Gender diversity and bank risk-taking: female directors and executives

Abstract

Purpose

The authors investigate how a gender-diverse board, a gender-diverse executive team, or a female chief executive officer (CEO) impact bank balance sheet and equity risk.

Design/methodology/approach

Using panel data of U.S. bank holding companies over the period of 1992–2019, the authors conduct panel regressions with bank and year-fixed effects to analyze how female directors, female executives, and female CEOs impact a wide range of bank risk measures, controlling for the bank, board and executive characteristics.

Findings

The authors find female directors significantly reduce all types of risk. Female executives reduce some balance sheet risk but have an insignificant effect on bank equity risk. However, the presence of female CEOs does not significantly reduce bank risk-taking. During financial crises, female CEOs even increase equity risk.

Social implications

The findings are important to shed light on the ongoing debate on how gender quota policy could be efficiently used to balance the need for gender diversity while ensuring corporate performance. It could also improve social welfare by guiding proper public policy to ensure the efficient use of social labor capital and curb banks' excessive risk-taking incentives.

Originality/value

The authors provide the first empirical evidence demonstrating that female directors and female executives in the banking industry have different impacts on bank risk-taking. The authors also provide the first empirical evidence that female leaders have a different impact on two different types of risks: balance sheet and equity risk. The study is also the first to analyze the impact of female executives over multiple financial crises.

Citation

Liu, C. and Wu, Y.W. (2023), "Gender diversity and bank risk-taking: female directors and executives", Managerial Finance, Vol. 49 No. 5, pp. 761-788. https://doi.org/10.1108/MF-01-2022-0059