Unveiling the association between the monitoring and demographic attributes of female directors and credit risk: evidence from an emerging country

Purpose This research explores how the presence and characteristics of female directors affect the credit risk of the financial sector. Design/methodology/approach The research draws on hand-collected data from the annual reports of 53 publicly traded financial firms listed on the Dhaka Stock Exchange in Bangladesh, spanning the years 2016–2022. Ordinary least squares regression models are employed to assess the associations. Findings The study finds that having more females on corporate boards reduces credit risk. This effect remains significant even after considering their monitoring and demographic attributes. Independent female directors and those with working experience in the financial sector or foreign degrees have a stronger impact on lowering credit risk. Moreover, the findings of the study confirm the partially mediating role of female directors with independence, leadership roles, and higher education in the association between female directorship and credit risk of sample financial firms in Bangladesh. The study also highlights that female directorship is stronger in reducing credit risk when there are at least three female directors on the board. Practical implications The findings of this study could guide market regulators, shareholders, and policymakers on the importance of encouraging gender diversity in boardrooms. Additionally, it provides valuable insights into board composition, specifically regarding gender quotas and qualifications under corporate governance guidelines. Originality/value This study uniquely investigates the association between female directorship and credit risk, focusing on the mediating role of female directors’ monitoring and demographic attributes in Bangladesh’s financial sector. Additionally, it reshapes the understanding of human capital by highlighting the importance of education and experience in relation to female board participation.