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The impact of board gender diversity on the financing costs of microfinance institutions: a global evidence

Md Aslam Mia (School of Management, Universiti Sains Malaysia, Penang, Malaysia)
Tanzina Hossain (Department of Business Administration, Faculty of Business and Entrepreneurship, Daffodil International University, Dhaka, Bangladesh)
Zinnatun Nesa (School of Business and Economics, United International University, Dhaka, Bangladesh)
Md Khaled Saifullah (Department of Economics, School of Business and Entrepreneurship, Independent University, Dhaka, Bangladesh)
Rozina Akter (Department of Business Administration, Faculty of Business and Entrepreneurship, Daffodil International University, Dhaka, Bangladesh)
Md Imran Hossain (School of Management, Universiti Sains Malaysia, Penang, Malaysia and Department of Finance, Jagannath University, Dhaka, Bangladesh)

Journal of Financial Reporting and Accounting

ISSN: 1985-2517

Article publication date: 8 December 2022

21

Abstract

Purpose

Considering the existing evidence on the impact of female board members on the default risks of an organization, the purpose of this study is to investigate the effect of board gender diversity, alongside institutional characteristics and macroeconomic factors, on the financing costs of microfinance institutions (MFIs).

Design methodology approach

This study collected unbalanced panel data of 1,190 unique MFIs between 2010 and 2018 from the World Bank. The collected data, which covers a total of 95 developing and emerging countries, was thereafter analyzed using the pooled ordinary least squares and random effects model. To overcome endogeneity and omitted variable bias (e.g. time-invariant variables), the authors have also used the generalized method of moments and fixed effects model, respectively. Different proxies of board gender diversity and sub-sample analysis by regions were further undertaken to examine the robustness of the obtained results.

Findings

The findings of this study revealed that board gender diversity has a statistically significant negative effect on the financing costs of MFIs. This suggests that a gender-diverse board can generate cheaper funding for MFIs by minimizing their default risks through effective monitoring and strategic management. Furthermore, the negative impact of board gender diversity on financing costs appears to be more pronounced when there is a minimum of two female board members in the boardroom of MFIs. The results of this study remain consistent and valid regardless of alternate model specifications (e.g. sub-sample analysis, use of alternative proxies of board gender diversity and application of different estimators) and endogeneity issues. Ultimately, the findings in this study reiterate the importance of promoting and implementing gender diversity in the boardroom to minimize the financing costs of MFIs.

Originality value

This study investigated the relationship between board gender diversity and financing costs of MFIs by using relatively recent and global data. The minimum number of female board members required to significantly reduce the financing costs of MFIs was also identified.

Keywords

Acknowledgements

The authors are very grateful to two anonymous reviewers, the Editor (Professor Khaled Hussainey) and the Associate Editor (Dr Ammar Ali Gull) for their very useful comments and suggestions. The authors show their sincere appreciation to Dr Gull for suggesting to integrate “tokenism” and “critical mass” theories in this paper to enrich the analysis and findings. They believe that the content and quality of the paper has enhanced substantially after addressing their recommended revisions. Usual disclaimer applies.

Funding: Md Aslam Mia and Md Imran Hossain acknowledge that this research was funded under the project named “short-term research grant” (Grant number: 304/PMGT/6315547) from Universiti Sains Malaysia, Penang, Malaysia.

Disclosure statement: The authors declare that they have no known conflict of interest associated with the study.

Data availability statement: The data related to this study can be found here: https://databank.worldbank.org/source/mix-market

Citation

Mia, M.A., Hossain, T., Nesa, Z., Saifullah, M.K., Akter, R. and Hossain, M.I. (2022), "The impact of board gender diversity on the financing costs of microfinance institutions: a global evidence", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-04-2022-0125

Publisher

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Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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