Do Board Characteristics Matter for Bank Performance and Risk-Taking? Evidence from European Banks

Abstract

We investigate the role of governance on performance and risk-taking for European banks focusing on board diversity and bank culture. We first examine the relationship between governance, performance and risk-taking employing a difference-in-difference approach centered around the 2012 EC Directive on gender balance on corporate boards. We then examine the role of bank culture on performance during the GFC and COVID-19 crisis. Our findings support the risk culture but not the learning hypotheses. Banks that did well in the GFC also did well in the pandemic while banks that did poorly during the GFC also did poorly during the pandemic.

Keywords: Bank governance, financial crises, Corporate Governance, bank performance, Bank risk