Does CEO Gender Matter at Financial Institutions? An Event-Study Analysis of Credit Union Data

Abstract

Previous studies of risk management and overconfidence at firms and financial institutions suggest that female CEOs engage in more conservative risk management practices relative to male CEOs, and less aggressive growth and acquisition behavior. However, these studies are limited by a lack of variation in CEO gender, as only 5% of commercial bank CEOs and 6% of Fortune 500 company CEOs are female. We examine gender differences in risk management and overconfidence in the distinct context of nonprofit financial cooperatives (“credit unions”), in which a majority (52%) of CEOs are female. Do observed gender differences in risk preferences and overconfidence hold under such circumstances? We utilize a unique dataset with 23 years of credit union quarterly data and CEO gender to employ two-way quarter and institution fixed effects and event study frameworks to focus on variation within credit unions that experience a CEO transition with a corresponding change in the gender of the CEO. The event study methodology allows us to thoroughly explore pre-CEO transition trends and parallel trends to account for potential selection bias. While gender differences in indicators of risk management are in the expected direction, few are statistically significant, and none are economically meaningful. The results suggest that practical differences in observable risk management are negligible among credit union CEOs. However, we do find statistically significant and large gender differences in credit union growth: male-led credit unions grow 2.9% larger in terms of memberships and 5.9% larger in terms of loans. They also expand their fields of membership to have 8.2% more potential members, execute 2.8% more merger-acquisitions, and increase their marketing expense by 7.5% relative to female-led credit unions. Nonetheless, there are no significant gender differences in credit union earnings. We argue that the results are consistent with gender differences in overconfidence but not risk aversion. The findings highlight the importance of context when evaluating gender differences in risk management and performance.