Lehman Sisters

Abstract

Based on documented population gender differences in risk aversion, some argue the crisis would not have happened if Lehman Brothers had been Lehman Sisters. Such generalizations from the population ignore the role of selection. We illustrate the importance of selection by comparing finance to other industries. Using measure of preferences, we show that gender gaps in risk-aversion can reverse in finance. Consistent with the existence of selection, financial firms with more female directors are, if anything, relatively riskier than non-financials. While diversity may be valuable in a crisis, taking selection into account may be critical for identifying the reasons why.

Keywords: Women, Gender, Risk Aversion, Selection, Risk, Crisis, Banks, Board of Directors

JEL Classification: G34, G38, G21, G28, J16, J78