The Impact of Executive Board Gender Diversity on Risk-Taking in Canadian and US Banks

Abstract

This paper examines the issue of board diversity and the role of women in the finance industry. Estimation of panel data regressions for a sample of all financial institutions in Canada and the US over the period 2008-2019 identified some qualitative and quantitative factors that allowed the Canadian banking system to withstand the 2008 financial crisis better than US financial institutions. We found that in Canadian banks risk-taking executive behaviour was moderated by gender diversity but no overall impact of gender diversity on financial risk-taking is evidenced in the US. Moreover, sub-sectoral analysis in the US shows that a higher relative number of women on executive boards actually increases risk-taking in investment banking, but not in commercial banking. Nonetheless, in investment management a higher female to male ratio on US executive boards tends to reduce leverage. There are no differences in the impact of number of female board members on Canadian investment banks relative to the overall financial services sector. Our analysis suggests that risk attitudes of female financial executives in the US financial industry is much more heterogeneous than in Canada, or in the general female population of both countries.