Banking on Diversity: Does Gender Diversity Improve Financial Firms' Risk Oversight?
70 SMU L. Rev. 327 (2017)
54 Pages Posted: 11 Oct 2017
Date Written: October 10, 2017
This Article surveys empirical studies examining the narrow question of whether the inclusion of greater numbers of women in senior leadership positions and on boards of directors may reduce excessive risk taking in financial institutions. While there is a significant literature exploring the impact of gender and racial diversity on better corporate governance and improved corporate performance, only a handful of studies have examined the potential influence of senior executive and board gender diversity on risk management in financial services firms.
Employing the results from these studies, this Article surveys a growing literature examining the narrow question of whether including greater numbers of women in senior leadership positions and on boards of directors enhances the performance of financial services firms. Only a handful of studies have examined the impact of senior women and female board members on financial services firms. Based on the conclusions presented by the studies, this Article is among the earliest contributions in the literature to examine whether increasing the representation of women in leadership positions in the financial services industry may enhance risk management in financial markets.
While research examining the impact of diversity on firms’ financial performance presents varying results, the early evidence on the impact of diversity on risk management oversight for financial institutions offers significant promise. After surveying the empirical literature exploring gender diversity and risk management, this Article explains that there may be other important reasons to encourage board diversity among financial services firms.
Keywords: risk management, financial crisis, banking, financial markets, board diversity, leadership diversity
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