Board Diversity and Financial Performance: The Mediating Role of ESG in Regional Banks

Kurniawan Widyatmiko(1), Muazaroh .(2*)


(1) Universitas Hayam Wuruk Perbanas
(2) Universitas Hayam Wuruk Perbanas
(*) Corresponding Author

Abstract


This study aims to examine the effect of board characteristics on financial performance with ESG performance as a mediating variable in Indonesian Regional Development Banks (BPD). A quantitative approach was employed using secondary data from annual and sustainability reports for the period 2021–2024. The data were analyzed using multiple regression and path analysis with SPSS. The results indicate that board size and gender diversity have a negative and significant effect on Return on Assets (ROA), while age diversity has a positive and significant effect, and educational diversity shows no significant effect. Furthermore, ESG performance does not significantly affect ROA and does not mediate the relationship between board characteristics and financial performance. These findings suggest that governance efficiency plays a more important role than ESG in determining short-term financial performance in BPD. This study contributes to the literature by providing empirical evidence on the limited mediating role of ESG in the context of regional banking in Indonesia.


Keywords


Board diversity; financial performance; ESG; ROA; corporate governance; regional banks

Full Text:

PDF

References


Abdul Gafoor, C. P., Mariappan, V., & Thyagarajan, S. (2018). Board characteristics and bank performance in India. IIMB Management Review, 30(2), 160–167. https://doi.org/10.1016/j.iimb.2018.01.007

Agnese, P., Arduino, F. R., Cerciello, M., & Taddeo, S. (2024). Does board knowledge matter for ESG performance in the European banking industry? Corporate Social Responsibility and Environmental Management, 31(5), 4454–4468. https://doi.org/10.1002/csr.2811

Birindelli, G., Dell’Atti, S., Iannuzzi, A. P., & Savioli, M. (2018). Composition and activity of the board of directors: Impact on ESG performance in the banking system. Sustainability, 10(12), 1–20. https://doi.org/10.3390/su10124699

Buallay, A. (2019). Is sustainability reporting (ESG) associated with performance? Evidence from the European banking sector. Management of Environmental Quality, 30(1), 98–115. https://doi.org/10.1108/MEQ-12-2017-0149

Cardillo, G., Onali, E., & Torluccio, G. (2021). Does gender diversity on banks’ boards matter? Evidence from public bailouts. Journal of Corporate Finance, 71, 101560. https://doi.org/10.1016/j.jcorpfin.2020.101560

Elsharkawy, M., Paterson, A. S., & Sherif, M. (2018). Now you see me: Diversity, CEO education, and bank performance in the UK. Investment Management and Financial Innovations, 15(1), 277–291. https://doi.org/10.21511/imfi.15(1).2018.23

Gangwani, M., & Kashiramka, S. (2024). Does ESG performance impact value and risk-taking by commercial banks? Evidence from emerging market economies. Business Strategy and the Environment, 33(7), 7562–7589. https://doi.org/10.1002/bse.3882

Janahi, M., Millo, Y., & Voulgaris, G. (2023). Age diversity and the monitoring role of corporate boards: Evidence from banks. Human Relations, 76(10), 1599–1633. https://doi.org/10.1177/00187267221108729

Krasnov, A. N., Balynin, I. V., & Shmeleva, L. A. (2023). Impact of the board of directors’ structure on the company’s financial results. Finance: Theory and Practice, 27(3), 189–198. https://doi.org/10.26794/2587-5671-2023-27-3-189-198

Lindhiasari, S., & Muazzaroh. (2024). Pengaruh diversitas dewan direksi terhadap kinerja perusahaan. Jurnal Ekonomi dan Ilmu Sosial, 9(2). https://doi.org/10.36636/dialektika.v9i2.3938

Mansour, M., Al Zobi, M., E’leimat, D. A., Alim, S. A., & Marei, A. (2024). Board gender diversity and bank performance in Jordan. Banks and Bank Systems, 19(1), 183–194. https://doi.org/10.21511/bbs.19(1).2024.16

Menicucci, E., & Paolucci, G. (2022). Board diversity and ESG performance: Evidence from the Italian banking sector. Sustainability, 14(20), 1–19. https://doi.org/10.3390/su142013447

Mustahidda, R., & Wahyono, A. T. (2022). Pengaruh karakteristik dewan direksi terhadap kinerja perusahaan perbankan di Bursa Efek Indonesia. Jurnal Jebaku, 2(1).

Pathan, S., & Faff, R. (2012). Does board structure in banks really affect their performance? Journal of Banking and Finance.

Pereira, V. M. M., & Filipe, J. A. C. B. (2022). Board members’ educational background and financial performance: Evidence from Eurozone banks. Journal of Central Banking Theory and Practice, 11(3), 203–227. https://doi.org/10.2478/jcbtp-2022-0030

Sekaran, U., & Bougie, R. (2010). Research methods for business.

Staikouras, P. K., Staikouras, C. K., & Agoraki, M. E. K. (2007). The effect of board size and composition on European bank performance. European Journal of Law and Economics, 23, 1–27. https://doi.org/10.1007/s10657-007-9001-2

Yuan, D., Gazi, M. A. I., Harymawan, I., Dhar, B. K., & Hossain, A. I. (2022). Profitability determining factors of banking sector: Panel data analysis of commercial banks in South Asian countries. Frontiers in Psychology, 13. https://doi.org/10.3389/fpsyg.2022.1000412

Zaidi, N., Azouzi, M. A., & Sadraoui, T. (2021). CEO financial education and bank performance. Journal of Entrepreneurship Education, 24(2).


Article Metrics

Abstract view : 35 times
PDF - 0 times

DOI: https://doi.org/10.26714/vameb.v22i2.21197

Refbacks

  • There are currently no refbacks.


Copyright (c) 2026 Value Added : Majalah Ekonomi dan Bisnis

 

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Address:

Department of Management

Faculty of Economics

University of Muhammadiyah Semarang

Kedungmundu Raya Road No. 18, Tembalang, Semarang, Central Java, Indonesia

 

Contact:

email: value-added@unimus.ac.id