Abstract
The aim of this study is to investigate the relationship between gender diversity and the risk profile of Italian financial institutions during the period 2013 to 2019. The paper examines whether the presence of top executives has any significant effect on corporate risk-taking. A sample of 160 Italian financial institutions was analyzed and a multivariate regression model was developed considering five risk dimensions to verify the effect of gender diversity. The results suggest that female Chief Executive Officers (CEOs), Chief Financial Officers (CFOs) and Chairmans of the Board of Directors (CHAIRs) are considerably less overconfident and less risky than their male colleagues, thus confirming a negative causation between gender diversity and risk-taking. The findings reveal that financial institutions headed by women are more risk averse since they account upper capital adequacy and equity to assets ratios. As credit risk in female-run financial institutions is no diverse from male-run financial institutions, higher capital adequacy does not come from minor asset quality because it is related to the greater risk aversion of female top managers. Key words: Gender diversity, female directors, female xsass, risk-taking, Italian financial institutions.
Highlights
The effect of gender diversity on performance and riskiness of a firm has been the focus of a number of studies in economic and finance literature for many years
We make estimates by by means of the mentioned five risk variables alternatively and we look at the effects of the explanatory variables (F_CEO, F_CFO, F_CHAIR) on risk-taking of Italian financial institutions
The results confirm that Italian financial institutions led by female executives show a reliably high amount of capital, identified by capital adequacy (CAR) and the equity to asset ratio (CR)
Summary
The effect of gender diversity on performance and riskiness of a firm has been the focus of a number of studies in economic and finance literature for many years. The literature on board diversity has appealed a growing interest in the last few years as many studies investigated the impacts of women holding leadership positions on corporate performance and corporate governance (Burgess and Tharenou, 2002; Carter et al, 2003; Adams and Ferreira, 2004, 2009; Farrell and Hersch, 2005). Gender diversity in boards of directors has turned into a relevant topic in the financial sector since there is a significant gap between the share of women employed in financial institutions and their presence among bank managers.
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