Female Leadership and Bank Risk-Taking: Evidence from the Effects of Real Estate Shocks on Bank Lending Performance and Default Risk

49 Pages Posted: 2 Nov 2018 Last revised: 4 May 2020

See all articles by Ajay A. Palvia

Ajay A. Palvia

FDIC, Division of Insurance and Research

Emilia Vähämaa

Hanken School of Economics

Sami Vähämaa

University of Vaasa

Date Written: September 18, 2019

Abstract

This paper examines whether banks with female Chief Executive Officers (CEOs) and chairpersons of the board are associated with better lending performance and lower default risk when faced with severe real estate price shocks. Using a large panel of U.S. commercial banks, we document that female-led banks with high real estate exposure are associated with lower loan charge-offs and lower non-accrual loans relative to similar male-led banks. Furthermore, our empirical findings indicate that female-led banks with high real estate exposure have lower default risk and are less likely to fail in the aftermath of real estate price shocks. However, we find no evidence of superior lending performance or reduced default risk for female-led banks which are not exposed to severe real estate price shocks through high levels of real estate lending.

Keywords: Female CEOs, Chairwomen, Lending Performance, Loan Losses, Default Risk, Bank Failures, Real Estate Shocks

JEL Classification: G01, G21, G30, G32

Suggested Citation

Palvia, Ajay A. and Vähämaa, Emilia and Vähämaa, Sami, Female Leadership and Bank Risk-Taking: Evidence from the Effects of Real Estate Shocks on Bank Lending Performance and Default Risk (September 18, 2019). Journal of Business Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3264126 or http://dx.doi.org/10.2139/ssrn.3264126

Ajay A. Palvia

FDIC, Division of Insurance and Research ( email )

550 17th Street NW
Washington, DC 20429
United States

Emilia Vähämaa

Hanken School of Economics ( email )

PB 287
Helsinki, Vaasa 65101
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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