The Role of Gender Diversity in Preventing Bank Failure: Empirical Evidence from Selected MENA Countries

Achieving gender diversity and women’s empowerment (SDG 5) is not only a social priority but also a key driver of sustainable financial resilience. This study investigates whether the presence of women on bank boards strengthens the stability of financial institutions in the Middle East and North Africa (MENA), where gender diversity remains limited yet is steadily growing. Using a balanced panel of 61 commercial banks across nine MENA countries from 2012 to 2020, we assess whether board gender diversity enhances the predictive performance of Early Warning Systems (EWSs) for bank distress. Applying a logit random-effects model, our results show that a higher proportion of female directors significantly lowers the probability of bank failure and improves EWS accuracy. Further analyses reveal that gender-diverse boards foster stronger governance by reducing operating costs, boosting profitability, and supporting higher capitalization and liquidity, indicating more prudent and risk-averse oversight. Robust tests using the Z-score and System Generalized Method of Moments (System-GMM) confirm these outcomes. Moreover, a non-linear pattern emerges: the stabilizing influence of women directors is most pronounced during financial crises but less evident in stable periods. These findings underscore the strategic value of women’s leadership in banking, offering insights for policymakers and regulators aiming to advance SDG 5 and promote resilient, inclusive financial systems.