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 article info Article history: Received 24 October 2020 Accepted 1 May 2021 Available online 05 May 2021 JEL classifications: G10 G34 M14 Keywords: Boardroom gender diversity Critical mass theory Distance to default Distance to insolvency Distance to capital Tokenism Women on board abstract Recent regulatory changes to promote boardroom gender diversity (BGD) around the globe have prompted academic debates about the risk and return preferences of gender quotas. However, most BGD literature has implications for the non-financial sector. We argue that peculiarities associated with the financial sector, such as complex regulations, economic sensitivity, and the quest for better risk management, merit more academic attention from gender diversity studies. This paper fills this literature gap by evaluating how BGD affects credit risk in the financial sector. For this purpose, we analyse a comprehensive sample of 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 capital by 39.80%, 50.97% and 38.61%, respectively. The role of the critical mass theory in boardroom diversity and bank-specific credit risk nexus is further tested. Our results show that three or more women on board (WOB) significantly reduce bank-specific credit risks. These findings remain robust to alternative methods that alleviate endogeneity concerns. The findings have important implications for practitioners, regulators and academics in the financial sector. 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 https://doi.org/10.1016/j.intfin.2021.101347 1042-4431/Ó 2021 Elsevier B.V. All rights reserved. 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). J. Int. Financ. Markets Inst. Money 73 (2021) 101347 Contents lists available at ScienceDirect Journal of International Financial Markets, Institutions & Money journal homepage: www.elsevier.com/locate/intfin