On one hand, the rapid progress in financial inclusion (FI) boosts the country’s economic development. On the other hand, it forces European economies to play the role of good governance, which helps promote FI in this zone. This study aims to explore the effects of corporate governance (CG) on FI in European countries with a particular focus on gender diversity.
The authors use a sample of 83 banks in 13 European countries from 2007 to 2021. The authors use the ordinary least squares test as the baseline model. In addition, the authors use the two-stage least square model to address potential endogeneity. Furthermore, the authors use Heckman selection techniques to rectify sample selection bias.
The study’s findings show that female on board (FOB) has a positive effect in FI. The FOB has more positive effects when the number of FOB is ≥3. Furthermore, the authors found that FOB has a more positive effect on FI in countries enforce gender quotas. On the other hand, the study findings show corporate board size adversely influences FI. Meanwhile, the authors found an increase in board meetings translate into better FI. The study outcomes are robust to endogeneity issues and selection bias issues.
The study outcomes suggest that bank regulators and policymakers must balance increasing FI and governance regulations by avoiding unnecessary and strict governance regulations. Likewise, they must design more policies to sustain FI through effective gender diversity policies.
To the best of the authors’ knowledge, this paper explores, for the first time, how CG practices with a particular focus on gender diversity can affect FI in European countries.
