Diversity in Financial Risk Management: Revisiting the Lehman Sisters Hypothesis
36 Pages Posted: 10 May 2017
Date Written: March 2017
Abstract
This paper scrutinises the supposed benefits of diversity for financial risk management on the dimensions of gender and age. Using employee survey responses from ten large banks we find that females are no more likely than males to manage risk well after controlling for individual risk attitudes. We observe wide dispersion of risk tolerance for both genders in the banking workforce. Gender differences in risk tolerance are decreasing in seniority, suggesting that female managers are very similar (in this regard) to their male counterparts. In contrast, older workers report more desirable risk management behaviour than their younger peers even after controlling for risk tolerance, suggesting that the benefits of experience for risk management go beyond just individual risk attitudes. To better understand the formation of business unit culture we also investigate the relationship between risk culture and demographics at the business unit level. We find no association between gender/age distribution of business units and their risk culture, nor between the gender/age of business unit leaders and their unit’s risk culture.
Keywords: Risk management, gender, age, banking
JEL Classification: G21, G32, M14
Suggested Citation: Suggested Citation