Board gender diversity and financial stability: Evidence from microfinance institutions

Figures & data

Table 1. Variable description and summary statistics

This table shows the definition, source, and summary statistics of all variables.
Variable	Definition	Source	N	Mean	SD	P.25	Median	P.75
LnZ	Measure of financial stability calculated using equation (1)(1) $Z-scor{e}_{i,t}=\frac{RO{A}_{i,t}+Equit{y}_{i,t}/Totalasset{s}_{i,t}}{\sigma RO{A}_{i,t}}$(1) . The denominator is computed by the three-year rolling window of return on assets (ROA).	MIX Market; authors’ calculation	1,463	3.221	1.146	2.519	3.266	3.963
LnZ_all	Alternative indicator of financial stability calculated using equation (1)(1) $Z-scor{e}_{i,t}=\frac{RO{A}_{i,t}+Equit{y}_{i,t}/Totalasset{s}_{i,t}}{\sigma RO{A}_{i,t}}$(1) but the denominator is estimated using the standard deviation of ROA over the entire period.	MIX Market; authors’ calculation	2,411	2.841	1.071	2.269	2.907	3.524
LLOSS	The loan loss rate, which is a measure of credit risk.	MIX Market	2,431	0.014	0.025	0.000	0.006	0.019
BGD	Indicator of board gender diversity. It is the share of female board members on number of board members.	MIX Market; authors’ calculation	2,464	0.324	0.243	0.143	0.286	0.429
DBGD	Dummy variable which equals 1 if the share of women directors is above the sample mean and 0 otherwise.	MIX Market; authors’ calculation	2,464	0.467	0.499	0.000	0.000	1.000
FNUM	The natural logarithm of the number of female directors.	MIX Market; authors’ calculation	2,128	0.794	0.753	0.000	0.693	1.386
Risk-taking	The indicator of risk-taking behaviour. It is calculated as the standard deviation of ROA using the three-year rolling window.	MIX Market; authors’ calculation	1,489	0.021	0.029	0.005	0.011	0.024
MFI-level controls
LnTA	Measure of MFI size calculated by the natural logarithm of total assets.	MIX Market; authors’ calculation	2,464	16.869	1.894	15.511	16.821	18.166
BSIZE	Board size measured as the number of board members.	MIX Market	2,464	8.713	14.232	5	7	9
This table shows the definition, source, and summary statistics of all variables.
Variable	Definition	Source	N	Mean	SD	P.25	Median	P.75
LOANS	Gross loan to total assets.	MIX Market	2,464	0.774	0.16	0.701	0.808	0.878
DEPOSITS	The share of deposits to total assets.	MIX Market	2,464	0.266	0.306	0	0.084	0.553
PROVISIONS	Provisions for loan impairment to total assets.	MIX Market	2,464	0.016	0.02	0.003	0.011	0.022
Country-level controls
GDPgr	GDP growth rate.	WDI	2,464	0.043	0.026	0.027	0.043	0.062
INFLATION	Inflation measured by annual change in consumer prices.	WDI	2,464	0.044	0.034	0.023	0.039	0.060
GOVERNANCE	Mean value of six dimensions: control of corruption, government effectiveness, political stability and absence of violence, regulatory quality, rule of law, and voice and accountability.	WGI	2,464	−0.495	0.371	−0.689	−0.543	−0.270

Table 2. Correlation matrix

This table presents the correlation matrix of all variables engaged in the baseline regression. The definition and source of all variables are shown in Table 1. Asterisks indicate statistical significance at 10% (*), 5% (**), and 1% (***).
	LnZ	BGD	LnTA	BSIZE	LOANS	DEPOSITS	PROVISIONS	GDPgr	INFLATION	GOVERNANCE
LnZ	1
BGD	0.092***	1
LnTA	0.168***	−0.189***	1
BSIZE	0.039	−0.026	0.156***	1
LOANS	0.074***	0.004	0.009	−0.126***	1
DEPOSITS	0.109***	−0.010	0.398***	0.207***	−0.269***	1
PROVISIONS	−0.148***	−0.061***	0.054***	−0.011	0.168***	−0.072***	1
GDPgr	−0.043*	0.011	−0.002	0.029	−0.070***	0.056***	−0.089***	1
INFLATION	−0.180***	−0.065***	−0.072***	−0.100***	−0.089***	−0.090***	0.053***	0.0426**	1
GOVERNANCE	0.140***	0.044**	−0.061***	−0.073***	0.151***	−0.133***	0.049**	−0.1209***	−0.1898***	1

Table 3. Board gender diversity and financial stability of MFIs

This table presents the relationship between board gender diversity (BGD) and risk in microfinance institutions (MFI) using model (2) with random effects. The dependent variable is financial stability measured by the natural logarithm of Z-score. The key independent variable (BGD) is the fraction of number of female directors on total number of board members. Year dummies are included but not reported for brevity. The definition and source of all variables are shown in Table 1. Robust standard errors adjusted for heteroskedasticity and autocorrelation clustered at the MFI level are in parentheses. Asterisks indicate statistical significance at 10% (*), 5% (**), and 1% (***).
	LnZ	LnZ	LnZ	LnZ	LnZ	LnZ
	(1)	(2)	(3)	(4)	(5)	(6)
BGD	0.475***		0.571***	0.570***	0.566***	0.557***
	(0.153)		(0.148)	(0.148)	(0.147)	(0.147)
LnTA		0.098***	0.114***	0.114***	0.112***	0.112***
		(0.025)	(0.025)	(0.025)	(0.025)	(0.025)
BSIZE		0.000	0.000	0.000	0.000	0.001
		(0.002)	(0.002)	(0.002)	(0.002)	(0.002)
LOANS		0.956***	1.068***	1.065***	1.041***	0.978***
		(0.274)	(0.275)	(0.274)	(0.274)	(0.273)
DEPOSITS		0.193	0.138	0.134	0.134	0.175
		(0.170)	(0.168)	(0.168)	(0.168)	(0.170)
PROVISIONS		−8.745***	−8.774***	−8.749***	−8.521***	−8.669***
		(2.191)	(2.125)	(2.147)	(2.177)	(2.164)
GDPgr		0.720		0.323	0.192	0.669
		(1.239)		(1.255)	(1.257)	(1.238)
INFLATION		−1.106			−1.530	−1.046
		(1.070)			(1.021)	(1.051)
GOVERNANCE		0.403***				0.394***
		(0.132)				(0.130)
Constant	4.235***	3.249***	1.891***	1.882***	2.036***	2.450***
	(0.153)	(0.407)	(0.432)	(0.436)	(0.446)	(0.455)
Observations	1,463	1,463	1,463	1,463	1,463	1,463
Random effects	Yes	Yes	Yes	Yes	Yes	Yes
Year dummies	Yes	Yes	Yes	Yes	Yes	Yes

Table 4. Robustness tests

This table shows the estimates of various robustness tests using alternative measures of financial stability (columns 1 and 2) and BGD (columns 3 and 4), alternative econometric techniques (columns 5 to 8), and approaches to handle the endogeneity issue (columns 9 to 12). The definition and source of all variables are shown in Table 1. MFI-level controls, country-level controls, and year dummies are included but not reported for brevity. The full table is available on request. Robust standard errors adjusted for heteroskedasticity and autocorrelation clustered at the MFI level are in parentheses. Asterisks indicate statistical significance at 10% (*), 5% (**), and 1% (***).

LnZ_all

LLOSS

LnZ

LnZ

LnZ

LnZ

LnZ

LnZ

LnZt +1

LnZt +2

LnZt +3

LnZ

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

BGD

0.162***

−0.004*

0.597***

0.372**

0.473***

0.499***

0.552***

0.454**

0.353**

1.564***

(0.060)

(0.002)

(0.213)

(0.164)

(0.179)

(0.178)

(0.162)

(0.180)

(0.180)

(0.573)

DBGD

0.207***

(0.064)

FNUM

0.178***

(0.058)

LnZt-1

0.423***

(0.077)

Constant

3.815***

0.035***

2.897***

3.121***

0.511

6.354***

2.921***

1.130**

2.823***

0.890

1.369**

−1.962

(0.452)

(0.007)

(0.418)

(0.439)

(2.378)

(1.096)

(0.454)

(0.461)

(0.466)

(0.571)

(0.688)

(1.735)

MFI-level controls

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Country-level controls

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Observations

2,411

2,431

1,463

1,308

1,463

1,463

1,463

1,463

1,433

955

651

939

Random effects

Yes

Yes

Yes

Yes

−

−

−

−

Yes

Yes

Yes

−

MFI fixed effects

−

−

−

−

Yes

−

−

−

−

−

−

−

Year dummies

Yes

Yes

Yes

Yes

Yes

Yes

Yes

−

Yes

Yes

Yes

Yes

Country fixed effects

−

−

−

−

−

Yes

−

−

−

−

−

R squared

0.047

0.301

0.122

0.118

Adjusted R squared

0.037

0.253

0.112

0.112

This table shows the estimates of various robustness tests using alternative measures of financial stability (columns 1 and 2) and BGD (columns 3 and 4), alternative econometric techniques (columns 5 to 8), and approaches to handle the endogeneity issue (columns 9 to 12). The definition and source of all variables are shown in Table 1. MFI-level controls, country-level controls, and year dummies are included but not reported for brevity. The full table is available on request. Robust standard errors adjusted for heteroskedasticity and autocorrelation clustered at the MFI level are in parentheses. Asterisks indicate statistical significance at 10% (*), 5% (**), and 1% (***).

LnZ_all

LLOSS

LnZ

LnZ

LnZ

LnZ

LnZ

LnZ

LnZt +1

LnZt +2

LnZt +3

LnZ

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

AR1 (p-value)

0.000

AR2 (p-value)

0.449

Hansen J-test (p-value)

0.492

Table 5. Risk-taking behavior as a potential channel

This table shows the estimated coefficients of model (3) and (4) with random effects. Year dummies are included but not reported for brevity. The definition and source of all variables are shown in Table 1. Robust standard errors adjusted for heteroskedasticity and autocorrelation clustered at the MFI level are in parentheses. Asterisks indicate statistical significance at 10% (*), 5% (**), and 1% (***).
	Risk-taking	Risk-taking	LnZ	LnZ
	(1)	(2)	(3)	(4)
BGD	−0.007**	−0.007**	0.388***	0.378***
	(0.003)	(0.003)	(0.107)	(0.105)
Risk-taking			−28.847***	−28.746***
			(1.937)	(1.926)
LnTA	−0.005***	−0.005***	0.012	0.010
	(0.001)	(0.001)	(0.020)	(0.020)
BSIZE	−0.000*	−0.000**	−0.001	−0.001
	(0.000)	(0.000)	(0.002)	(0.002)
LOANS	−0.030***	−0.029***	0.201	0.140
	(0.009)	(0.009)	(0.213)	(0.213)
DEPOSITS	−0.011**	−0.011**	−0.285**	−0.257**
	(0.004)	(0.004)	(0.128)	(0.129)
PROVISIONS	0.184***	0.184***	−5.554***	−5.395***
	(0.057)	(0.058)	(1.370)	(1.380)
GDPgr		−0.043		0.199
		(0.035)		(0.967)
INFLATION		−0.013		−1.283*
		(0.028)		(0.740)
GOVERNANCE		−0.006		0.264***
		(0.004)		(0.099)
Constant	0.101***	0.096***	4.411***	4.840***
	(0.013)	(0.014)	(0.338)	(0.353)
Observations	1,489	1,489	1,463	1,463
Random effects	Yes	Yes	Yes	Yes
Year dummies	Yes	Yes	Yes	Yes

Table 6. Additional analysis

This table shows the result of the baseline model (2) when introducing the non-monotonic relationship between board gender diversity (BGD) and financial stability. In column (1), BGD and BGD^2 are included, while in column (2), BGD, BGD^2 and BGD^3 are employed. Control variables and year dummies are included but not reported for brevity. The definition and source of all variables are shown in Table 1. Robust standard errors adjusted for heteroskedasticity and autocorrelation clustered at the MFI level are in parentheses. Asterisks indicate statistical significance at 10% (*), 5% (**), and 1% (***).
	LnZ	LnZ	LnZ
	(1)	(2)	(3)
BGD	0.580	−0.394
	(0.460)	(0.884)
BGD^2	−0.027	2.904
	(0.466)	(2.191)
BGD^3		−2.145
		(1.512)
FR1			0.028
			(0.128)
FR2			0.174
			(0.132)
FR3			0.326**
			(0.134)
Constant	2.455***	2.657***	2.901***
	(0.448)	(0.469)	(0.434)
MFI-level controls	Yes	Yes	Yes
Country-level controls	Yes	Yes	Yes
Observations	1,463	1,463	1,463
Random effects	Yes	Yes	Yes
Year dummies	Yes	Yes	Yes