Are Female CEOs and Chairwomen More Conservative and Risk Averse? Evidence from the Banking Industry during the Financial Crisis

48 Pages Posted: 28 Aug 2012 Last revised: 28 Nov 2015

See all articles by Ajay A. Palvia

Ajay A. Palvia

Government of the United States of America - Office of the Comptroller of the Currency (OCC)

Emilia Vähämaa

Hanken School of Economics; University of Vaasa

Sami Vähämaa

University of Vaasa

Date Written: June 10, 2014

Abstract

This paper examines whether bank capital ratios and default risk are associated with the gender of the bank’s Chief Executive Officer (CEO) and Chairperson of the board. Given the documented gender-based differences in conservatism and risk tolerance, we postulate that female CEOs and board Chairs should assess risks more conservatively, and thereby hold higher levels of equity capital and reduce the likelihood of bank failure during periods of market stress. Using a large panel of U.S. commercial banks, we document that banks with female CEOs hold more conservative levels of capital after controlling for the bank’s asset risk and other attributes. Furthermore, while neither CEO nor Chair gender is related to bank failure in general, we find strong evidence that smaller banks with female CEOs and board Chairs were less likely to fail during the financial crisis. Overall, our findings are consistent with the view that gender-based behavioral differences may affect corporate decisions.

Keywords: female CEOs, Chairwomen, bank risk-taking, bank failures, financial crisis

JEL Classification: G01, G21, G30, G32

Suggested Citation

Palvia, Ajay A. and Vähämaa, Emilia and Vähämaa, Sami, Are Female CEOs and Chairwomen More Conservative and Risk Averse? Evidence from the Banking Industry during the Financial Crisis (June 10, 2014). Journal of Business Ethics, Vol. 131, No. 3, pp. 577-594, 2015; 25th Australasian Finance and Banking Conference 2012. Available at SSRN: https://ssrn.com/abstract=2136978 or http://dx.doi.org/10.2139/ssrn.2136978

Ajay A. Palvia

Government of the United States of America - Office of the Comptroller of the Currency (OCC) ( email )

400 7th Street SW
Washington, DC 20219
United States

Emilia Vähämaa

Hanken School of Economics ( email )

PB 287
Vaasa, Vaasa 65101
Finland

University of Vaasa ( email )

P.O. Box 700
Wolffintie 34
FIN-65101 Vaasa
Finland

Sami Vähämaa (Contact Author)

University of Vaasa ( email )

P.O. Box 700
Vaasa, FI-65101
Finland
+358 29 449 8455 (Phone)

HOME PAGE: http://www.uva.fi/~sami

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