2021 Kinatedr Et Al

J. Int. Financ. Markets Inst.
Money 73 (2021) 101347
Contents lists available at ScienceDirect
Journal of International Financial

Markets, Institutions & Money
j o u r n a l h o m e p a g e : w w w . e l s e v i e r . c o m / l o c a t e / i n t fi n
Does boardroom gender diversity decrease credit risk in the

financial sector? Worldwide evidence q
Harald Kinateder a,⇑, Tonmoy Choudhury b, Rashid Zaman b, Simone D. Scagnelli b, Nurul Sohel c
a
School of Business, Economics and Information Systems, University of Passau, Innstrasse 27, 94030 Passau, Germany
b
School of Business and Law, Edith Cowan University, 270 Joondalup Drive, Perth 6027, Australia
c
Centre for Higher Studies and Research, Bangladesh University of Professionals, Dhaka 1216, Bangladesh
a r t i c l e i n f o a b s t r a c t
Article history: Recent regulatory changes to promote boardroom gender diversity (BGD) around the globe
Received 24 October 2020 have prompted academic debates about the risk and return preferences of gender quotas.
Accepted 1 May 2021 However, most BGD literature has implications for the non-financial sector. We argue that
Available online 05 May 2021
peculiarities associated with the financial sector, such as complex regulations, economic
sensitivity, and the quest for better risk management, merit more academic attention from
JEL classifications: gender diversity studies. This paper fills this literature gap by evaluating how BGD affects
G10
credit risk in the financial sector. For this purpose, we analyse a comprehensive sample of
G34
M14
listed banks across 20 countries from 2006 to 2017. We find that a one standard deviation
increase in BGD increases the distance to default, distance to insolvency and distance to
Keywords: capital by 39.80%, 50.97% and 38.61%, respectively. The role of the critical mass theory in
Boardroom gender diversity boardroom diversity and bank-specific credit risk nexus is further tested. Our results show
Critical mass theory that three or more women on board (WOB) significantly reduce bank-specific credit risks.
Distance to default These findings remain robust to alternative methods that alleviate endogeneity concerns.
Distance to insolvency
The findings have important implications for practitioners, regulators and academics in
Distance to capital
the financial sector.
Tokenism
Women on board Ó 2021 Elsevier B.V. All rights reserved.
1. Introduction
The past decade has seen considerable interest in board composition and structure from policymakers, academics and the
investment world (Moch, 2018; Sikochi, 2020), with a substantial amount of literature commenting on board gender com-
position in enhancing corporate performance (Li et al., 2017; Song et al., 2017). Many of these studies focused on the mon-
itoring role of boardroom gender diversity (BGD), finding women as an effective monitor in mitigating stakeholders’
concerns (Adams and Ferreira, 2009; Jain and Zaman, 2020). However, most studies examining the role of gender diversity
in managing risk either remained limited to the non-banking sector or found divergent results in the banking sector.
On the one hand, studies confirming the risk-averse attitudes of women found a significant negative association between
women on board (WOB) and bank risk (Cardillo et al., 2020; Farag and Mallin, 2017). However, others documented a positive
q
We want to thank three anonymous referees for their insightful comments and suggestions. Tonmoy Choudhury acknowledges the support of Edith
Cowan University for their financial assistance under grant number G1004390. All omissions and errors are the authors’ own.
⇑ Corresponding author.
E-mail addresses: harald.kinateder@uni-passau.de (H. Kinateder), t.choudhury@ecu.edu.au (T. Choudhury), r.zaman@ecu.edu.au (R. Zaman),
s.scagnelli@ecu.edu.au (S.D. Scagnelli), sohelibadu15@gmail.com (N. Sohel).
https://doi.org/10.1016/j.intfin.2021.101347
1042-4431/Ó 2021 Elsevier B.V. All rights reserved.
H. Kinateder, T. Choudhury, R. Zaman et al. J. Int. Financ. Markets Inst. Money 73 (2021) 101347
(Berger et al., 2014) or insignificant association between WOB and bank risk (Sila et al., 2016). Most recently, Cardillo et al.
(2020) attributed these discrepancies to sample selection bias since these studies either focused on US banks or European
banks as a sample. In particular, Berger et al. (2014) and Sila et al. (2016) were limited to the German and US banking sys-
tems, respectively, while Cardillo et al. (2020) and Farag and Mallin (2017) considered banks with headquarters in Europe.
None of these studies considered the worldwide banking sector or looked beyond the US or European settings. Hence, these
studies failed to account for the peculiarities associated with the international banking sector. Further, they used different
risk proxies and mostly did not test the critical mass theory concept in the banking sector. The present study is one of its
kind, evaluating bank-specific credit risk in the international banking sector. Specifically, findings contribute to the literature
gap by examining how BGD affects bank-specific credit risks within the global banking sector.
This study evaluates panel data of listed banks and financial institutions in 20 countries from 2006 to 2017. Our results
show a significant positive relationship between BGD and three measures of bank-specific credit risk (i.e., distance to default
[DD], distance to insolvency [DI] and distance to capital [DC]). We find that a one standard deviation increase in BGD
increases the DD, DI and DC by 39.80%, 50.97% and 38.61%, respectively. These results suggest that female board represen-
tation significantly reduces bank-specific credit risk. Our findings confirm a longstanding debate that gender diversified
boards in the banking sector are more capable in managing and mitigating bank-specific credit risks than boards made
up of men only. This study further tests the role of critical mass theory in boardroom diversity and bank-specific credit risk
nexus, finding that three or more WOB significantly reduce the bank-specific credit risk in the international banking sector.
This contrasts with gender diversity literature believing in tokenism, which argued that even the presence of one woman on
the board matters in reducing firm risk. We show that bank-specific credit risks are lower with three or more WOB compared
to the presence of only one woman.
These results remain consistent with a large number of robustness tests, including:
(i) using alternative measurements of BGD

(ii) using alternative proxies of bank-specific credit risk
(iii) controlling for bank, country and year fixed effects
(iv) excluding the global financial crisis (GFC)
(v) using alternative estimation techniques controlling for endogeneity biases (i.e., two-stage instrumental variable
regression, propensity score matching [PSM] and difference in differences [DID]).
Our paper is closely related to Cardillo et al. (2020) and Farag and Mallin’s (2017) research, which considered banks in
Europe and found a negative association between WOB and bank-specific credit risk. However, our paper is different from
theirs in three important aspects. First, both studies focused on the European banking sector while we investigated the role
of WOB in international settings over and beyond the European banking sector. Therefore, our findings captured the nuances
of global socio-economic factors associated with women in managing risk. Second, Cardillo et al. (2020) did not comment on
the role of critical mass in BGD and bank risk nexus. Our findings explored this theory, highlighting that merely placing one
woman on the board does not provide robust evidence of risk reduction. Third, Cardillo et al. (2020) and Farag and Mallin
(2017) had different proxies than the present study. We rely on more robust measures to capture bank-specific credit risk
(i.e., DD, DI, and DC). In contrast, Cardillo et al. (2020) adopted public bailouts as a proxy for bank-specific credit risk, and
Farag and Mallin (2017) used the ratio of impaired loans to gross loans to measure credit risk.
Our findings contribute to both BGD and risk management literature. This study contributes to calls for sectorial-focused
studies by investigating women’s role on banking firm boards to influence bank-specific credit risk (Adams, 2016). It further
provides an excursion to prior literature that heavily focused on board diversity and firm risk nexus in the non-financial sec-
tor. Our paper also contributes to the inconclusive debate over gender quotas and firm risk. Finally, while female board rep-
resentation is linked with lower corporate social irresponsibility (Jain and Zaman, 2020), evidence concerning which
mechanisms of WOB affect a firm’s outcome is limited.
The remainder of the paper is organised as follows. The next section explains the theoretical rationale and hypothesis
development, followed by data and research methodology. Afterwards, we discuss the empirical results and end with a
conclusion.
2. Theoretical rationale and hypothesis development
Bank-specific credit risk is one of the most discussed and investigated issues of the modern financial literature. An impor-
tant part of it is the stability of the financial sector (Gozgor et al., 2019; Wojewodzki et al., 2020), given its massive economic
impact demonstrated by the GFC (Cai et al., 2018; Karimalis and Nomikos, 2018). The modern literature focuses on the col-
lapse of the whole financial network created by the transmission of shocks from one to many financial and non-financial
entities within that environment (Bostandzic and Weiß, 2018; Daly et al., 2019; van Oordt and Zhou, 2019).
Several avenues to determine the origin and aftereffect of systemic risk in the financial sector have been discussed in pre-
vious publications (Brunnermeier et al., 2019; Donaldson and Micheler, 2018; Löffler and Raupach, 2018). For example, Cai
et al. (2018) stated that interconnectedness is completely correlated with diverse bank-specific risk measures. They further
suggested that such an optimistic correlation mostly ascends from a raised consequence of bank-specific systemic risk
2
during economic downturns. Another group of authors looked into the impact of systemic risk in modern-day financial sys-
tem regulations (Benoit et al., 2017; Freixas et al., 2015). Most prominently, they were interested in the contagion effect or
spillover of systemic risk (Ahnert and Georg, 2018; Bai et al., 2019; Dungey et al., 2019). Recent contemporary researchers
eagerly evaluated the relationship between systemic risk and governance mechanisms within financial networks (Ehrmann
and Schure, 2020). Since bank-specific credit risk is closely related to systemic risk, it is important to understand the relevant
drivers.1 To our best knowledge, there is no single study that has attempted to explore the impact of WOB on bank-specific
credit risk. This point is very important as suboptimal board structures may increase bank-specific credit risk and thus can
be an additional source of systemic risk in the financial sector.
2.1. Behavioural theory of gender-based differences
We invoke the behavioural theory of gender-based differences to establish the relationship between BGD and bank-
specific credit risk. A behavioural theory of gender-based differences highlights the heterogeneous aspects among genders.
Further, it emphasises that gender-appropriate behaviours, like cultural patterns, are learned behaviours shaped by conse-
quences (Damian et al., 2020). Many studies have adopted this view in recent years, highlighting the differences and hetero-
geneity between men and women (Russell et al., 2016). For instance, Schwartz and Rubel (2005) noted the difference
between men and women for at least ten basic values. Their findings suggested that men attribute more preference to power,
incentive, profligacy, achievement and self-direction values, while women prefer compassion and amplitude. Others, such as
Croson and Gneezy (2009), found robust differences among gender concerning risk, social and competitive preferences.
Meanwhile, recent literature findings predominantly label women as risk-averse (Eckel and Grossman, 2008; Jianakoplos
and Bernasek, 1998), socially sensitive (Nadeem, 2020a), ethical (Nadeem et al., 2017; Zaman et al., 2020) and fair in business
dealings (Nadeem, 2020b).
Several studies suggested the aforementioned characteristics of women largely differ according to personal characteris-
tics, such as age, education, social status and confidence level (Ghosh, 2018). Similarly, some gender-risk scholars also argued
that the above studies’ findings of women being risk-averse are largely based on the general population (Nadeem et al.,
2019). They argued that risk averseness is contingent on individual characteristics (Adams and Funk, 2012). Therefore, it
is probable that gender differences in the general population also hold in a professional setting (e.g., boardrooms). Indeed,
Adams and Funk (2012) found that women in pursuit of breaking the glass ceiling behave differently in boardroom settings
than in general. Swedish findings further revealed that women are more inclined to risk-taking than males. Concurrently, if
varying gender risk-taking attitudes exist, boardroom composition research might explain this variation.
At the board level, gender diversity is thought to improve organisational processes, enhance transparency and promote
quality decision-making (Jain and Jamali, 2016; Sila et al., 2016). The presence of WOB promotes ethical thinking and effi-
cient decision-making (Adams and Ferreira, 2004; Lewellyn and Muller-Kahle, 2020; Moreno-Gómez and Calleja-Blanco,
2018). We argue that the presence of such directors would lower the firm-level risk, building on the literature that considers
women as compassionate (Bullough et al., 2017; Sims and Morris, 2018; Velte, 2017). Indeed, study findings indicated that
high gender diversity on corporate boards reduces insolvency, resulting in on-time loan payments (Beck et al., 2013), lower
crash risks (Jebran et al., 2020) and improved profitability (Owen and Temesvary, 2018). Therefore, we expect banks with
high female board representation to have lower risks.
2.2. Hypotheses
We postulate our first hypothesis in line with the behavioural theory and acknowledged gender differences in decision-
making.
H1a: Female board representation significantly reduces bank-specific credit risk.
Some competing arguments in the literature label women as either risk-neutral or risk-takers, despite the gender diver-
sity role in risk reduction. For instance, Berger et al. (2014) investigated the executive board composition’s role in German
banks’ risk-taking. They uncovered a risk-enhancement perspective from females on portfolio risk and documented a signif-
icant positive relationship between WOB and portfolio risk. Similarly, Adams and Funk (2012) used survey data from Swed-
ish companies and found that women are more risk-loving than their male director counterparts.
Studies elaborating the reason behind female riskier initiatives suggested that performance pressure and competition
between board members tempt women directors to follow riskier strategies. Extending Berger et al.’s (2014) findings,
Loukil and Yousfi (2016) drew on a sample of Tunisian listed firms and found no association between WOB and firms’
propensity to financial risk-taking. Consistently, Sila et al. (2016) used a sample of non-financial US-listed banks and found
no association between BGD and equity risk. This is because women who pursue breaking the glass ceiling behave differently
than the general population, especially in a boardroom setting (Adams and Funk, 2012). Scholars also asserted that women in
finance scholarship exhibit similar risk preferences as men (Adams and Ragunathan, 2017). We formulate the following com-
peting hypotheses based on the ongoing discussion:
1
The default of a large bank is often not an independent event due to high interconnectness in the financial sector. As a result, high credit risk on the
individual bank level may also induce high systemic risk.
3
H1b: Female board representations have no or negative effect on bank-specific credit risk.
Despite our competing hypotheses for the relationship between female board representation and bank-specific credit
risk, there remains ambiguity on the effectiveness of such a relationship. Indeed, the board of directors makes decisions after
much discussion and deliberation democratically (Daily and Dalton, 1993). In such a scenario, the number of female appoint-
ments or directors remains a valid question. For instance, a board with higher female representation would be more enabled
to easily dictate their opinions, thereby influencing board decision-making, than a board with lower female representation.
The proportionate female board representation holds important implications for gender-risk literature due to the risk–return
relationship. Companies are often under pressure to generate a higher return for shareholders. Therefore, boards in such
companies might be reluctant to follow the risk reduction strategies because of lower return concerns (Bowman, 1980). A
high level of female representation on a board could play a significant role in framing the board’s opinions and making con-
sensual decisions (Gulamhussen and Santa, 2015). A sole (token) female member is more likely to be imitated by the male-
dominant directors’ behaviours than a board with high female representation. In this vein, studies have suggested that the
‘old boys’ club attitude in the boardroom often results in non-conciliatory and patronising behaviour from existing members
towards new entrants, particularly a sole female director (Nadeem, 2020a). Therefore, we argue that the token representa-
tion of females might limit the effectiveness of such an appointment, especially in our case (bank risk).
In this manner, prior literature has adopted a critical mass theory lens to support a greater female board representation
connotation (Amorelli and García-Sánchez, 2020; Dobija et al., 2021; Wiley and Monllor-Tormos, 2018) and explain the
board effectiveness level. For instance, Torchia et al. (2011) tested critical mass in gender diversity and firm innovation with
a sample of 151 Norwegian companies. Their findings revealed that attaining a critical mass (i.e., going from one or two WOB
to at least three) enhances firm innovation significantly. Likewise, Joecks et al. (2013) evaluated 151 German-listed compa-
nies and found a negative relationship between female board representation and firm performance. However, this relation-
ship became positive and significant after reaching a critical mass of 30% women. Despite such explicit variation in gender
behaviour across the female board representation levels, most prior studies ignored the critical mass aspect in gender diver-
sity and firm risk-taking scholarship. Therefore, we postulate the following hypothesis to fill this literature gap:
H2: The relationship between female board representation and bank-specific credit risk will be more pronounced in the
presence of three or more WOB.
3. Data and methodology
3.1. Data
We collected firm-level governance data from Bloomberg for 2006–2017. We started with 2006, from which Bloomberg
started their coverage. Following this, we collected information on bank financial characteristics from Thomson Reuters
Datastream. Data on World Governance Indicators were obtained from the World Bank website. Notably, we used the Thom-
son Reuters Datastream for the information used to capture bank-specific credit risk (i.e., the processes mentioned in Sec-
tion 3.2.1; DD, DI and DC). Merging all data yielded a final sample of 1,692 bank-year observations across 20 countries.
The list of the banks used in our analysis is demonstrated in Appendix A.
3.2. Variable definitions
3.2.1. Dependent variables

We capture bank-specific credit risk using different distance to risk-based models. These models have received significant
support from international financial regulatory authorities (Chan-Lau and Sy, 2007; Zambrana, 2010). Merton (1974) first
introduced DD in his seminal work, referring to the distance between the bank’s given position and default position where
default is a position in which the bank’s asset value goes under the liability value threshold (Milne, 2014). Later studies
extended the same model by introducing DI (Atkeson et al., 2017) and DC (Ji et al., 2019). While DI refers to the distance
between the insolvent condition to the current position (Harada et al., 2013), DC shows the capital buffer drilled before
reaching the default (Harada and Ito, 2011). We adopt all three measures to calculate bank-specific credit risk in this paper.
Theoretically, DD refers to a position where a firm’s market value of assets At is lesser than its value of liability L (Dar and
Qadir, 2019). Following Akhter and Daly (2017), Eq. (1) presents the DDt at time t:

lnðLÞ lnðAt Þ þ l 0:5r2A ðT tÞ
DDt ¼ pffiffiffiffiffiffiffiffiffiffiffi ð1Þ
rA T t
where parameter l is the expected drift in the asset At , modelled by the risk-free return, and rA is the asset volatility.
The DI is an alternative credit risk measure based on a different approach than DD but has its roots in the credit risk struc-
tural model. The DIt in Eq. (2) is calculated as:

At L t 1
DIt ¼ ð2Þ
At rA;t
4
Concurrently, DC is also a special derivation of the underlying DD model. It uses the prompt corrective action (PCA) and
Basel framework’s capital adequacy ratio (CAR) to fine-tune DD, where CARt is at least 8%. Following Chan-Lau and Sy (2007)
and Eq. (1), we can derive DC t in Eq. (3):
" ! #
At pffiffiffiffiffiffiffiffiffiffiffi 1
DC t ¼ ln 1
þ l 0:5r ðT tÞ ðrA T tÞ
2
A ð3Þ
1CARt
L
3.2.2. Explanatory variables

We capture BGD as the proportion of female directors to the total directors on board, which is in line with previous work
of Nadeem et al. (2017) and Zaman et al. (2020), for example. A company’s risk may vary across different national-level and
firm-level governances and financial characteristics. Therefore, we add additional variables to control for such
characteristics.
Concerning firm-level characteristics, we control for independent directors (i.e., board independence), measured as the
proportion of independent directors to total directors on board. Board size is measured as the number of total directors
on board and board tenure as the average tenure of all directors on the board. Prior studies suggested that companies’ finan-
cial performance significantly influences corporate risk, allowing us to control for return on assets (ROA) captured as the net
income before extraordinary items divided by the total asset. The price to book ratio (P/B ratio) is measured as the market
price of the company stock divided by the book value of its share, bank size as the natural logarithm of a company’s total
assets, and sales growth as the percentage of growth in the net sales of the firm compared to the past fiscal year.
Concerning the country-level variables, we rely on World Governance Indicators directly obtained from the World Bank
website.2 These variables include voice and accountability, political stability, government effectiveness, regulatory quality, the rule
of law and corruption control. We add these country-level control variables based on the past literature that suggested that coun-
try national governance indicators significantly affect bank risk (Anheier et al., 2018; Berger et al., 2020; Brenton-Rule et al.,
2016; Mselmi, 2020).
3.3. Regression Model
We use the following regression model to examine the effect of female board representation on bank-specific credit risk:
CRi;t ¼ a þ uBGDi;t þ c C i;t þ ei;t

0
ð4Þ
where i represents the bank and t represents the time (i.e., year). The dependent variable CRi;t is one of the bank-specific
credit risk variables (DDt , DIt and DC t ) defined in Eqs. (1) to (3). BGDi;t represents the main independent variable of interest
(i.e., BGD). The vector C i;t represents a comprehensive set of k control variables; a is a constant, and u and c are the estimated
coefficients for the BGDi;t and k control variables, respectively; ei;t is the residual of the model. Since bank risk and gender
diversity both vary across different banks and over time, we included bank and year fixed effects in all our regressions,
except when mentioned otherwise.
4. Empirical Analysis
4.1. Descriptive statistics
We present the sample distribution in Table 1, followed by the descriptive statistics reported in Table 2. At the outset,
Table 1 confirms the US’s global dominance (42.6%) in the international financial sector, followed by China (5.7%).
Table 2 reports the summary statistics of the variables included in the regression. All bank-specific credit risk measures
were calculated for each year from 2006 to 2017. The mean value of bank-specific risk results is consistent with previous
findings of (Daly et al., 2019). They suggest that the average bank has a DD value of 5.42, with a DI value of 4.03 and a
DC of 9.21. The mean value of BGD indicates a low level of female board representation (11.9%) across the international bank-
ing sector. This result is close to some recent studies that have reported a similar lower trend in international settings (i.e.,
9%) (Cardillo et al. 2020). The descriptive statistics of our control variable are consistent with prior literature (Zaman et al.,
2020).
4.2. Baseline results: Female board representation and bank-specific credit risk
Table 3 reports the baseline regression results, testing hypotheses H1a and H1b. Columns (1) to (3) present the results of
BGD on three measures of bank-specific risk variables (i.e., DD, DI and DC) after controlling for the bank-year fixed effect.
Columns (4) to (6) include the country-year fixed effect to capture country-specific heterogeneity. All of the model specifi-
cations provide strong support for hypothesis H1a, while there is no evidence for hypothesis H1b. These results suggest that
2
See https://info.worldbank.org/governance/wgi/.
5
Table 1
Sample distribution.
No. Country name Observations Percentage

1. Australia 48 2.84
2. Belgium 36 2.13
3. Brazil 48 2.84
4. China 96 5.67
5. Denmark 48 2.84
6. France 48 2.84
7. Germany 48 2.84
8. India 84 4.96
9. Italy 48 2.84
10. Japan 48 2.84
11. South Korea 36 2.13
12. Malaysia 48 2.84
13. Mexico 48 2.84
14. Netherlands 48 2.84
15. South Africa 48 2.84
16. Spain 48 2.84
17. Sweden 48 2.84
18. Switzerland 48 2.84
19. United Kingdom 48 2.84
20. United States 720 42.55
Total 1,692 100
This table reports the sample distribution of 1,692 bank-year

observations from 20 countries from 2006 to 2017.
Table 2
Descriptive statistics.
Observations Mean Std. Dev. P25 Median P75

Panel A: Dependent variables
DD 1,692 5.422 14.187 2.358 3.832 5.305
DI 1,692 4.030 12.143 1.620 2.917 4.185
DC 1,692 9.212 18.829 4.386 6.660 9.056
Panel B: Independent variable
BGD 1,692 11.890 11.737 0.000 10.000 18.180
Panel C: Control variables
Board independence 1,692 50.977 36.341 0.000 63.636 84.620
Board size 1,692 10.490 6.531 8.000 12.000 15.000
Board tenure 1,692 3.905 4.569 0.000 2.320 7.190
ROA 1,692 0.755 1.037 0.390 0.801 1.080
P/B ratio 1,692 1.347 0.960 0.805 1.186 1.638
Bank size 1,692 11.683 3.542 9.127 11.992 14.078
Sales growth 1,692 7.034 20.039 3.457 3.854 14.822
Voice and accountability 1,692 77.569 22.466 75.829 84.834 87.793
Political stability 1,692 59.333 19.409 54.976 61.611 66.985
Government effectiveness 1,692 84.212 14.249 81.043 90.732 92.753
Regulatory quality 1,692 82.206 17.041 77.990 88.942 93.204
Rule of law 1,692 81.796 18.752 77.461 91.080 92.788
Corruption control 1,692 79.802 19.274 67.788 89.423 91.748
This table presents descriptive statistics for the variables used in this study. The dependent variables in Panel A include distance to default (DD), distance to
insolvency (DI), and distance to capital (DC). The independent variable is boardroom gender diversity (BGD). Panel C consists of a comprehensive set of
control variables. The sample consists of 1,692 bank-year observations from 2006 to 2017.
female board representation significantly reduces bank-specific credit risk. Specifically, our findings suggest that the esti-
mated coefficient on BGD was positive (0.184 and 0.216) in columns (1) and (4) and statistically significant at 5% and 1%
levels of significance. These results imply that higher BGD reduces a bank’s DD risk, supporting our hypothesis. Similarly,
the BGD (0.175 and 0.193) is positively related with DI risk at 5% and 1% levels of significance in columns (2) and (5), respec-
tively. Finally, the results in columns (3) and (6) confirm our earlier findings for the third measure of bank-specific credit risk,
being positive at 5% and 1% levels of significance, respectively.
We fail to find any conclusive evidence at the outset that board independence and board size are associated with any
bank-specific credit risk of our interest. This aligns with the literature that labels the board formation as a complex and cog-
nitive process (Nordberg and Booth, 2019). However, board tenure shows a positive and significant association with bank-
specific credit risks, implying that banks with higher board tenure face lower risks. While the bank-specific credit risks are
not significantly associated with profitability (ROA), they are negatively and significantly correlated with the P/B ratio, size,
6
Table 3
Female board representation and bank-specific credit risk: Baseline results.
(1) (2) (3) (4) (5) (6)

DD DI DC DD DI DC
BGD 0.184** 0.175** 0.303** 0.216*** 0.193*** 0.335***
(0.084) (0.072) (0.138) (0.081) (0.069) (0.110)
Board independence 0.013 0.008 0.004 0.014 0.009 0.015
(0.017) (0.015) (0.022) (0.023) (0.019) (0.028)
Board size 0.108 0.127* 0.160 0.053 0.069 0.275**
(0.082) (0.070) (0.114) (0.064) (0.055) (0.120)
Board tenure 0.219*** 0.197*** 0.225** 0.175*** 0.156*** 0.227***
(0.071) (0.061) (0.092) (0.061) (0.053) (0.087)
ROA 0.161 0.179 0.229 0.466 0.368 0.690
(0.311) (0.265) (0.406) (0.466) (0.398) (0.591)
P/B ratio 0.207 0.283 0.293 0.681 0.518 1.946***
(0.346) (0.302) (0.449) (0.494) (0.426) (0.663)
Bank size 0.229 0.235 0.431* 1.176*** 1.002*** 1.573***
(0.229) (0.180) (0.244) (0.405) (0.344) (0.536)
Sales growth 0.050 0.044 0.040 0.035* 0.031** 0.015
(0.034) (0.029) (0.036) (0.019) (0.016) (0.024)
Voice and accountability 0.279 0.189 0.359 0.285 0.195 0.403
(0.394) (0.336) (0.488) (0.438) (0.376) (0.521)
Political stability 0.062 0.077 0.180 0.067 0.080 0.179
(0.075) (0.063) (0.155) (0.082) (0.070) (0.169)
Government effectiveness 0.208 0.153 0.104 0.199 0.144 0.090
(0.299) (0.254) (0.333) (0.349) (0.299) (0.387)
Regulatory quality 0.488** 0.436** 0.337 0.495 0.438* 0.342
(0.234) (0.199) (0.226) (0.307) (0.263) (0.279)
Rule of law 0.296 0.252 0.037 0.248 0.208 0.095
(0.284) (0.242) (0.229) (0.398) (0.341) (0.327)
Corruption control 0.021 0.027 0.195 0.028 0.031 0.185
(0.238) (0.202) (0.271) (0.286) (0.244) (0.305)
Bank & year fixed effects Yes Yes Yes No No No
Country & year fixed effects No No No Yes Yes Yes
F-test (p-value) 0.000 0.000 0.000 0.000 0.000 0.000
Observations 1,692 1,692 1,692 1,692 1,692 1,692
Adjusted R2 0.556 0.561 0.540 0.194 0.186 0.220
This table reports regression results for the baseline model in Eq. (4). The relationship between bank-specific credit risk variables, i.e. distance to default
(DD), distance to insolvency (DI), and distance to capital (DC), and boardroom gender diversity (BGD) as well as other control variables is analysed from
2006 to 2017. While columns (1) to (3) present the results after controlling for the bank-year fixed effect, columns (4) to (6) include the country-year fixed
effect to capture country-specific heterogeneity. For brevity, the constant is not reported. The standard errors reported in parentheses are based on the
Windmeijer correction for heteroscedasticity and clustering. ***, **, * denote significance at the 1%, 5% and 10% level, respectively.
and sales growth. This finding suggests that the higher the P/B ratio, size, and sales growth, the higher the bank-specific
credit risks faced by the sampled banks. Among the macro-economic governance indices, only regulatory quality has a neg-
ative and significant relationship with the risks, indicating that a higher level of regulatory quality increases bank-specific
credit risks.
Overall, our results portray that banks with more female representation in boardrooms are more likely to reduce bank-
specific credit risks. Our findings align with the behavioural theory of gender-based differences and highlight the heterogene-
ity across genders in a boardroom setting. Our findings are in contrast to studies that suggested that WOB might hesitate to
question the status quo due to performance pressure to generate a higher return for shareholders (Daily and Dalton, 2003).
4.3. Testing for the critical mass theory
We follow similar intuition mentioned in Section 4.2 to test the tokenism vs the critical mass theory concept in BGD.
However, we replace our main explanatory variable (BGD) with three newly created variables: BGD-I (presence of one
woman), BGD-II (two WOB) and BGD-III (three or more WOB). Table 4 presents the results of tokenism vs critical mass
on BGD and bank-specific credit risks.
Our results provide strong support for the critical mass theory concept across all model specifications. The coefficient on
BGD-III is positive and statistically significant at the 1% level. Our tokenism results remain variegated across the bank-year
fixed effect and country-year fixed effect settings, despite the consistent results for the critical mass theory across all models.
While we find partial support of tokenism across the bank-year fixed effect models (columns [1] to [3]), the results for the
country-fixed effect model (columns [4] to [6]) remained insignificant. However, the coefficient’s magnitude increases as the
female representation on the board increases, even in the bank-year fixed effect model. These findings confirm hypothesis
H2, indicating that the critical mass theory holds in relationships between BGD and bank’s credit risks. Our results suggest
that the presence of three or more WOB significantly reduces credit risk compared with one or two WOB (tokenism), con-
firming hypothesis H2.
7
Table 4
Female board representation and bank-specific credit risk: critical mass vs tokenism.
(1) (2) (3) (4) (5) (6)

DD DI DC DD DI DC
BGD-I 2.477*** 2.069*** 2.926** 0.416 0.416 0.096
(0.836) (0.708) (1.138) (0.803) (0.695) (1.127)
BGD-II 2.197** 2.084*** 2.838** 1.989** 1.886** 2.324*
(0.883) (0.753) (1.204) (0.986) (0.842) (1.306)
BGD-III 4.504*** 4.336*** 4.487** 4.690** 4.432*** 5.077**
(1.472) (1.251) (1.980) (1.928) (1.654) (2.267)
Board independence 0.001 0.006 0.016 0.007 0.009 0.047*
(0.014) (0.012) (0.020) (0.018) (0.016) (0.027)
Board size 0.141* 0.155** 0.192 0.062 0.079 0.265**
(0.083) (0.071) (0.117) (0.070) (0.060) (0.128)
Board tenure 0.228*** 0.206*** 0.234** 0.188*** 0.168*** 0.248***
(0.072) (0.062) (0.093) (0.062) (0.053) (0.088)
ROA 0.164 0.187 0.250 0.374 0.282 0.565
(0.311) (0.265) (0.410) (0.462) (0.395) (0.580)
P/B ratio 0.223 0.297 0.284 0.770 0.596 2.093***
(0.342) (0.299) (0.443) (0.500) (0.430) (0.679)
Bank size 0.251 0.251 0.500* 1.073*** 0.915*** 1.373***
(0.236) (0.186) (0.258) (0.394) (0.334) (0.520)
Sales growth 0.049 0.043 0.041 0.036* 0.032* 0.018
(0.035) (0.029) (0.036) (0.020) (0.017) (0.025)
Voice and accountability 0.343 0.248 0.439 0.338 0.244 0.456
(0.404) (0.345) (0.502) (0.454) (0.390) (0.540)
Political stability 0.049 0.064 0.170 0.049 0.063 0.160
(0.073) (0.062) (0.155) (0.079) (0.067) (0.168)
Government effectiveness 0.188 0.136 0.093 0.193 0.138 0.094
(0.301) (0.257) (0.340) (0.349) (0.299) (0.392)
Regulatory quality 0.488** 0.434** 0.337 0.474 0.419 0.304
(0.233) (0.198) (0.226) (0.303) (0.260) (0.276)
Rule of law 0.316 0.272 -0.008 0.270 0.227 -0.061
(0.288) (0.245) (0.233) (0.403) (0.346) (0.334)
Corruption control 0.001 0.008 0.148 -0.007 0.001 0.124
(0.245) (0.208) (0.280) (0.292) (0.250) (0.313)
F-test (p-value) 0.000 0.000 0.000 0.000 0.000 0.000
Observations 1,692 1,692 1,692 1,692 1,692 1,692
Adjusted R2 0.556 0.561 0.536 0.189 0.182 0.209
This table reports regression results of critical mass testing using the baseline model in Eq. (4). As in Table 3, the relationship between bank-specific credit
risk variables, i.e. distance to default (DD), distance to insolvency (DI), and distance to capital (DC), and boardroom gender diversity (BGD) as well as other
control variables is analysed from 2006 to 2017. For this purpose, our main variable of interest BGD is split up into three newly created variables: BGD-I
(presence of one woman), BGD-II (two women on board) and BGD-III (three or more women on board). While columns (1) and (3) present the results after
controlling for bank-year fixed effects, columns (4) to (6) include country-year fixed effects to capture country-specific heterogeneity. For brevity, the
constant is not reported. The standard errors reported in parentheses are based on the Windmeijer correction for heteroscedasticity and clustering. ***, **, *
denote significance at the 1%, 5% and 10% level, respectively.
5. Robustness checks
We performed several robustness checks to confirm that our baseline findings remain valid. In this section, we report the
results on whether our baseline findings remained robust when using an alternative measure for BGD, excluding the GFC
(i.e., from 2007 to 2009), and under various identification strategies countering endogeneity concerns.
5.1. Alternative BGD measure
The model in Panel A of Table 5 uses an alternative variable for BGD, namely, a BGD dummy, which takes the value 1 if the
bank has WOB and 0 otherwise. The results reported across all models suggest that the presence of a female on board mat-
ters in reducing the bank-specific credit risk.
5.2. Controlling for the GFC period
Prior literature on bank risk-taking documents heterogeneity among bank performance during periods of uncertainty
(Olson and Zoubi, 2017). Several studies have indicated that market uncertainty, such as during the GFC, increases the prob-
ability of bank default (Kenc et al., 2020). For instance, Vazquez and Federico (2015) found that banks with weak liquidity
and higher leverage in the pre-crisis period were more likely to default during the GFC. Similar to bank risk dependency on
8
Table 5
Female board representation and bank-specific credit risk: Robustness tests.
Panel A: Alternative independent variable

(1) (2) (3) (4) (5) (6)
DD DI DC DD DI DC
BGD dummy 2.950*** 2.692*** 3.325** 2.477*** 2.069*** 2.926**
(0.970) (0.824) (1.305) (0.836) (0.708) (1.138)
Control variables Yes Yes Yes Yes Yes Yes

F-test (p-value) 0.000 0.000 0.000 0.000 0.000 0.000
Observations 1,692 1,692 1,692 1,692 1,692 1,692
Adjusted R2 0.555 0.558 0.535 0.194 0.186 0.220
Panel B: Excluding the GFC
(1) (2) (3) (4) (5) (6)
DD DI DC DD DI DC
BGD 0.158** 0.149** 0.274* 0.179** 0.161** 0.283**
(0.079) (0.067) (0.142) (0.080) (0.069) (0.111)

F-test (p-value) 0.000 0.000 0.000 0.000 0.000 0.000
Observations 1,256 1,256 1,252 1,256 1,256 1,252
Adjusted R2 0.626 0.629 0.559 0.195 0.186 0.211
This table presents the results of additional robustness tests for the baseline results reported in Table 3. Panel A uses an alternative specification for the
boardroom gender diversity (BGD) variable, namely a BGD Dummy which is an indicator variable that takes the value 1 if the bank has women on board and
0 otherwise. In Panel B, the Global Finance Crisis (2007–2009) is excluded from the sample period (2006–2017). Both modifications are used to reestimate
the baseline model in Eq. (4). While columns (1) to (3) present the results after controlling for bank-year fixed effects, columns (4) to (6) include country-
year fixed effects to capture country-specific heterogeneity. For brevity, the constants and coefficients of the control variables are not tabulated, only the
coefficient estimates of the variables of interest. The standard errors reported in parentheses are based on the Windmeijer correction for heteroscedasticity
and clustering. ***, **, * denote significance at the 1%, 5% and 10% level, respectively.
market uncertainty, some studies captured the heterogeneity of the board of directors and corporate risk-taking during the
GFC period. For example, Ferrero-Ferrero et al.’s (2012) findings suggested that the board’s effectiveness is sensitive to the
economic period. Consistently, Vallascas et al. (2017) documented that post-GFC reform related to increasing board indepen-
dence significantly reduced the bank risk compared to during the GFC.
Accordingly, Cardillo et al. (2020) found that banks with higher female representation on boards required less public funding
during the financial crisis than low gender-diverse boards. The above findings imply that the GFC period might have affected
our baseline results. We follow Jain and Zaman (2020) and excluded 2007 to 2009 from our sample, and then reestimated our
baseline model to test whether our results are sensitive to the GFC period. The results presented in Panel B of Table 5 remain
qualitatively similar to our baseline findings, suggesting that our baseline results are not biased by the GFC period.
5.3. Identification strategies
As previous work on gender diversity and firm performance, particularly gender diversity and firm risk, has documented
divergent results (Jain and Jamali, 2016), recent work has attributed such divergent results to failing to counter endogeneity
concerns (Nadeem et al., 2017). For instance, banks may appoint female directors in response to higher risk. In this case, bank
risk is determined by female board representation. Similarly, there might be some variables that we fail to account for in our
model or other unobservable factors, which have the potential to influence bank-specific credit risk. We have performed
three tests to rule out such endogeneity concerns: two-stage least squares (2SLS) regression, propensity score matching
(PSM), and DID analysis. We discuss these results in subsequent sections.
5.3.1. Two-stage least squares regression

One way to reduce the endogeneity (mainly because of an omitted variable or simultaneity) is to use an instrumental
variable approach by modelling it into two stages (Semykina and Wooldridge, 2010). Therefore, we implement a two-
stage instrumental variable estimation process to confirm that endogeneity concerns did not drive our baseline results.
The two-stage instrumental variable approach requires an exogenous instrument that induced changes to an explanatory
variable without affecting the dependent variable. We use the enactment of law mandating companies to ensure a certain
level of female representation (gender quota) on the board as an exogenous instrument.
The first stage result reported in column (1) of Table 6 suggest that gender quota laws significantly improve the female
board representation. The F-test value (71.16) of the first-stage regressions is significant at 1%. Therefore, we can reject the
9
Table 6
Female board representation and bank-specific credit risk: 2SLS.
Instrumental variable (IV) approach

(1) (2) (3) (4)
1st-stage 2nd-stage 2nd-stage 2nd-stage
BGD DD DI DC
Gender quota laws 5.283***
(0.626)
BGD-instrumented 0.516*** 0.489*** 1.130***
(0.200) (0.170) (0.333)
Board independence 0.107*** 0.054* 0.045* 0.097**
(0.014) (0.029) (0.025) (0.039)
Board size 0.847 0.194** 0.187** 0.323**
(0.691) (0.092) (0.079) (0.143)
Board tenure 0.291*** 0.070 0.043 0.136
(0.523) (0.063) (0.055) (0.118)
ROA 0.262 0.470 0.348 0.641
(0.227) (0.320) (0.275) (0.448)
P/B ratio 0.551** 1.361*** 1.089*** 1.505***
(0.261) (0.357) (0.303) (0.498)
Bank size 0.601 0.328* 0.311** 0.667***
(0.120) (0.184) (0.158) (0.255)
Sales growth 0.012 0.032 0.031 0.013
(0.010) (0.030) (0.026) (0.032)
Other control variables (world governance indicators) Yes Yes Yes Yes
Bank & year fixed effects Yes Yes Yes Yes
Observations 1,692 1,692 1,692 1,692
Instrument validity tests for IV regression
(i) F-test for excluded instrument in first stage
Sanderson-Windmeijer F-test 71.16
(ii) Under-identification test
Kleibergen-Paap rk LM statistic 60.60
(iii) Weak identification test
Cragg-Donald Wald F-statistic 87.92
Stock-Yogo weak ID test
10% max. IV size 16.38
This table reports the results of boardroom gender diversity (BGD) and bank-specific credit risk variables, i.e. distance to default (DD), distance to insolvency
(DI), and distance to capital (DC), using two-stage least squares. Column (1) reports the result of first stage of 2SLS regression using country-specific gender
quota law as exogenous instrument. Column (2) to (4) present the second stage result of 2SLS for three proxies of bank-specific credit risks, i.e. DD, DI and
DC, respectively. The sample period is 2006–2017. For brevity, the constant is not reported. The standard errors reported in parentheses are based on the
Windmeijer correction for heteroscedasticity and clustering. ***, **, * denote significance at the 1%, 5% and 10% level, respectively.
null hypothesis (Larcker and Rusticus, 2010). Consequently, the following stage results are acceptable. The outcomes for the
under-identification test (Kleibergen-Paap rk LM statistic) are also significant (an F-value of 60.60), rejecting the null hypoth-
esis of under-identification. Similarly, the value of Cragg-Donald Wald F-statistics (87.92) is higher than the Stock-Yogo crit-
ical values (max. 16.38 at 10%), indicating that the instrument is robust. Thus, we can conclude that the selected instrument
is properly recognised, strong and valid.
Columns (2) to (4) report the second stage results of 2SLS. The significant positive association between BGD and bank-
specific risk proxies corroborated our earlier findings.
5.3.2. Propensity score matching

We implement PSM in two steps to examine whether the change in bank-specific credit variables (DD, DI and DC)
occurred due to the presence of female directors. First, we created two groups (a treatment group and a control group) based
on an indicator variable (a woman dummy), taking the value of 1 if the bank had women on their board and 0 otherwise. We
included banks with female directors in the treated group, whereas the control group was comprised of banks without
women on their boards. We matched both groups using PSM with replacement (a calliper set at 0.001) on all firm-level
covariates to ensure comparability across groups. Panel A of Table 7 reports the univariate results after matching.
The results suggest that our treatment and control groups are nearly identical for all the independent variables but not
the dependent variables. Therefore, the statistically significant values of DD, DI and DC could be attributed to differences in
female board representation rather than other covariates. We re-ran our baseline model on the matched sample to ensure
the difference in the bank-specific credit risks was due to BGD. The result presented in Panel B of Table 7 indicates that the
10
Table 7
Female board representation and bank-specific credit risk: PSM analysis.
Panel A: Comparison of treatment and control firms

Dependent variables N Treated N Control Differences t-stat
DD 36 6.892 36 4.316 2.576 2.30**
DI 36 2.979 36 2.387 0.592 1.97**
DC 36 8.250 36 6.254 1.996 1.89*
Control variables N Treated N Control Differences t-stat
Board independence 36 54.260 36 51.476 2.784 0.41
Board size 36 11.615 36 10.744 0.871 0.82
Board tenure 36 2.177 36 2.385 0.208 0.25
ROA 36 0.755 36 0.614 0.141 0.93
P/B ratio 36 1.139 36 1.279 0.140 0.55
Bank size 36 13.086 36 11.666 1.420 1.52
Sales growth 36 5.889 36 13.008 7.119 1.14
Voice and accountability 36 73.027 36 79.769 6.742 1.66
Political stability 36 54.295 36 60.550 6.255 1.42
Government effectiveness 36 80.781 36 84.701 3.920 1.17
Regulatory quality 36 77.161 36 83.290 6.129 1.63
Rule of law 36 78.206 36 83.269 5.063 1.30
Corruption control 36 73.226 36 80.847 7.621 0.79
Panel B: Female board representation and bank-specific credit risk: PSM regression
Bank-specific credit risk
(1) (2) (3)
DD DI DC
BGD 0.054*** 0.031** 0.086**
(0.014) (0.012) (0.040)
Control variables Yes Yes Yes

Bank & year fixed effects Yes Yes Yes
F-test p-value 0.000 0.000 0.000
Observations 72 72 72
Adjusted R2 0.943 0.828 0.781
This table presents the baseline results for the impact of boardroom gender diversity (BGD) on bank-specific credit risk variables, i.e. distance to default
(DD), distance to insolvency (DI) and distance to capital (DC), using propensity score matching (PSM). Panel A reports the univariate analysis of matched vs
treatment group based on an indicator variable (1 if the bank has women on board and 0 otherwise). We re-ran our baseline model on the matched sample
to ensure the difference in the bank-specific credit risk was due to BGD. The results are reported in Panel B. N stands for the number of matched
observations as a part of PSM. For brevity, the constant and the coefficients of the control variables are not tabulated in Panel B, only the coefficient
estimates of the variables of interest. The sample period is 2006–2017. The standard errors reported in parentheses are based on the Windmeijer correction
for heteroscedasticity and clustering. ***, **, * denote significance at the 1%, 5% and 10% level, respectively.
coefficient of BGD is significant and positive, suggesting that female board representation reduces bank risk, even after con-
trolling for all covariates.
5.3.3. Difference in differences analysis

Many countries worldwide have enacted regulations to support female board representation. For instance, in 2010, the
Australian Securities Exchange (ASX) introduced a clause in their corporate governance code to facilitate a 30% women board
representation (Nadeem et al., 2017). Similarly, Norway and Germany have also mandated gender quotas to promote female
representation in the upper echelons (Jain and Zaman, 2020). We take advantage of such a rule using a quasi-experimental
approach to observe the changes in companies’ bank-specific risks after enacting such laws. First, we create an indicator vari-
able that takes the value of 1 for countries that enacted mandatory gender quotas and 0 otherwise. Second, we create two
groups based on this variable. The treatment group included companies with headquarters in countries that mandated gen-
der quotas, while the control group included companies operating in countries without such laws. We applied PSM matching
with replacement (calliper at 0.001) with all bank-level covariates to ensure comparability across both groups. Panel A of
Table 8 reports the univariate results after matching.
The results suggest that our treatment and control groups are nearly identical for all the independent variables but not
the dependent variables. Therefore, the statistically significant values of DD, DI and DC could be attributed to differences in
female board representation due to gender quotas. We performed DID regression to examine whether such changes in laws
to increase female representation on board leads to lower bank-specific risk. We specifically created an indicator variable
(Post, that is equal to 1 for the period after the trigger event in the respective country and 0 otherwise). We then interacted
the Post variable with the BGD proxy (i.e., Post BGD). We use this interacted variable in our baseline model and re-ran the
regression. The result reported in Panel B of Table 8 suggest that the interaction variables’ coefficients estimates (Post BGD)
are statistically positive and significant at the 5% level for DD and the 10% level for DI and DC. These findings corroborated
our earlier baseline results that gender diversity in boardrooms reduces bank-specific credit risk.
11
Table 8
Female board representation and bank-specific credit risk: DID analysis.
Panel A: Comparison of treatment and control firms

Dependent variables N Treated N Control Differences t-stat
DD 55 5.030 55 3.744 1.286 1.97**
DI 55 3.339 55 2.072 1.267 2.68***
DC 55 9.851 55 7.279 2.572 1.75*
Control variables N Treated N Control Differences t-stat
Board independence 55 35.389 55 33.681 1.708 0.28
Board size 55 9.179 55 9.597 0.418 0.34
Board tenure 55 1.784 55 1.564 0.220 0.54
ROA 55 0.410 55 0.641 0.231 0.97
P/B ratio 55 1.241 55 1.222 0.019 0.10
Bank size 55 12.712 55 12.456 0.256 0.41
Sales growth 55 1.156 55 1.221 2.377 0.90
Voice and accountability 55 82.492 55 84.753 2.261 0.75
Political stability 55 65.552 55 64.992 0.560 0.13
Government effectiveness 55 83.907 55 84.051 0.144 0.05
Regulatory quality 55 80.799 55 82.689 1.890 0.54
Rule of law 55 82.801 55 83.221 0.420 0.14
Corruption control 55 80.340 55 82.514 2.174 0.62
Panel B: Female board representation and bank-specific credit risk – DID regression
Bank-specific credit risk
(1) (2) (3)
DD DI DC
Post BGD 0.040** 0.0302* 0.080*
(0.020) (0.017) (0.046)
Post 0.628 0.999 0.101
(0.537) (0.770) (0.901)
BGD 0.022 0.009 0.054
(0.020) (0.020) (0.044)
Control variables Yes Yes Yes

Bank & year fixed effects Yes Yes Yes
F-test p-value 0.000 0.000 0.000
Observations 110 110 110
Adjusted R2 0.866 0.842 0.605
This table presents the baseline results for the impact of gender diversity on bank-specific credit risk variables, i.e. distance to default (DD), distance to
insolvency (DI) and distance to capital (DC), using difference in differences (DID) analysis. Panel B presents the DID regression results. We specifically
created an indicator variable (Post), that is equal to 1 for the period after the trigger event (i.e., changes in laws to increase female representation) in the
respective country and 0 otherwise. We then interacted the Post variable with the BGD proxy (i.e., Post BGD). N stands for the number of matched
observations as part of DID analysis. For brevity, the constant and the coefficients of the control variables are not tabulated in Panel B, only the coefficient
estimates of the variables of interest. The sample period is 2006–2017. The standard errors reported in parentheses are based on the Windmeijer correction
for heteroscedasticity and clustering. ***, **, * denote significance at the 1%, 5% and 10% level, respectively.
6. Conclusion
BGD is a pivotal dimension in corporate governance (CG) since women and men possess heterogeneous characteristics
regarding risk-taking. For instance, a handful of studies documented that women differ from men in their personality in
the way that they are more risk averse and ethically sensitive (see literature summary in Cumming et al., 2015). Prior liter-
ature has mostly investigated the impact of BGD on firm performance, especially related to non-financial banks. The present
paper examines the effect of BGD on bank-specific credit risks in the financial sector. We draw on the behavioural theory of
gender-based differences and find that gender diversity in boardrooms is associated with significantly lower bank-specific
credit risks. We further explore how the number of female directors on boards affects bank-specific credit risks. For this pur-
pose, we employ the critical mass theory and conclude that three or more WOB reduce bank-specific credit risks compared to
one or two WOB (tokenism).
Our paper makes several contributions to both CG and risk management literature. We extend the CG and credit risk lit-
erature by focusing on the behavioural theory of gender-based differences, which comprises an essential yet largely over-
looked dimension of boardroom diversity. We provide an excursion to prior literature that heavily focuses on BGD and
firm performance nexus in non-financial banks. Our results are of interest to policymakers and practitioners in financial
banks looking to enhance BGD for the sole purpose of risk management.
However, this study’s limitation lies in its dataset, which only included listed banks. Future studies should evaluate pri-
vate banks to gain a better understanding of the context. Further, as most of our sample banks are from developed countries,
future research could draw samples from developing countries.
12
CRediT authorship contribution statement
Harald Kinateder: Project administration, Methodology, Supervision, Validation, Writing - review & editing. Tonmoy
Choudhury: Conceptualization, Data curation, Formal analysis, Funding acquisition, Investigation, Methodology, Resources,
Visualization. Rashid Zaman: Conceptualization, Data curation, Formal analysis, Funding acquisition, Investigation, Method-
ology, Resources, Visualization. Simone Scagnelli: Conceptualization, Data curation, Formal analysis, Funding acquisition,
Investigation, Methodology, Resources, Visualization. Nurul Sohel: Conceptualization, Data curation, Formal analysis, Fund-
ing acquisition, Investigation, Methodology, Resources, Visualization.
Appendix A:
List of sample financial banks
No. Name Bloomberg ticker Country State

1. AUS and NZ Banking Group ANZ AU Equity Australia N/A
2. Westpac Banking Corporation WBC AU Equity Australia N/A
3. National Australia Bank NAB AU Equity Australia N/A
4. Banque Nale De Belgique 1413118D BB Equity Belgium N/A
5. Dexia BEXB BB Equity Belgium N/A
6. KBC Group KBC BB Equity Belgium N/A
7. Keytrade Bank KEYT BB Equity Belgium N/A
8. Brb Banco De Brasilia BSLI3 BZ Equity Brazil N/A
9. Banco Do Nord On BBAS3 BZ Equity Brazil N/A
10. Banco Estado Espirito Santo BEES3 BZ Equity Brazil N/A
11. Amazonia BAZA3 BZ Equity Brazil N/A
12. Agricultural Bank of China 601,288 CH Equity China N/A
13. Bank of China 601,988 CH Equity China N/A
14. China Construction Bank 601,939 CH Equity China N/A
15. China Merchants Bank 600,036 CH Equity China N/A
16. China Minsheng Banking 600,016 CH Equity China N/A
17. Huaxia Bank 600,015 CH Equity China N/A
18. Industrial & Commercial Bank of China 601,398 CH Equity China N/A
19. Shanghaii Pudon Development Bank 600,000 CH Equity China N/A
20. Danske Bank DANSKE DC Equity Denmark N/A
21. Jyske Bank JYSK DC Equity Denmark N/A
22. Spar Nord Bank SPNO DC Equity Denmark N/A
23. Sydbank SYDB DC Equity Denmark N/A
24. BNP Paribas BNP FP Equity France N/A
25. Credit Agricole ACA FP Equity France N/A
26. Natixis KN FP Equity France N/A
27. Societe Generale GLE FP Equity France N/A
28. Deutsche Bank DBK GR Equity Germany N/A
29. Commerzbank CBK GR Equity Germany N/A
30. Oldenburgische Landesbank OLB GR Equity Germany N/A
31. Umweltbank UBK GR Equity Germany N/A
32. Bank of India BOI IN Equity India N/A
33. Bank of Baroda BOB IN Equity India N/A
34. Canara Bank CBK IN Equity India N/A
35. HDFC Bank HDFC IN Equity India N/A
36. ICICI Bank ICICIBC IN Equity India N/A
37. Punjab National Bank PNB IN Equity India N/A
38. State Bank of India SBIN IN Equity India N/A
39. Unicredit UCG IM Equity Italy N/A
40. Banco Popolare BAMI IM Equity Italy N/A
41. Intesa Sanpaolo ISP IM Equity Italy N/A
42. Unione Di Banche Italian UBI IM Equity Italy N/A
43. Mitsubishi UFJ Financial Group 8306 JP Equity Japan N/A
(continued on next page)
13
List of sample financial banks (continued)

44. Mizuho Financial Group 8411 JP Equity Japan N/A
45. Sumitomo Mitsui Financial Group 8316 JP Equity Japan N/A
46. Chiba Bank 8331 JP Equity Japan N/A
47. Hana Financial Group 086790 KP Equity Korea N/A
48. Industrial Bank of Korea 024110 KP Equity Korea N/A
49. Shinhan Financial Group 055550 KP Equity Korea N/A
50. CIMB Group Holdings CIMB MK Equity Malaysia N/A
51. Malayan Banking MAY MK Equity Malaysia N/A
52. RHB Bank RHB MK Equity Malaysia N/A
53. Alliance Financial Group ABMB MK Equity Malaysia N/A
54. Banregio Grupo Financiero 6145695Z MM Equity Mexico N/A
55. Gpo Finance Banorte GFNORTEO MM Equity Mexico N/A
56. Grupo Financiero Inbursa GFINBURO MM Equity Mexico N/A
57. Santander Mexico BSMXB MM Equity Mexico N/A
58. ING Group INGA NA Equity Netherlands N/A
59. BinckBank BINCK NA Equity Netherlands N/A
60. Kas Bank KA NA Equity Netherlands N/A
61. Van Lanschot VLK NA Equity Netherlands N/A
62. Firstrand FSR SJ Equity South Africa N/A
63. Nedbank Group NED SJ Equity South Africa N/A
64. Capitec Bank CPI SJ Equity South Africa N/A
65. Standard Bank Group SBK SJ Equity South Africa N/A
66. Banco Santander SAN SM Equity Spain N/A
67. Bbv. Argentaria BBVA SM Equity Spain N/A
68. Banco De Sabadell SAB SM Equity Spain N/A
69. Banco Popular Espanol POP SM Equity Spain N/A
70. Nordea NDA SS Equity Sweden N/A
71. SEB Group SEBA SS Equity Sweden N/A
72. Svenska Handbkn SHBA SS Equity Sweden N/A
73. Swedbank SWEDA SS Equity Sweden N/A
74. Credit Suisse Group CSGN SW Equity Swiss N/A
75. UBS UBSG SW Equity Swiss N/A
76. St. Galler Kantonalbank SGKN SW Equity Swiss N/A
77. Banque Cantonale de Geneve BCGE SW Equity Swiss N/A
78. Barclays Bank BARC LN Equity UK N/A
79. HSBC HSBA LN Equity UK N/A
80. Royal Bank of Scotland RBS LN Equity UK N/A
81. Standard Chartered Bank STAN LN Equity UK N/A
82. Cathay General Bancorp Inc. CATY US Equity USA California
83. SVB Financial Group SIVB US Equity USA California
84. Wells Fargo & Company WFC US Equity USA California
85. Charles Schwab Corporation SCHW US Equity USA California
86. Bank of New York Mellon BK US Equity USA New York
87. Citigroup C US Equity USA New York
88. Goldman Sachs GS US Equity USA New York
89. JPMorgan Chase JPM US Equity USA New York
90. Ameris Bancorp ABCB US Equity USA Georgia
91. SunTrust Banks, Inc. STI US Equity USA Georgia
92. Synovus Financial Corporation SNV US Equity USA Georgia
93. United Community Banks, Inc. UCBI US Equity USA Georgia
94. First Busey Corporation BUSE US Equity USA Illinois
95. First Midwest Bancorp, Inc. FMBI US Equity USA Illinois
96. MB Financial Inc. MBFI US Equity USA Illinois
97. Wintrust Financial Corporation WTFC US Equity USA Illinois
98. 1st Source Corporation SRCE US Equity USA Indiana
99. First Merchants Corporation FRME US Equity USA Indiana
14
List of sample financial banks (continued)

100. Old National Bancorp ONB US Equity USA Indiana
101. Lakeland Financial Corporation, Indiana LKFN US Equity USA Indiana
102. Berkshire Hills Bancorp Inc. BHLB US Equity USA Massachusetts
103. Boston Private Financial Holdings Inc. BPFH US Equity USA Massachusetts
104. Brookline Bancorp Inc. BRKL US Equity USA Massachusetts
105. State Street Corporation STT US Equity USA Massachusetts
106. Chemical Financial Corporation CHFC US Equity USA Michigan
107. Enterprise Financial Services Corporation EFSC US Equity USA Michigan
108. Flagstar Bancorp Inc. FBC US Equity USA Michigan
109. Independent Bank Corporation IBCP US Equity USA Michigan
110. Trustmark Corporation TRMK US Equity USA Mississippi
111. BancorpSouth, Inc. BXS US Equity USA Mississippi
112. Hancock Holding Company HWC US Equity USA Mississippi
113. Renasant Corporation RNST US Equity USA Mississippi
114. ConnectOne Bancorp Inc. CNOB US Equity USA New Jersey
115. Lakeland Bancorp, Inc. LBAI US Equity USA New Jersey
116. Provident Financial Services, Inc. PFS US Equity USA New Jersey
117. Valley National Bancorp VLY US Equity USA New Jersey
118. Bank of America Corporation BAC US Equity USA North Carolina
119. BB&T Corporation TFC US Equity USA North Carolina
120. First Citizens BancShares FCNCA US Equity USA North Carolina
121. Yadkin Financial Corporation YDKN US Equity USA North Carolina
122. Fifth Third Bancorp FITB US Equity USA Ohio
123. First Defiance Financial Corp FDEF US Equity USA Ohio
124. Huntington Bancshares Inc. HBAN US Equity USA Ohio
125. KeyCorp KEY US Equity USA Ohio
126. Northwest Bancshares Inc. NWBI US Equity USA Pennsylvania
127. Fulton Financial Corporation FULT US Equity USA Pennsylvania
128. FNB Corporation FNB US Equity USA Pennsylvania
129. PNC Financial Services Group Inc. PNC US Equity USA Pennsylvania
130. Comerica Incorporated CMA US Equity USA Texas
131. Prosperity Bancshares, Inc. PB US Equity USA Texas
132. Texas Capital Bancshares, Inc. TCBI US Equity USA Texas
133. Cullen/Frost Bankers, Inc. CFR US Equity USA Texas
134. Capital One Financial Corporation COF US Equity USA Virginia
135. Freddie Mac FMCC US Equity USA Virginia
136. Towne Bank TOWN US Equity USA Virginia
137. Union Bankshares Corporation AUB US Equity USA Virginia
138. Premier Financial Bancorp PFBI US Equity USA West Virginia
139. City Holding Company CHCO US Equity USA West Virginia
140. WesBanco, Inc. WSBC US Equity USA West Virginia
141. United Bankshares, Inc. UBSI US Equity USA West Virginia
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Money 73 (2021) 101347

Contents lists available at ScienceDirect

Journal of International Financial

Does boardroom gender diversity decrease credit risk in the

(i) using alternative measurements of BGD

2. Theoretical rationale and hypothesis development

2.1. Behavioural theory of gender-based differences

3. Data and methodology

3.2. Variable definitions

3.2.1. Dependent variables

3.2.2. Explanatory variables

3.3. Regression Model

CRi;t ¼ a þ uBGDi;t þ c C i;t þ ei;t

4.1. Descriptive statistics

No. Country name Observations Percentage

This table reports the sample distribution of 1,692 bank-year

Observations Mean Std. Dev. P25 Median P75

(1) (2) (3) (4) (5) (6)

4.3. Testing for the critical mass theory

(1) (2) (3) (4) (5) (6)

5.1. Alternative BGD measure

5.2. Controlling for the GFC period

Panel A: Alternative independent variable

Control variables Yes Yes Yes Yes Yes Yes

Bank & year fixed effects Yes Yes Yes No No No

5.3. Identification strategies

5.3.1. Two-stage least squares regression

Instrumental variable (IV) approach

5.3.2. Propensity score matching

Panel A: Comparison of treatment and control firms

Control variables Yes Yes Yes

5.3.3. Difference in differences analysis

Panel A: Comparison of treatment and control firms

Control variables Yes Yes Yes

CRediT authorship contribution statement

List of sample financial banks

No. Name Bloomberg ticker Country State

(continued on next page)

List of sample financial banks (continued)

List of sample financial banks (continued)

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