Board Diversity and Financial Performance of Commercial Banks in Ghana: the Role of Sustainability Reporting

Abstract

ABSTRACT This study sought to examine the role of sustainability reporting on the link between board diversity and financial performance of commercial banks in Ghana. To serve this purpose, content analysis was conducted on annual reports of commercial banks between 2010 and 2019. The independent variable was proxied by educational background, qualification and tenure diversities whereas the dependent variable was measured by ROA. Furthermore, a sustainability disclosure index which comprises the economic, environmental and social dimensions was computed guided by Generation four (G4) Global Reporting Initiative Guidelines. The data was analyzed quantitatively through dynamic panel-data estimation, two-step system GMM using Stata. The findings of the study submit that board diversity has no significant effect on banks financial performance. The study also reveals that sustainability reporting has a significant positive effect on the financial performance of commercial banks. Finally, in relation to the moderation effect, the study concludes that sustainability reporting does not moderate the link between board diversity and banks financial performance. Therefore, the study recommends that banks embrace diversity on boards together with conflict control mechanisms to minimize disagreements that may arise and impede board performance in the course of duties. Again, the study recommends that proper measures to manage and enhance sustainability performance and disclosures be implemented to improve banks performance