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This study aims to analyze the impact of board gender diversity (BGD) on a bank’s financial stability. Moreover, it also examines whether digitalization and income diversification act as mediators (individual and serial) in this relationship.

Hypotheses were tested using data from Pakistan’s banking sector financial statements from 2017 to 2021. A two-step analytical approach was used: panel regression in STATA for initial hypothesis examination, followed by mediation analyses using bootstrapping in SPSS. In addition, mixed-effect ML regression was conducted to verify causation and ensure robust findings.

Results demonstrate that BGD, digitalization and income diversification are positively associated with higher financial stability. Moreover, as hypothesized, both digitalization and income diversification individually and sequentially mediate the relationship between BGD and banks’ financial stability.

It is important to acknowledge the study’s limited five-year timeframe. Further investigation is needed to determine the optimal board compositions, especially considering the study’s inclusion of up to 25% female directors on boards.

Policymakers and top management should prioritize increasing the number of female directors on boards for diversity. Banks that involve female directors can benefit from the synergies between gender diversity and digitization, along with the unique perspectives these women offer. This cooperative dynamic enables banks to explore and capitalize on innovative income diversification opportunities, enter new markets and ensure financial stability.

Research findings emphasize promotion of gender equality and meritocracy through increased female director representation. This fosters a more inclusive and cooperative decision-making culture, benefiting individual banks and setting a model for other sectors. Ultimately, it contributes to greater social acceptance of women executives.

The study reveals a novel mechanism, emphasizing the revolutionary impact of active female directors in tandem with digitalization, amplifying chances for income diversification and accelerating increased bank viability.

This study aims to examine the nonlinear threshold effect of female board gender diversity (FBGD) on debt financing (DF) and equity financing (EF) decisions arguing that the effect of FBGD varies/changes depending on the numerical strength of the women on the board.

This study uses seemingly unrelated simultaneous panel equation modeling of 19 listed firms on the Ghana Stock Exchange (GSE) between 2010 and 2021. Although natural logs of equity and debts are used to proxy financing decisions, FBGD is measured as a percentage of total female board members to total board members.

This study reveals a nonlinear inverted U-shape effect of FBGD on EF and DF options. Although this result implies that the positive effects transit to negative effects when FBGD reaches numerical thresholds 34.20% and 35.11%, respectively, it also suggests that the risk averse nature of women on EF and DF usage becomes more visible and intense when the percentage of women on board increases above the mentioned thresholds, respectively. Clearly, the effect gender diversity on DF and EF depends on the numerical strength of the women on a board.

These results suggest that corporate entities and managers must be careful in the formation and implementation of gender diversity policies as gender diversity policies can influence/change debt and EF decisions. In addition, the thresholds show that a smaller number of women on board is required to lower EF compared to debt and this highlights risk-aversion nature women toward riskier financing decision. Also, the nonlinear inverted U-shape nexus from FBGD to EF and DF confirms the inverted U curve theory implying that the numerical strength of females on boards is critical for financing decisions.

This study contributes to the “gender diversity-financing decision” literature by simultaneously conceptualizing and modellng debt and EF structures and providing an emerging economy perspective on how gender diversity nonlinearly affects financing decisions.