Morocco
(Kilic, 2015; Chebri and Bahoussa, 2020). Nevertheless, some other studies conclude that
female representation on the board has no association with firm performance in financial
institutions in Kenya and Indonesia (Ekadah and Kiweu, 2012; Farhana, 2020). Due to the
inconclusive and mixed findings in the literature, there is a need to examine the relationship
between BGD and firm performance. Indeed, some studies, such as Galbreath (2016),
have returned inconsistent findings to differences in the methodologies employed and
contexts (countries). These mixed results evidence that the direct link may be simple.
However, despite this evidence, research on the validity of alternative possibilities, such as
moderating variables, is still insufficient. To bridge the gaps in the literature, Galbreath
(2016) states that the relationship between female representation on corporate boards and
financial performance may be indirect. Hence, introducing a moderating variable becomes
necessary to strengthen the relationship between variables.

VOL. 23 NO. 7 2023 j CORPORATE GOVERNANCE j PAGE 1507

 Harjoto et al. (2015) stated that board diversity influences the company’s actions, especially
those related to corporate social responsibility (CSR). In the same vein, Hermalin and
Weisbach (2003) revealed that board characteristics might be related to financial
performance through the actions boards influence, such as CSR, which, in turn, improves
firm performance. Hence, in the current scholarly work, we extend the literature by including
CSR as a moderating variable in the relationship between women’s representation on
boards and financial performance. This is in line with the stakeholder theory, which was
mainly used by prior researchers to study interrelationships between women on the board
of directors, CSR and financial performance. This theory suggests that the higher the CSR
levels, the more likely are firms to secure ongoing capital from stakeholders and/or make
valuable resources that can positively influence financial performance (Freeman, 1984;
Donaldson and Preston, 1995; Harjoto et al., 2015). Therefore, by investigating the actions
women on boards may influence, this study attempts to understand how such influence
improves financial performance. CSR is supposed to be one such action that women on
boards appear to be particularly attracted to as they are more attuned to stakeholder
interests concerning the firm’s commitment to CSR activities (Cook and Glass, 2015).
Our study aimed to investigate the moderating effect of CSR on the relationship between
BGD and financial performance in UK financial institutions. To this end, we used data on 42
UK financial institutions listed in the ESG index between 2005 and 2019. The findings show
that gender diversity is significantly associated with firm financial performance and that CSR
moderates this relationship.
The present study makes several contributions to the literature. First, it provides further
evidence on company financial valuation in a developed setting, namely the UK.
Furthermore, it provides new insights into the literature by extending the dynamic links
between BGD and financial performance. Contrary to most prior studies that only examined
the direct relationship between BGD and financial performance, this study further explored
how CSR potentially influences this relationship, especially in financial institutions. Overall,
the findings of this paper contribute to the agency theory and the resource dependency
theory by underscoring the crucial role of BGD in improving firm performance. Moreover,
the outcomes of this research contribute to the stakeholder theory by showing that CSR
activities that respond to the needs and interests of stakeholders are the mechanism with
which female directors on the board can have a major, although indirect, impact on firm
performance. Finally, the absence of time variation in company valuation may be
problematic. Indeed, identifying the consequences of the implementation of a corporate
governance requires taking into account the dynamic effect of firm performance (the
lagged dependent variable, at least). Thus, this paper asserts that the firm performance at
period t depends necessarily on the information about the firm performance at period t1,
and the BGD. We explore this relationship using the generalized moment method (GMM),
as proposed by Arellano and Bond (1991).
The remainder of the paper is structured as follows. Section 2 discusses the relevant
literature review and hypotheses development. Section 3 describes the research design.
The main empirical results are presented and analyzed in Section 4. Finally, the paper ends
with some concluding remarks, outlined in Section 5.

2. Literature review and hypotheses development

2.1 BGD and financial performance
BGD can be expressed as the representation of women on the corporate board of directors
(Wu et al., 2022). In the last few years, the presence of women on the board has become a
focal aspect of the corporate governance field. Saleh et al. (2021) indicated that both the
agency and the resource dependency theories show the positive effect of gender diversity
on firm performance in two ways. According to the agency theory, female directors can

PAGE 1508 j CORPORATE GOVERNANCE j VOL. 23 NO. 7 2023

increase the effectiveness of board monitoring, therefore reducing agency costs. In this
way, having many female directors on the board could have a positive impact on firm
performance through service monitoring. Besides, the resource dependency theory
suggests that women directors are seen as an instrument for the management to facilitate
access to resources critical to the company’s financial success (Johnson et al., 1996).
The association between BGD and firm performance has been excessively studied in
previous literature, but the reached results were mixed. Several previous works, namely,
Jiang et al. (2020), EmadEldeen et al. (2021), Arvanitis et al. (2022), Brahma et al. (2022),
Fahad et al. (2022) and Fayyaz et al. (2022), showed that gender diversity is positively
related to firm performance. This positive association confirms that women directors
improve the effectiveness of boards based on their innovation and creativity regarding
problem-solving, thus enhancing corporate performance. For the financial sector, Mintah
and Schadewitz (2019) found that women directors have a positive effect on the value of
financial institutions in the UK implying that female representation on the financial
institutions’ board can influence decision-making and lead to better corporate governance,
thereby improving the firm’s financial valuation. Likewise, Ibrahim et al. (2019) showed that
gender diversity has a significant positive association with the financial performance of
insurance firms in Kenya and stated that high representation of women on the board is
expected to enhance the oversight function of the board, which will lead to minimizing
agency conflict and then better firm performance. Moreover, Noguera (2020) found that
female directors have a significant positive association with real estate investment trust’
performance in the USA and that women can be skilled director candidates who promote
the understanding of the marketplace in the boardroom. However, Adams and Ferreira
(2009) and Zhong et al. (2014) found a negative and significant relationship between
gender diversity and firm performance and stated that the more women sitting on the board,
the lower the performance of companies. In the same vein, Kilic (2015) shows that women
directors have a negative effect on Turkish banks’ performance. He provides evidence that
female representation on the board is associated with different styles, attitudes and
perspectives that may slow the decision-making process because of coordination
difficulties between the board members, which can makes businesses operate less
efficiently and decrease their performance. Furthermore, Chebri and Bahoussa (2020) have
demonstrated the negative relationship between gender diversity and firm performance of
listed commercial banks in Morocco. Nevertheless, some studies found no significant link
between BGD and firm performance (Farhana, 2020; Ahmad et al., 2021; Marquez-
Cardenas et al., 2022; Habash and Abuzarour, 2022).
Based on what preceded, prior literature showed inconclusive results about the systematic
relationship between BGD and corporate performance. Consequently, further evidence of
gender diversity’s role in affecting firm performance is needed. Nevertheless, most prior
findings confirm the positive effect of gender diversity. Thus, the following hypothesis is
developed:
H1. BGD is positively associated with the financial performance of UK financial
institutions.

2.2 Moderating role of CSR

Assuming gender diversity has a potentially crucial role to play in reducing agency
problems (Adams and Ferreira, 2009), influencing the decision-making process on the
board (Al Fadli et al., 2019) and reinforcing links between the company and its external
environment (Guizani and Ajmi, 2022), questions about the effect of gender diversity on
CSR have attracted significant scholarly attention (Boukattaya and Omri, 2021; Buertey,
2021; Singh et al., 2021; Wu et al., 2022; Gaio and Gonçalves, 2022). The majority of the
findings indicate that female representation on the board enhances the company’s CSR
engagement. In this vein, previous studies by Daniel and Urhoghide (2018), Al Fadli et al.

VOL. 23 NO. 7 2023 j CORPORATE GOVERNANCE j PAGE 1509

 (2019), Guping et al. (2020), and Wu et al. (2022) found that gender diversity has a positive
and significant association with CSR. They indicate that female members on the board can
play a central role in improving the quality of strategic decisions and ensuring a successful
implementation of innovative strategies, including CSR. Similarly, Shaheen et al. (2021)
found that gender-diverse boards have a positive effect on firms’ CSR engagement and
that female directors have some unique qualities, such as a stronger emphasis on ethical
and social concerns, deeper comprehension and awareness of their environment, and the
capacity to respond appropriately to their environment. However, some other studies found
no significant link between gender diversity and CSR (Saleh et al., 2021; Singh et al., 2021).
Many research works have focused on the CSR-financial performance nexus, while
evidence is inconclusive. Most prior studies have concluded that the higher a firm performs
in CSR, the better its financial performance will be (Franco et al., 2020; Kammoun et al.,
2021; Waheed et al., 2021). In this vein, Hou (2019) found that socially responsible firms
benefit from superior financial performance compared to companies that do not adopt CSR
initiatives. Likewise, Bagh et al. (2017) revealed that in the financial sector, financial
institutions which implement CSR in their operations could achieve better financial results
than those which implement traditional management strategies. It is known that CSR
enables companies to reinforce their competitive advantage (Carroll and Shabana, 2010)
improve their reputation (Tangngisalu et al., 2020) and achieve customer loyalty (Martı́nez
and Rodrı́guez Del Bosque, 2013); as a consequence, firm performance is positively
influenced (Khan et al., 2013). According to the stakeholder theory, CSR activities respond
to the demands of the different stakeholders leading to a decrease in agency conflicts, thus
increasing financial performance.
The above discussion indicates that gender diversity can support firm performance through
CSR activities. In this context, the stakeholder theory suggests that building mutual
relationships with stakeholders via ethical and social standards (CSR demonstrative actions)
would improve the company’s financial performance (Freeman, 1984; Jensen, 2001). Indeed,
the mechanism via which females on boards affect financial performance may be through
CSR activities that respond to the needs and interests of the stakeholders. Consequently,
whether CSR moderates the relationship between females on boards and financial
performance needs empirical investigation. Hence, the following hypothesis is formulated:
H2. CSR moderates the relationship between BGD and the financial performance of UK
financial institutions.

3. Research design
3.1 Sample and data collection
The research paper aimed to explore the moderating effect of CSR on the nexus between BGD
and financial performance among a sample of UK financial institutions that are part of the
Thomson Reuters Eikon ASSET 4 database that are essentially listed in the ESG index between
2005 and 2019, hence an initial sample of 110 financial institutions. We based our analysis on
the Thomson Reuters Eikon ESG index because it provides objective and systematic
environmental, social, and governance information to professional investors interested in
integrating social responsibility features into their investment decisions. Moreover, CSR
engagement varies by country and company, and we used the Thomson Reuters Eikon ESG to
identify the financial institutions that practice environmental and social activities in the UK. Data
on financial performance, CSR, as well as control variables were collected from the Thomson
Reuters Eikon ASSET4 database. However, data on board diversity were collected from the
Thomson Reuters Eikon ASSET4 database and the annual reports of the financial institutions.
Not all the necessary financial data are available for each firm over such a long period.
Therefore, financial institutions with missing and unavailable data were excluded from the
sample (68). Our final sample covered 42 UK financial institutions corresponding to 630 firm-

PAGE 1510 j CORPORATE GOVERNANCE j VOL. 23 NO. 7 2023

year observations. The financial institutions used for the data in this study are in four sectors, i.e.
banks, insurance companies, financial services and real estate investments. Table 1 shows the
sample selection procedure of our study. Panel A describes the sample selection, and Panel B
provides the sample distribution by activity sector.

3.2 Variables’ definition and measurement

3.2.1 Dependent variable: financial performance. Various accounting and financial

measures can be used to assess firm performance, such as Tobin’s Q (TOBINQ), market-
to-book value (MTBV), return on assets (ROA) and return on equity (ROE) (Adeneye and
Ahmed, 2015; Galant and Cadez, 2017; Carini et al., 2017; Kyere and Ausloos, 2020). In
this study, we adopted Tobin’s Q (TOBINQ) to measure the financial performance of UK
financial institutions. It is defined as the market value of equity plus the book value of total
assets minus the book value of equity over the book value of total assets (Adams and
Ferreira, 2009; Servaes and Tamayo, 2013). Companies with Tobin’s Q value greater than 1
will be more attractive to investors and have good investment opportunities. Conversely, if
Tobin’s Q value is lower than 1, it indicates that the stock is under an undervalued condition,
which means that management has failed to manage the company’s assets and the
potential for low investment growth so that investor interest is low to invest (Campbell and
Vera, 2008; Tarigan et al., 2018). The choice of Tobin’s Q in our study was motivated, first,
by the fact that most prior research on gender diversity had used Tobin’s Q as a measure of
firm performance (Campbell and Vera, 2008; Carter et al., 2010; Ntim, 2013; Boubaker
et al., 2014; Kramaric et al., 2016; Syamsudin et al., 2017; Li and Chen, 2018; Mintah and
Schadewitz, 2019; Jiang et al., 2020). Second, Tobin’s Q is considered better than other
accounting measures, i.e. ROA and ROE, as it can capture the firm’s long-term value and
reflect the market’s expectation of future earnings; thus, it is a good proxy for a firm’s
competitive advantage (Slama et al., 2019; Assidi, 2020).
3.2.2 Independent variable: gender diversity. Following prior studies (Tarigan et al., 2018; Li
and Chen, 2018; Ararat and Sayedy, 2019; Farhana, 2020; Jiang et al., 2020; Habash and
Abuzarour, 2022), we used the Blau index to measure gender diversity on the board of
Xn
directors. This index (BLAU) was calculated using the following formula 1  p 2 where
i¼1 i
Pi is the percentage of board members in each category and n is the number of categories.
In our case, n is 2, and the categories are “male” and “female.” The Blau index values range

Table 1 Sample selection and distribution by sector activity

Sample No. of financial institutions No. of observations

Panel A. Sample selection

Initial sample 110 1650
-Financial institutions with missing or unavailable data (68) (1,020)
Final sample 42 630
Sector activity No. of financial institutions %
Panel B. Sample distribution by sector activity
Banks 6 14%
Life insurance 4 10%
Non-life insurance 4 10%
Financial services 13 30%
Real estate investments and services 7 17%
Real estate investment funds 8 19%
Total 42 100%
Notes: Panel A describes the sample selection; Panel B presents the sample distribution by sector
activity. Observations are the total of firm-year observations by sector activity
Source: Authors’ own work

VOL. 23 NO. 7 2023 j CORPORATE GOVERNANCE j PAGE 1511

 from 0 to 0.5, where 0 indicates the lowest diversity due to the absence of women on the
board and 0.5 indicates the maximum diversity when the number of female and male board
members is the same. The choice of the Blau index in our study was motivated by the fact
that it is the superior measure of BGD if compared to the proportion of female directors
(Blau, 1977).

3.2.3 Moderating variable: corporate social responsibility. To assess corporate social

responsibility (CSR_SCO), we used CSR scores developed by the ASSET4 database to
ensure comparability between companies. The ASSET4 database provides a combined
CSR score of three dimensions; environmental, social and governance (ESG). This score is
based on a defined set of weighted data points ranging from 0 to 100 for each ESG
dimension according to their importance. As CSR engagement is our focus, we excluded
the governance dimension from our analysis and only used the environmental and social
dimensions. Consistent with Chouaibi et al. (2021), the governance dimension is eliminated
from our analysis because, first, it is not a direct measure of CSR, and second there is
potential for multicollinearity with our entrenchment measure.
Following Chouaibi et al. (2021) and Muriithi et al. (2021), we measured CSR by a combined
score of the environmental and social dimensions as calculated by the ASSET4 database.

3.2.4 Control variables. To improve the accuracy of our predictions, we considered other
variables that are likely to explain the financial performance of UK financial institutions.
Thus, by following prior works, we incorporated several control variables related to the
characteristics of the financial institution and its board of directors in our empirical models.
More precisely, we included variables that measure the financial institution’s size (LNSIZE)
(Nyabaga and Wepukhulu, 2020; Chebri and Bahoussa, 2020), age (AGE) (Deitiana and
Habibuw, 2015; Abubakar, 2018) and leverage (LEV) (Mohammad et al., 2018; Farhana,
2020). For variables concerned the financial institution’s board of directors, we controlled
the effect of the board size (LNBDSIZE) (Kilic, 2015; Noja et al., 2021) and the board
independence (BDINDEP) (Osman and Samontaray, 2022; Handa, 2022).
For more details on measuring control variables, we define all the variables of the model in
Table 2.

Table 2 Variable definitions and measurements

Variables Symbols Measurement

Financial performance TOBINQ As computed by ASSET4 database, it is [(Book value of assets 

book value of equity  deferred taxes þ market value of equity)/
Book value of assets] Xn
Board gender diversity BLAU Blau index which is measured as 1  p 2 where Pi is the
i¼1 i
percentage of board members in each category and n is the total
number of board members. Values range from 0 to 0.5, where 0
indicates the lowest diversity due to the absence of women on the
board and 0.5 indicates the maximum diversity when the number
of female and male board members is the same
Corporate social responsibility CSR_SCO It is a score developed by ASSET4 database and which consists
of a series of items that count the CSR of financial institutions
Financial institution size LNSIZE The natural logarithm of total assets of the financial institution
Financial institution age AGE The natural logarithm of the number of years since the creation of
the financial institution
Financial institution leverage LVG The ratio of total debt to total assets of the financial institution
Board size BDSIZE Total number of directors on the board
Board independence BDINDEP Percentage of independent directors to total number of board
members
Notes: Table 2 reports the definitions of all variables used in our study
Source: Authors’ own work

PAGE 1512 j CORPORATE GOVERNANCE j VOL. 23 NO. 7 2023

3.3 Model specification
To examine the moderating effect of CSR on the relation between BGD and corporate
financial performance, panel regression analysis (using Stata 13 software) was used in this
study. The panel regression equations was developed as follows:

TOBINQi;t ¼ b0 þ b1 BLAUi;t þ b2 CSR SCOi;t þ b3 LNSIZEi;t þ b4 AGEi;t þ b5 LVGi;t

X
23 X
30
þ b6 BDSIZEi;t þ b7 BDINDEPi;t þ bl YEARi;t þ bj FIRMi;t þ «i;t
l¼8 j¼24

(Model 1)

TOBIi;t ¼ b0 þ b1 BLAUi;t þ b2 CSR SCOi;t þ b3 BLAU  CSR SCOi;t þ b4 LNSIZEi;t

X
24
þ b5 AGEi;t þ b6 LVGi;t þ b7 BDSIZEi;t þ b8 BDINDEPi;t þ bl YEARi;t
l¼9

X
31
þ bj FIRMi;t þ «i;t
j¼25

(Model 2)

where: All variables definitions and measurements are depicted in Table 2. YEARit and
FIRMit represent year and firm fixed effects; «it is the random error term; and b0 is the
constant. Concerning the indices i and t, they correspond to the firm and period of the
study.

4. Result analysis and discussion

4.1 Descriptive statistics
Table 3 reports the descriptive statistics of the main variables used in this study. The table
provides the mean, standard deviation and minimum and maximum values for the
dependent, independent, moderator and control variables. Tobin’s Q (TOBINQ) shows a
mean value of 4.174, which is above one, suggesting that the average market value of the
sample financial institutions is higher than their average book value. Financial institutions
feature higher performance variability with a minimum Tobin’s Q of 0.020 and a maximum of
46.71. Board diversity (BLAU) has a mean value of 0.402, ranging between 0 and 0.5,
indicating that we have a rich dataset that includes financial institutions characterized by a
high degree of variation in the gender diversity of their boards. CSR (CSR_SCO) ranges
from a minimum of 11.57 to a maximum of 98.45, suggesting a high divergence in CSR
levels across the financial institutions of our sample. CSR has a mean value of 58.415, which
implies that most of the financial institutions in our sample are socially responsible. Indeed,

Table 3 Descriptive statistics

Variables Obs Mean SD Min Max

TOBINQ 630 4.174 5.290 0.020 46.71

BLAU 630 0.402 0.115 0 0.5
CSR_SCO 630 58.415 24.693 11.57 98.45
LNSIZE 630 6.974 1.071 4.811 9.311
AGE 630 1.748 0.404 1 2.439
LVG 630 0.217 0.229 0 0.936
BDSIZE 630 10.740 2.887 5 21
BDINDEP 630 0.465 0.181 0.039 0.918
Notes: This table reports descriptive statistics. Variables definitions are outlined in Table 2
Source: Authors’ own work

VOL. 23 NO. 7 2023 j CORPORATE GOVERNANCE j PAGE 1513

 the rating agency ASSET4 provides an annual CSR score between 0 and 100 points for
each company, where a CSR score between 50 and 100 corresponds to high CSR
engagement, while a score between 0 and 50 points corresponds to weak CSR
engagement (Miralles-Quiro s et al., 2018). Thus, the mean CSR score of 58.415 was higher
than 50 points for the UK financial institutions, revealing their higher performance in terms of
CSR. Regarding the control variables, the average size of the financial institution (LNSIZE)
is 6.974, the average financial institution age (AGE) is 1.748 and the average leverage ratio
(LEV) is 21.7%. Board size (BDSIZE) has a mean value of 10.740, ranging from 5 to 21
directors. Finally, board independence (BDINDEP) has a mean of 0.465, suggesting that,
on average, 46.5% of directors on the board are independent, varying from 3.9% to 91.8%.

4.2 Correlation matrix

To test for the presence of multicollinearity, we calculated the Pearson correlation and the
variance inflation factor (VIF) for all the explanatory variables considered in our research.
Results from the correlation matrix and VIF are depicted in Table 4. Pallant (2007) reported
that a serious multicollinearity problem is present if the correlation coefficient among
explanatory variables exceeds a threshold of 0.700. The correlation coefficients show that
the multicollinearity problem is not a concern in this study, as the highest coefficient among
the explanatory variables is 0.511, between LNSIZE and CSR_SCO. In addition, the same
table shows that all VIFs do not exceed the value of 10, which confirms the absence of any
multicollinearity problem in this study.

4.3 Multivariate analysis

4.3.1 Regression analysis. Table 5 provides the results of the regression analysis. We used
multivariate regression analysis on panel data as part of this study to empirically test our
hypotheses. Accordingly, we started by running a specification panel test following Beck
(2001) to decide on the homogeneity or heterogeneity of the panel data. The homogeneity
test shows a probability lower than 1% for the two models. Thus, we should reject the null
hypothesis of homogeneity among individuals, which led us to conclude the sample
heterogeneity and then test the existence or not of individual effects. Therefore, we run a
fixed-effects model on the one hand, and a random effect, on the other. We compared the
two methods via the Hausman test to determine the most suitable model. The results of this
test indicate that the fixed effects model is better than the random-effects model. The Fisher
test proves significant at the 1% level for the two models, proving the individual fixed
effects. The assumption of homoscedasticity was also verified in the present study. Thus,
the Wald test performed on the two study models show a probability lower than 1%,
attesting that the models are heteroscedastic. Given this error structure, our regressions will

Table 4 Correlation matrix

Variables 1 2 3 4 5 6 7 VIF

1. BLAU 1 1.46
2. CSR_SCO 0.108 1 1.05
3. LNSIZE 0.270 0.511 1 1.70
4. AGE 0.159 0.227 0.267 1 1.18
5. LVG 0.138 0.221 0.195 0.282 1 1.14
6. BDSIZE 0.118 0.324 0.451 0.166 0.117 1 1.30
7. BDINDEP 0.163 0.277 0.283 0.225 0.059 0.091 1 1.20
Notes: This table presents the correlation matrix between the variables used in the study. Variables
definitions are outlined in Table 2. The asterisks  ,  and  appearing close to a coefficient indicate
the significance levels of 1, 5 and 10%, respectively
Source: Authors’ own work

PAGE 1514 j CORPORATE GOVERNANCE j VOL. 23 NO. 7 2023

 Table 5 Regression results
Model (1) Model (2)
Variables Coefficient t-statistic Probability Coefficient t-statistic Probability

Intercept 9.805 6.24 0.000 11.551 9.03 0.000

BLAU 0.440 2.39 0.025 0.430 2.11 0.030
CSR_SCO – – – 0.807 2.75 0.006
BLAU CSR_SCO – – – 1.367 3.21 0.001
LNSIZE 1.639 4.48 0.000 1.671 4.67 0.000
AGE 1.284 3.44 0.001 1.203 3.17 0.003
LVG 4.606 7.13 0.000 4.608 7.11 0.000
BDSIZE 1.750 4.82 0.001 1.817 4.93 0.000
BDINDEP 0.706 2.58 0.016 0.696 2.47 0.020
Year fixed effect Yes Yes
Firm fixed effect Yes Yes
Observations 630 630
R2 0.2988 0.3457
Fisher 38.55 46.43
Fisher (p-value) (0.000) (0.000)
Homogeneity test 79.77 75.53
(p-value) (0.000) (0.000)
Hausman test 27.98 24.93
(p-value) (0.000) (0.000)
Heteroscedasticity test 101.94 103.22
(p-value) (0.000) (0.000)
Notes: Table 5 presents the results of regression estimation that includes fixed effects for fiscal year and firm. Year and firm indicators
are included in our models, but their coefficients are not shown in this table. Variables definitions are outlined in Table 2.  and

indicate statistical significance at the level of 1 and 5%, respectively
Source: Authors’ own work

be estimated by the generalized least squares method which is more suitable for panel data
and has more advantages (Wooldridge, 2003).
4.3.2 Discussion of results. Our hypothesis (H1) was about the direct relationship between
BGD and firm performance. Table 5 presents the results of the estimating equation (1) to test
H1. The results of the regression analysis show that BGD is positively and significantly
associated with firm performance at the 5% significance level (b = 0.440, t = 2.39). This finding
confirms H1 and demonstrates that UK financial institutions with female representation on the
board of directors have a high financial performance. This result also implies that the presence
of men and women is essential to forming a stronger board that boosts the financial
institution’s value. This may be due to greater gender diversity offering a broader perspective
in decision-making, as the directors come from different demographic backgrounds. This
finding is supported by earlier studies which indicate that higher female representation
contributes to higher quality decisions and increases creativity and innovation (Mintah and
Schadewitz, 2019; Noguera, 2020; EmadEldeen et al., 2021; Fahad et al., 2022). In addition,
the differences in the women’s demographic background compared to men offer a variety in
terms of personality, communication style, educational background, career experience and
expertise (Liao et al., 2015), which contribute to a broader perspective on decision-making
and strategic planning, thus contributing positively to the firms’ value and increasing their
competitive advantage. This finding supports the resource dependency theory and the
agency theory and, therefore, is consistent with the view that women reinforce the monitoring
function of the board and facilitate access to valuable resources that are principal to a
company’s success, which can enhance the firm’s financial performance.
Our second hypothesis (H2) was about the possible moderating effect of CSR on the
relationship between BGD and firm performance. Table 5 presents the results of the estimating
equation (2) to test H2. In other words, the coefficient of BLAU CSR_SCO is used to test the

VOL. 23 NO. 7 2023 j CORPORATE GOVERNANCE j PAGE 1515

 moderating effect. The aim was to discover whether the increase or decrease in CSR affects
the relationship between women on boards and financial performance. The results show that
BLAU CSR_SCO is positive and significant at the 1% level (b = 1.367, t = 3.21). This finding
supports H2 and implies that the high level of CSR engagement strengthens the relationship
between BGD and financial performance. This finding can be explained by the fact that
females on the board of directors are more inclined to corporate social responsibilities, which
is in line with Rao and Tilt (2016) and Fayyaz et al. (2022), who state that women use some
mechanisms to improve the financial performance of the company. For instance, the
stakeholder theory suggests that enhancing the company’s CSR standards can lead to
improved relationships with the stakeholders and gaining their support, which will, in turn,
improve the firm’s reputation and increase its value.
For the control variables, the financial institution size is positively related to firm
performance. This result is consistent with the findings of Kilic (2015), Nyabaga and
Wepukhulu (2020) and Chebri and Bahoussa (2020) that the large size of the financial
institution enhances firm performance. According to Tornyeva and Wereko (2012), larger
firms are more likely to have better performance because they have access to more
resources and would be in a better position to take advantage of investment opportunities
compared to smaller ones.
Moreover, we document that the financial institution’s age is negatively and significantly
related to firm performance. This result indicates that older financial institutions tend to have
a low firm performance. This finding is consistent with those of Deitiana and Habibuw (2015)
and Abubakar et al. (2018). Also, according to Coad et al. (2013), older companies
experience lower expected growth rates of sales, profits and productivity, which could
reduce their performance.
The financial institution’s leverage is negatively and significantly related to firm
performance. This finding is consistent with earlier studies (Mohammad et al., 2018;
Farhana, 2020) and indicates that highly leveraged financial institutions tend to have a low
firm performance. According to Gonza lez (2013), the relationship between leverage and
firm performance depends on two different factors: the costs of financial distress and the
benefits of the disciplinary role of debt financing. Thus, the inverse relationship between
leverage and firm performance suggests that the costs of financial distress prevail over the
benefits.
Furthermore, our findings indicate that the board size is positively and significantly
associated with firm performance. This finding is consistent with other studies (Kilic, 2015;
Bouteska, 2020; Noja et al., 2021) and implies that UK financial institutions with larger
boards have a high firm performance. This result is in line with both the agency theory and
the resource dependency theory that large boards are better than small ones because
more directors on the board provide more expertise in decision-making for the firm, which
helps improve its overall value.
Finally, board independence is positively and significantly related to firm performance. This
result is consistent with the findings of Ayodeji and Okunade (2019), Bouteska (2020),
Osman and Samontaray (2022) and Handa (2022) that financial institutions with more
independent directors on the board tend to have a high firm performance. This result
corroborates both the agency theory and the resource dependency theory that more
independent directors on the board improve the board’s role in monitoring and controlling
the management, which ultimately makes the company’s operations more efficient and
increases its performance.

4.4 Robustness checks

To ensure the robustness of our main results, we conducted three additional analyses
related to:

PAGE 1516 j CORPORATE GOVERNANCE j VOL. 23 NO. 7 2023

1. alternative measure of the dependent variable;
2. the sector of activity where financial institutions operate; and

3. dynamic effect.
4.4.1 Alternative measure of the dependent variable. We relied on ROA as an alternative
measure of firm performance (measured by TOBINQ). Indeed, we verified whether the
moderating role of CSR remains intact if we change the measure of firm performance using
ROA, which is defined by the ASSET4 as pre-tax income divided by total assets (Salhi et al.,
2019; Bouteska, 2020). Thus, we re-estimated regressions (1) and (2) using the ROA as a
proxy for the firm’s financial performance. Table 6 shows that the results are similar to those
reported in Table 5.
4.4.2 Effect of activity sector of the financial institution. Given that the financial institutions
used in this study do not have the same sector of activity, the behavior of financial
institutions will be affected in terms of corporate governance practices, CSR
engagement and financial performance. We chose UK financial institutions providing
different products and services and belonging to banks, insurance companies, financial
services and real estate investment. For this reason, we considered administering a
robustness test to validate our results. To this end, we divided our study sample into four
subsamples. The first subsample consisted of financial institutions belonging to banks
(i.e. 6 corresponding to 90 observations), the second encompassed financial institutions
related to insurance companies (i.e. 8 corresponding to 120 observations), the third
included financial institutions related to financial services (i.e. 8 corresponding to 195
observations) and the fourth consisted of financial institutions belonging to real estate
investment (i.e. 15 corresponding to 225 observations). We also reiterated our analysis
regarding the two advanced hypotheses, following the splitting of our sample into
financial institutions according to their sector of activity. The results are displayed in
Table 7.
On subdividing the sample of financial institutions, the results seem similar for H1 and H2. In
this way, the obtained results tend, in their entirety, to validate the reached findings of the
first and second models, i.e. the corporate governance mechanism relating to BGD proves
to have a positive and significant effect on improving the financial institution’s financial

Table 6 Robustness check results on alternative measure of firm performance (ROA)

Model (1) Model (2)
Variables Coefficient t-statistic Probability Coefficient t-statistic Probability

Intercept 8.622 5.11 0.000 10.375 8.20 0.000

BLAU 0.437 2.21 0.028 0.424 1.98 0.050
CSR_SCO – – – 0.864 3.01 0.003
BLAU CSR_SCO – – – 1.253 3.13 0.002
LNSIZE 1.467 3.81 0.000 1.485 3.96 0.000
AGE 1.158 3.14 0.002 1.125 2.98 0.004
LVG 4.266 5.72 0.007 4.281 5.86 0.005
BDSIZE 1.573 4.55 0.003 1.663 4.71 0.001
BDINDEP 0.701 2.50 0.019 0.678 2.26 0.035
Year fixed effect Yes Yes
Firm fixed effect Yes Yes
Observations 630 630
R2 0.2765 0.3581
Fisher 36.23 47.68
Fisher (p-value) (0.000) (0.000)
Notes: Table 6 reports results of an additional test to extend our research. Year and firm indicators are included in our models, but their
coefficients are not shown in this table. Variables definitions are outlined in Table 2. ROA is the ratio of the pre-tax income and total asset.

and  indicate statistical significance at the level of 1 and 5%, respectively
Source: Authors’ own work

VOL. 23 NO. 7 2023 j CORPORATE GOVERNANCE j PAGE 1517

 PAGE 1518
Table 7 Robustness check results by sector of activity
Variable/Sector activity Banks Insurance companies Financial services Real estate investment
Model 1 Model 2 Model 1 Model 2 Model 1 Model 2 Model 1 Model 2

j CORPORATE GOVERNANCE j VOL. 23 NO. 7 2023

Intercept 6.589 (0.000) 7.516 (0.000) 4.758 (0.000) 6.150 (0.000) 5.395 (0.000) 7.004 (0.000) 3.592 (0.000) 5.213 (0.000)
BLAU 0.400 (0.040) 0.415 (0.035) 0.322 (0.038) 0.314 (0.040) 0.390 (0.028) 0.385 (0.030) 0.249 (0.064) 0.228 (0.071)
CSR_SCO – 0.689 (0.002) – 0.656 (0.006) – 0.577 (0.008) – 0.411 (0.027)
BLAU CSR_SCO – 1.159 (0.000) – 1.098 (0.000) – 1.039 (0.000) – 0.967 (0.003)
LNSIZE 1.703 (0.000) 1.714 (0.000) 1.003 (0.002) 1.118 (0.001) 1.263 (0.000) 1.280 (0.000) 0.823 (0.005) 0.829 (0.005)
AGE 1.691 (0.008) 1.643 (0.000) 0.821 (0.001) 0.798 (0.004) 0.422 (0.020) 0.570 (0.010) 1.885 (0.000) 1.859 (0.001)
LVG 3.668 (0.000) 3.692 (0.000) 2.021 (0.000) 2.451 (0.000) 2.952 (0.000) 2.970 (0.000) 0.692 (0.018) 0.755 (0.009)
BDSIZE 1.681 (0.000) 1.708 (0.000) 1.189 (0.001) 1.202 (0.001) 1.603 (0.000) 1.649 (0.000) 0.970 (0.003) 1.115 (0.002)
BDINDEP 0.587 (0.013) 0.566 (0.015) 0.447 (0.024) 0.478 (0.022) 0.550 (0.017) 0.575 (0.014) 0.498 (0.020) 0.483 (0.019)
Year fixed effect Yes Yes Yes Yes Yes Yes Yes Yes
Firm fixed effect Yes Yes Yes Yes Yes Yes Yes Yes
Observations 90 90 120 120 195 195 225 225
R2 0.2901 0.3252 0.2768 0.2897 0.2797 0.3155 0.2598 0.2707
Fisher 36.72 40.35 32.72 35.56 33.16 39.81 31.05 33.35
Fisher (p-value) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
Notes: This table reports results of an additional test to extend our research. Year and firm indicators are included in our models, but their coefficients are not shown in this table.
Measurements are summarized in Table 2. The asterisks  ,  and  appearing close to a coefficient indicate the significance levels of 1, 5 and 10%, respectively
Source: Authors’ own work
performance, and CSR strengthens the relationship between BGD and financial
performance of all subsamples.
4.4.3 Dynamic effect. This robustness check focuses on the dynamic effect to deal with the
possible endogeneity problem that can appear when studying the relationship between
corporate governance and firm performance. In this regard, we opted for Arellano and
Bond’s (1991) dynamic panel data estimation in Stata under the assumptions of the
generalized moment method system (GMM-SYS) in two stages proposed by Blundell and
Bond (1998), as this technique is considered the best in checking the endogeneity between
variables and unobservable heterogeneity (Wintoki, 2007). This technique allows the
explanatory variable (i.e. BGD) to be determined based on past and present performance
but not future performance. Moreover, this method uses the lagged value of performance
as an explanatory variable by taking the first difference to remove firm-specific fixed effects.
Thus, we revised our initial model by testing the continuity effect of the exercises on
corporate performance. This can be expressed in the following dynamic specification
model consisting of establishing a relationship between the performance of the financial
institutions at period t, denoted Y, and its one-year lagged values (Lag TOBINQ), the BGD
and the set of control variables (X):

Yi;t ¼ b1 Lag Yi þ b2 BLAUi;t þ b3 CSR SCOi;t þ b4 Xi;t þ mt þ «i;t (Model 3)

Table 8 reports the results found following the introduction of the delayed effect in our
research model. We notice that these results are substantially similar to those of the main
analysis (Table 5).
Indeed, it is necessary to examine the validity of the instruments which must be assessed
by the adoption of two tests: the Hansen test and the Arellano–Bond (AR) autocorrelation
test. The Hansen test is applied for over-identifying instrument restriction, where the null
hypothesis is the exogeneity of instruments (delayed variables) used in the GMM
estimation. The Hansen test shows a p-value higher than 5%; therefore, the null hypothesis
should not be rejected. Besides, the Arellano–Bond tests for AR1 and AR2, first and
second-order autocorrelation tests, respectively, were used to check for serial correlations
of error terms, where the null hypothesis is the independence of the instruments and the
error term. As can be seen in Table 8, AR1 and AR2 tests confirm the nonreject of the null
hypothesis of the autocorrelation of first-order residues and lack of second-order
autocorrelation of errors, respectively. It is then possible to conclude that the residuals are
not correlated and the condition on the moments is correctly specified. Finally, the level of
significance and the value of the coefficients of the delayed variable of firm performance
(Lag TOBINQ) provide a new justification for the dynamic specification of the model and
confirm the need to include these effects. Indeed, the results presented in Table 8 indicate
that the firm performance at period t1 is positively and significantly correlated with that in
(t) at the 5% significance level (b = 0.684, p < 0.05). This finding highlights that Tobin’s Q
values depend strongly on their lagged variables. Considering the dynamic temporal nature
between Tobin’s Q value and its one-year lagged value, we can clarify the results obtained
previously and, thus, confirm the synergy of complementarities in compliance with our
research hypotheses.

5. Conclusion
This study investigated the impact of BGD on firm performance and explored the potential
moderating effect of CSR on this relationship among a sample of UK financial institutions
between 2005 and 2019. The outcomes show that BGD improves firm performance.
Furthermore, the results demonstrate that CSR moderates the BGD-firm performance
nexus, implying that women on the board may exercise more effort to push managers
toward more engagement in CSR, which will increase the firm financial performance.

VOL. 23 NO. 7 2023 j CORPORATE GOVERNANCE j PAGE 1519

 Table 8 Robustness check results on dynamic estimation of panel data
Variables Coefficient t-statistic Probability

Intercept 5.417 4.36 0.000

Lag TOBINQ 0.684 2.40 0.024
BLAU 0.357 2.02 0.040
CSR_SCO 0.653 3.35 0.047
LNSIZE 1.436 4.01 0.000
AGE 0.998 2.93 0.023
LVG 4.403 5.11 0.002
BDSIZE 1.491 4.25 0.000
BDINDEP 0.634 2.15 0.028
Year fixed effect Yes
Firm fixed effect Yes
Number of observations 630
R2 0.2374
Arellano Bond AR (1) 2.120
(z, p-value) (0.000)
Arellano Bond AR (2) 1.230
(z, p-value) (0.219)
Sargan test 183.13
(Chi-square, p-value) (0.000)
Hansen test 48.49
(Chi-square, p-value) (0.331)
Notes:  ,  Significance at p < 0.01 and p < 0.05, respectively; the table presents results of the
GMM system regressions of firm value. Lag TOBINQ is the one-year lagged value of the firm
performance. Variables definitions are outlined in Table 2
Source: Authors’ own work

Concerning the control variables, the results show that financial institution size, leverage,
age, board size and board independence are significant factors in changing firm
performance in the UK.
This study has several potential implications for academic researchers, financial institutions
and policymakers. First, the findings of our study provide a better understanding of the role
of CSR in the BGD–firm performance relationship, which can help researchers interested in
discovering female representation on the board, firm valuation and CSR. Second, our
findings suggest that BGD is a crucial aspect of corporate governance that financial
institutions should take into account in their strategies to ensure corporate success by
sustaining value creation and improving financial performance. Third, the findings of our
study are important to policymakers in the UK context. These findings indicate that the
representation of female directors on boards should be encouraged in UK financial
institutions. The government and the regulatory bodies should propose regulations that
enforce diversifying gender on the boards of financial institutions to enhance the financial
performance of the financial institutions in the UK, which may help financial institutions
ensure their long-term survival and reduce the risk of financial distress or bankruptcies in
the future.
The current study has some limitations, which open new future research avenues. First,
the study only used financial sector companies as a sample, which means that the
findings may not be generalized to other industries. Therefore, a larger sample,
including non-financial enterprises, is suggested for future research. Second, this
study focused on some variables from the board attributes as control variables;
therefore, future studies could investigate other corporate governance mechanisms
such as, board meetings, board member tenure, CEO characteristics, ownership
structure and audit committee characteristics, to understand their role in influencing
firm performance.

PAGE 1520 j CORPORATE GOVERNANCE j VOL. 23 NO. 7 2023

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About the authors

Hanen Ben Fatma is a doctor in Accounting, Faculty of Economics and Management of
Sfax, University of Sfax, Sfax, Tunisia. Her main research interests are related to corporate
governance, corporate social responsibility and investment decisions. Hanen Ben Fatma is
the corresponding author and can be contacted at: [email protected]
Jamel Chouaibi holds a PhD degree from the University of Sfax in Tunisia. He is now
associate professor of Accounting at the Faculty of Economics and Management of Sfax
(Tunisia) and a Researcher at laboratory of research in information technology, governance
and entrepreneurship “LARTIGE”: His research works focus on financial and accounting
information, corporate governance, standards and accounting principles and corporate
social responsibility. He has published several papers in various refereed journals such as
International Journal of Law and Management, Journal of the Knowledge Economy, Journal
of Economics Finance and Administrative Science, International Journal of Managerial and
Financial Accounting, Accounting & Management Information Systems and EuroMed
Journal of Business.

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