When do women on board of directors reduce bank risk?

Birindelli, Giuliana; Chiappini, Helen; Savioli, Marco

doi:10.1108/cg-03-2020-0089

Cited by 37 publications

(41 citation statements)

References 83 publications

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“…Hence, the presence of female directors is related to more prudent CAR for the same level of risk, which shows greater bank stability. These findings are consistent with recent studies by Birindelli et al (2020), Owen and Temesvary (2018) and Farag and Mallin (2017), who demonstrated that a critical mass of female directors reduces bank risk when banks are sound. In line with these studies, we implicitly prove that the relationship between female directors and bank risk-taking depends on bank soundness.…”

Section: Findings and Discussionsupporting

confidence: 93%

“…The results of their investigation indicate that a higher percentage of women on bank boards is related to lower risk-taking. Using a sample of 215 listed banks from 40 countries from 2008 to 2016, Birindelli et al (2020) showed that female directors have a significant and positive role in reducing risk when banks are sound. This finding supports the view of a negative relationship between the presence of females on the bank's board and its risk-taking behavior.…”

Section: Percentage Of Females On Boards Of Directors and Bank Risk-t...mentioning

confidence: 99%

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Gender diversity and bank risk-taking: an empirical investigation in Italy

Menicucci

Paolucci

2021

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Purpose The purpose of this paper is to investigate the relationship between gender diversity and the risk profile of Italian banks during the period 2015–2019. This study examines whether the presence of female board directors or top executives has any significant effect on bank risk-taking. Design/methodology/approach To explore the influence of women on bank risk-taking, the authors analyzed a sample of 387 Italian banks and developed an econometric model applying unbalanced panel data with firm fixed effects and controls per year. Within a multivariate regression model, the authors considered five risk dimensions to verify the effect of gender diversity. Findings The findings suggest that female board directors and executives are considerably more risk averse and less overconfident than their male colleagues, thus confirming a negative causality between risk-taking and gender diversity. The results reveal that banks headed by women are less risky because they report higher capital adequacy and equity to assets ratios. As credit risk in female-led banks is no different from male-led ones, higher capital adequacy does not derive from lower asset quality because it is linked to the higher risk aversion of female directors and top managers. Research limitations/implications From a theoretical standpoint, the results suggest that having women in executive positions entails different risk implications for Italian banks; from a managerial perspective, the results highlight conditions that may promote the role of women in the banking sector. The conclusions are of particular significance because they provide some support for the view that regulators should favor gender quotas in the board management of banks to reduce risk-taking behavior. Originality/value This paper offers an in-depth examination of the risk practices of banks and it attempts to bridge the gap in prior literature on the risk profile of the Italian banking industry given that few empirical studies have examined the determinants of risk-taking in this field, to date. The findings on the higher risk aversion of women directors advance the understanding of the determinants of risk-taking behavior in banks, suggesting that gender quotas in bank boards can contribute to reducing risk-taking behavior. This also unveils some policy implications for bank regulatory authorities.

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Section: Findings and Discussionsupporting

confidence: 93%

Section: Percentage Of Females On Boards Of Directors and Bank Risk-t...mentioning

confidence: 99%

Gender diversity and bank risk-taking: an empirical investigation in Italy

Menicucci

Paolucci

2021

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“…We use other dependent variables ( CAMEL ) than the Z-score to check the robustness of our findings. Natural logarithmic transformations of the three non-index variables (bank age, bank size and GDP ) are used to better estimate a normal distribution (Birindelli et al , 2020).…”

Section: Methodsmentioning

confidence: 99%

Financial soundness of Islamic banks: does the structure of the board of directors matter?

Khalil

Slimene

2021

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Purpose The purpose of this paper is to examine the Board of Directors’ characteristics and their impact on the financial soundness of Islamic banks. Design/methodology/approach Regression analysis is applied to test the impact of the Board of Directors’ characteristics on the financial soundness of Islamic banks, using a panel data set of 67 Islamic banks covering 20 countries from 2005 to 2018. The Z-score indicator is used to evaluate the Islamic banks’ soundness. To check the robustness of the results, this paper uses other dependent variables (CAMEL) than the Z-score. Findings The main results show that the presence of an independent non-executive director negatively impacts the financial soundness of Islamic banks, while the chief executive officer duality practice has a positive effect on it. Other characteristics of the Board of Directors do not significantly impact the financial soundness of Islamic banks (foreign director, institutional director, chairman with a Shari’ah degree, interlocked chairman and the Board of Directors’ size). Practical implications This study aims to fill the gaps in the literature that discuss the Board of Directors’ role in corporate governance and its impact on the financial soundness of Islamic banks. In other words, it shows the role played by the Board of Directors and improves the knowledge of the corporate governance-financial soundness relationship. Plus, managers, investors and regulators may gain evocative insights, particularly those looking to improve their Islamic banks’ soundness by restructuring their boards’ composition. Originality/value This study sheds new light on the literature on Islamic banking by clarifying the relationship between the Board of Directors and the financial soundness of Islamic banks. Contrary to previous research, this paper uses an additional hypothesis stating that a chairman with a Shari’ah degree (Fiqh Muamalt) has a positive impact on the financial soundness of Islamic banks.

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“…Compared to studies focused on corporate governance and firm performance, the existing literature on the association between corporate governance and the level of risk faced by firms is relatively small (Alam and Shah, 2013; Chang et al , 2015; Alfiero and Venuti, 2016). Studies on the topic mainly investigate the influence exerted by the board of directors and by the ownership structure on corporate risk-taking, showing mixed results (Morck et al , 1999; Nguyen, 2011; Mathew et al , 2016; Birindelli et al , 2020).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Family ownership and risk: the role of family managers

D’Este

Carabelli

2022

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Purpose This study aims to investigate the relationship between family managers and firms’ risk levels in a context characterized by low investor protection and firm opacity. Specifically, this paper examines whether the level of risk faced by firms is affected by family shareholders’ ownership stake and activism. Design/methodology/approach Corporate governance data were hand-collected for a sample of 90 Italian listed companies and 540 observations from the year 2018. Regression analysis was then used to test the research hypotheses. Findings This study provides evidence of a positive association between active family ownership and risk faced by sampled firms. This study also finds that the number of inside directors is negatively correlated with firms’ risk-taking. Overall, the results confirm family managers’ influence on firms’ risk choices and show consistency with theoretical arguments in favor of hiring professional managers to guide family-owned firms. Practical implications Practical implications emerge from the study findings. First, family owners should consider to hire a larger number of professional managers to support firms’ wealth maximization and retention and to reduce default risks. Second, investors should take into account the firms’ board of directors and management composition to better assess the investments risk level. Finally, the positive correlation between active family owners and systematic risk suggests the opportunity for regulators to improve the legal requirements related to minority directors to increase their effectiveness and, therefore, minority shareholders’ protection. Originality/value This study extends the literature on the association between ownership structure and firms’ risk levels, showing the effect of family managers on firms’ risk levels. Besides, to the best of the authors’ knowledge, no previous study investigates professional executives’ influence on risk when family ownership prevails.

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When do women on board of directors reduce bank risk?

Cited by 37 publications

References 83 publications

Gender diversity and bank risk-taking: an empirical investigation in Italy

Gender diversity and bank risk-taking: an empirical investigation in Italy

Financial soundness of Islamic banks: does the structure of the board of directors matter?

Family ownership and risk: the role of family managers

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