Abstract
We are the first to examine the impact of gender diversity on banks' boards on the probability and size of public bailouts. Our findings, based on a sample of listed European banks over the period 2005–2017, suggest that banks with more gender-diverse boards are less likely to receive a public bailout and receive a lower amount of bailout funds as a percentage of total assets than banks with less gender-diverse boards. Specifically, an increase by one standard deviation in gender diversity decreases the probability of a bailout by at least 2.44%, a significant reduction considering that the unconditional probability is 18.7%. Gender diversity is also positively related to bank performance, as proxied by ROA and Tobin's Q and with dividend payout ratios, consistent with the hypothesis that female directors are better monitors than male directors. These results are robust to a variety of econometric approaches and provide support for recent reforms in several EU countries regarding gender quotas.
Highlights
When there is a very difficult situation, women are called in to do the work
We find that banks with a high percentage of female directors are less likely to receive a bailout than those with a low percentage; the coefficient on Gender Diversity is statistically significant at the 5% level or 1% level for nine out of the 11 specifications
For the remaining specifications (column (9) and column (11)), Gender Diversity is significant at the 10% level, and such an increase in the pvalues is due to the low number of observations: in column (9), using bank and year fixed effects leads to a drop in the number of observations of over 60% with respect to column (1)
Summary
When there is a very difficult situation, women are called in to do the work. To sort out the mess. The impact on firm performance can be ascribed, among other things, to a monitoring channel: female directors are likely to exert stronger monitoring efforts than their male counterparts, and this might increase performance for firms with weak governance mechanisms (Adams and Ferreira, 2009). This prediction is confirmed by recent contributions focusing on European firms (Bennouri et al, 2018; Green and Homroy, 2018). Chen et al (2017) show that in firms with weak corporate governance mechanisms, female directors tend to increase payout ratios
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