Board gender diversity and financial stability: Evidence from microfinance institutions

Abstract

The effects of board gender diversity (BGD) on financial stability of financial institutions have long been an important topic, creating a rich strand of literature that focuses extensively on banks.Meanwhile, little is known about the implications of BGD on risk in microfinance institutions (MFI).This study aims to fill this gap.Using a data sample retrieved from the MIX Market database spanning the 2009-2018 period and the random-effects estimator, we find that the proportion of female directors on the board is positively associated with financial stability of MFIs measured by the Z-score.The result is robust when using alternative measures of financial stability and BGD, and alternative estimation techniques.In addition, we document a negative relationship between BGD and risk-taking behavior of MFIs.Further, the research result favors the critical mass theory rather than tokenism.Lastly, we find that BGD links with financial stability in a monotonic instead of non-monotonic manner.

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