Would Lehman Sisters Have Saved the Day?

Abstract

Would Lehman Sisters have saved the financial industry from the 2008 financial crises? We provide the first empirical test of this hypothesis by investigating how female executives impact bank risk-taking using US bank panel data from 2002 to 2010. Controlling for a wide range of factors including CEO equity compensation, board characteristics, and macroeconomic conditions, we find no supportive evidence to the Lehman Sisters Hypothesis that female executives reduce bankruptcy risk. Neither the presence of bank female executives nor the percentage of females on an executive team has a significant effect on bank risk-taking. Furthermore, female CEOs or CFOs do not have a significant effect on bank risk-taking either. The results are robust under alternative specifications of riskiness and instrument variable approach.