Female Chief Risk Officers (Cros) and Risk-Taking in Banks

Abstract

This study investigates how the presence of a female chief risk officers (CROs) affects risk-taking practices in banks. We follow the enterprise risk management (ERM) perspective by considering the environment surrounding the CROs (i.e., female representation in both the risk committee and the boardroom). Using a unique dataset of 120 US banks for 2004–2018, we find that female CROs serve shareholder incentives via higher risk-taking activities. However, female presence on risk committees and in boardrooms moderates the risk-taking behaviour of the female CROs. Interestingly, the reporting line of the female CROs (reporting to the board instead of the CEO) leads to lower rates of risk-taking by banks. Our results have important implications for both regulators and corporate boards, showing that the appointment of a female risk officer is not sufficient to reduce risk-taking by banks. The study also contributes to the literature by exploring the corporate governance arrangements under which gender-specific risk-taking preferences lead to observable effects on bank risk-taking.

Keywords: enterprise risk management, chief risk officer, board gender-diversity, risk committee, risktaking