Workforce culture diversity and compliance costs in the global banking sector

• Published date: 01 October 2022
• Author: Min Bai,Greg Hou,Frank Scrimgeour
• Date: 01 October 2022
• DOI: http://doi.org/10.1002/jcaf.22566

Received:  January  Accepted:May

DOI: ./jcaf.

RESEARCH ARTICLE

Workforce culture diversity and compliance costs in the

global banking sector

Min Bai Greg Hou Frank Scrimgeour

School of Accounting, Finance and

Economics, University of Waikato, New

Zealand

Correspondence

Min Bai and Greg Hou, School of

Accounting, Finance and Economics,

University of Waikato, NewZealand.

Email: mbai@waikato.ac.nz;

gerg.hou@waikato.ac.nz

Abstract

Business cultural diversity is particularly important in the Banking sector.Using

 to  data from  banks across the globe, this study provides evidence–

both board diversity and workforce diversity have a significant negative rela-

tionship with ethics compliance costs, implying that enhancing diversity in the

board room and employee workforce improves the ethicalperformance of banks.

And, the results show a significant positive relationship between diversity com-

pliance costs and ethics compliance costs. We further demonstrate a significant

inverse U-shape between diversity in the workforce and costs of business uneth-

ical behavior in the banking sector. The results remain statistically and quan-

titatively unchanged from further robustness tests and endogeneity estimates.

Overall, this paper sheds light and highlights the important role of diversity in

shaping banks’ ethics activities and performance.

KEYWORDS

banking sector, board diversity, compliance costs, decision making, firm performance, work-

force diversity

JEL CLASSIFICATION

G, G, M

1 INTRODUCTION

Credible ethical policies and practices in business are

an important issue for economic development globally.

Effectively addressing the ethical components in the tradi-

tional business model bring value-added effects related to

human and social dimensions (Erwin, ; Paulet, ).

Among business sectors banking is deemed essential and

crucial for economies since it provides funds to those who

need money for running businesses and supplies liquidity

for capital markets as one of the major intermediaries.

Banking services bridge between depositors and money

borrowers facilitating the mobilization of funds bringing

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium,

provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.

©  The Authors. Journalof Corporate Accounting & Finance published by Wiley Periodicals LLC.

material benefits to societies. The success of banking ser-

vices, indeed, intertwines with ethics which is perceived as

one of the most important factors for the former (Cowton,

). The necessity of considering ethics in the banking

industry and ways of how to apply it in practice has been

examined in the literature (e.g. Carrasco, ;Cowton,

; Goyal & Joshi, ;Harvey,; Paulet, ).

An emerging conclusion is that ethical factors cannot

be ignored when banks deliver their services to relevant

stakeholders. Further, a question arises as to what drives

the ethical behavior of banks and how the effects take

place. However, there has been minimal attention to this

question.

J Corp Account Finance. ;:–. wileyonlinelibrary.com/journal/jcaf 109