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Little is known about how socioeconomic characteristics of executive teams affect corporate governance in banking. Exploiting a unique dataset, we show how age, gender, and education composition of executive teams affect risk taking of financial institutions. First, we establish that age, gender, and education jointly affect the variability of bank performance. Second, we use difference-in-difference estimations that focus exclusively on mandatory executive retirements and find that younger executive teams increase risk taking, as do board changes that result in a Non-technical summaryThe socio-economical composition of a company's executive board is highly relevant for economic and social policy. For example, gender quotas are often advocated to improve career outcomes for females and 'break the glass ceiling'. Similarly, educational requirements for bank boards have been proposed in the past as a means to improve corporate governance.However, little is known about the effects on firm outcomes of having more female, more educated or older board members. Do female board members really force a less risky conduct of business? Do educated board members increase or reduce bank risk-taking? And does the age of executive board members matter?We construct a unique dataset for the entire population of German bank executive teams for the period 1994 -2010. Exploiting this dataset, we examine how the age, gender, and education composition of banks' executive boards affect bank risk taking. In our first test, we empirically establish that age, gender, and education affect the observed volatility of bank profits. In a second step, we compare banks which experienced changes in board structure to similar banks without such a change. Generally, changes in board structure could be symptoms of underlying trends in a bank's business model. For example, shareholders might appoint directors with similar views regarding the bank's optimal strategy. Such underlying trends would confound our analysis, as we would attribute the changes in risk taking to the new board structure. We circumvent this problem by only considering board changes due to the retirement of a board member. This strategy allows us to capture the impact of a younger, more female or more experienced board.We obtain the following key results. First, we show that younger executive teams increase risk-taking. Second, board changes that result in a higher proportion of female executives also lead to a more risky conduct of business. Third, if board changes increase the representation of executives holding Ph.D. degrees, risk taking declines. This has important policy implications: while quotas regarding the age, gender and education of an executive directly affect the representation of different groups on executive boards, they have a knock-on effect on corporate outcomes.

Using the Panzar and Rosse H-statistic as a measure of competition in 45 countries, we find that more competitive banking systems are less prone to experience a systemic crisis and exhibit increased time to crisis. This result holds even when we control for banking system concentration, which is associated with higher probability of a crisis and shorter time to crisis. Our results indicate that competition and concentration capture different characteristics of banking systems, meaning that concentration is an inappropriate proxy for competition. The findings suggest that policies promoting competition among banks, if well executed, have the potential to improve systemic stability. Copyright (c) 2009 The Ohio State University.

Little is known about how socioeconomic characteristics of executive teams affect corporate governance in banking. Exploiting a unique dataset, we show how age, gender, and education composition of executive teams affect risk taking of financial institutions. First, we establish that age, gender, and education jointly affect the variability of bank performance. Second, we use difference-in-difference estimations that focus exclusively on mandatory executive retirements and find that younger executive teams increase risk taking, as do board changes that result in a Non-technical summaryThe socio-economical composition of a company's executive board is highly relevant for economic and social policy. For example, gender quotas are often advocated to improve career outcomes for females and 'break the glass ceiling'. Similarly, educational requirements for bank boards have been proposed in the past as a means to improve corporate governance.However, little is known about the effects on firm outcomes of having more female, more educated or older board members. Do female board members really force a less risky conduct of business? Do educated board members increase or reduce bank risk-taking? And does the age of executive board members matter?We construct a unique dataset for the entire population of German bank executive teams for the period 1994 -2010. Exploiting this dataset, we examine how the age, gender, and education composition of banks' executive boards affect bank risk taking. In our first test, we empirically establish that age, gender, and education affect the observed volatility of bank profits. In a second step, we compare banks which experienced changes in board structure to similar banks without such a change. Generally, changes in board structure could be symptoms of underlying trends in a bank's business model. For example, shareholders might appoint directors with similar views regarding the bank's optimal strategy. Such underlying trends would confound our analysis, as we would attribute the changes in risk taking to the new board structure. We circumvent this problem by only considering board changes due to the retirement of a board member. This strategy allows us to capture the impact of a younger, more female or more experienced board.We obtain the following key results. First, we show that younger executive teams increase risk-taking. Second, board changes that result in a higher proportion of female executives also lead to a more risky conduct of business. Third, if board changes increase the representation of executives holding Ph.D. degrees, risk taking declines. This has important policy implications: while quotas regarding the age, gender and education of an executive directly affect the representation of different groups on executive boards, they have a knock-on effect on corporate outcomes.

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.We use data for more than 2,600 European banks to test whether increased competition causes banks to hold higher capital ratios. Employing panel data techniques, and distinguishing between the competitive conduct of small and large banks, we show that banks tend to hold higher capital ratios when operating in a more competitive environment. This result holds when controlling for the degree of concentration in banking systems, inter-industry competition, characteristics of the wider financial system, and the regulatory and institutional environment. JEL Classification Numbers: C41, G21, G28, L11