The Influence Of Board Attributes And Gender Diversity On Risk-Taking In Banking Sector

Abstract

The effective operation of board of directors is a key factor in a firm's ability to succeed. The function of boards in directing business operations has drawn a lot of attention in the area of corporate governance. Notably, it has been determined that having female board members is essential for improving the ability of decision-making processes. This paper aims to analyze the impact of board attributes and board gender diversity on the risk-taking of banks in South Asia i.e., Pakistan, Sri Lanka, India, and Bangladesh. For the analyses, data is taken from DataStream for the period of 2011 to 2022. Using the fixed effect model and generalized method of moment (GMM) model for testing the hypotheses, we find that board attributes such as board size, board meetings and board independence have significant and negative effects on the credit risk of banks. Additionally, board gender diversity also significantly and negatively reduces bank credit risk. The study adds to the body of knowledge that banks in South Asian countries may be able to understand how to effectively manage structure of board of directors and to consider female directors for proper monitoring in order to control credit risk. These findings can help banking sector develop strong corporate governance procedures and risk management plans.