Executive Board Composition and Bank Risk Taking
80 Pages Posted: 21 Jun 2016
Date Written: 2012
Little is known about how socioeconomic characteristics of executive teams affect corporate governance in banking. Exploiting a unique dataset, we show how age, gender, and education composition of executive teams affect risk taking of financial institutions. First, we establish that age, gender, and education jointly affect the variability of bank performance. Second, we use difference-in-difference estimations that focus exclusively on mandatory executive retirements and find that younger executive teams increase risk taking, as do board changes that result in a higher proportion of female executives. In contrast, if board changes increase the representation of executives holding Ph.D. degrees, risk taking declines.
Keywords: Banks, executives, risk taking, age, gender, education
JEL Classification: G21, G34, I21, J16
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