Does boardroom gender diversity affect the risk profile of acquiring banks?

Abstract

Purpose

The purpose of this paper is to investigate the influence of gender diversity on the boardroom and in top management positions on the risk profile (RP) of acquiring banks.

Design/methodology/approach

To estimate the effect of mergers and acquisitions (M&A) in the RP of the acquirer, the authors will use the same methodology adopted by Vallascas and Hagendorff (2011), this method compares the variation of the RP of the acquirer to the level risk of control banks. To investigate how merger-related risk changes are affected by gender diversity, the authors use a linear regression.

Findings

The results show that, on average, bank mergers do not significantly affect the RP of the acquiring bank. However, the authors found that the proportion of women in the board standing reduces the RP of the acquiring bank. Overall, the authors observe evidence that the appearance of a female in top management is associated with lower bank risk. Moreover, the authors conclude that the relationship between the presence of at least three women on the board and the default risk of the acquiring bank is negative.

Originality/value

This finding suggests that in the M&A transactions, female directors are considerably more conservative than their male counterparts. Thus, the authors confirm the postulate that women are more risk averse and less overconfident than their male counterpart. The conclusions are of particular significance for the banking industry. The authors provide some support for the view that regulators should favor gender quotas in the board management of banks to reduce risk-taking behavior.

Citation

Sghaier, A. and Hamza, T. (2018), "Does boardroom gender diversity affect the risk profile of acquiring banks?", Managerial Finance, Vol. 44 No. 10, pp. 1174-1199. https://doi.org/10.1108/MF-09-2017-0373