Demographic Composition of the Board and the Managerial Efficiency of Credit Unions

Abstract

In this paper we use non-parametric envelopment methods to determine whether the demographic composition of the board of directors effects the efficiency in which credit unions offer loans and savings products to their members. We find strong evidence credit unions with boards where the majority of directors are either women or racial and ethnic minorities improves the provision of financial services among the largest and most complex credit unions. We also observe strong evidence that credit unions with minority governed boards operate more efficiently than their counterparts in communities that are more racially diverse, while female governed boards are more efficient in communities where there is greater parity of economic opportunity across genders. These findings suggest greater inclusion of minorities and women on boards of credit unions is not only of importance to these firms’ survival, but is also important to the efficient provision of financial services to their members.