Gender diversity and bank risk-taking: an empirical investigation in Italy

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Elisa Menicucci ◽  
Guido Paolucci
Keyword(s):  
Risk Aversion ◽  
Risk Taking ◽  
Gender Diversity ◽  
Risk Profile ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Gender Quotas ◽  
Content Type ◽  
Board Directors ◽  
Risk Taking Behavior

Purpose The purpose of this paper is to investigate the relationship between gender diversity and the risk profile of Italian banks during the period 2015–2019. This study examines whether the presence of female board directors or top executives has any significant effect on bank risk-taking. Design/methodology/approach To explore the influence of women on bank risk-taking, the authors analyzed a sample of 387 Italian banks and developed an econometric model applying unbalanced panel data with firm fixed effects and controls per year. Within a multivariate regression model, the authors considered five risk dimensions to verify the effect of gender diversity. Findings The findings suggest that female board directors and executives are considerably more risk averse and less overconfident than their male colleagues, thus confirming a negative causality between risk-taking and gender diversity. The results reveal that banks headed by women are less risky because they report higher capital adequacy and equity to assets ratios. As credit risk in female-led banks is no different from male-led ones, higher capital adequacy does not derive from lower asset quality because it is linked to the higher risk aversion of female directors and top managers. Research limitations/implications From a theoretical standpoint, the results suggest that having women in executive positions entails different risk implications for Italian banks; from a managerial perspective, the results highlight conditions that may promote the role of women in the banking sector. The conclusions are of particular significance because they provide some support for the view that regulators should favor gender quotas in the board management of banks to reduce risk-taking behavior. Originality/value This paper offers an in-depth examination of the risk practices of banks and it attempts to bridge the gap in prior literature on the risk profile of the Italian banking industry given that few empirical studies have examined the determinants of risk-taking in this field, to date. The findings on the higher risk aversion of women directors advance the understanding of the determinants of risk-taking behavior in banks, suggesting that gender quotas in bank boards can contribute to reducing risk-taking behavior. This also unveils some policy implications for bank regulatory authorities.

Capital regulation, competition and risk-taking behavior of Indian banks in a simultaneous approach

2018 ◽  
Vol 44 (4) ◽  
pp. 459-477 ◽  
Author(s):  
Santi Gopal Maji ◽  
Preeti Hazarika
Keyword(s):  
Human Capital ◽  
Risk Taking ◽  
Value Added ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Capital Regulation ◽  
Content Type ◽  
Risk Taking Behavior ◽  
Indian Banks ◽  
The Impact

Purpose The purpose of this paper is to investigate the association between capital regulation and risk-taking behavior of Indian banks after incorporating the influence of competition. Further, the study intends to enrich the existing literature by providing empirical evidence on the role of human resources in managing risk along with the influence of other bank specific and macroeconomic variables. Design/methodology/approach Secondary data on 39 listed Indian commercial banks are collected from “Capitaline Plus” corporate data database for a period of 15 years. Capital is measured by capital adequacy ratio as defined by the regulators, and two definitions of risk – credit risk and insolvency risk – are employed. Competition is measured by Herfindahl-Hirschman deposits index, concentration ratio and H-statistic. The value-added intellectual coefficient model is employed to compute human capital efficiency (HCE). Three-stage least squares technique in a simultaneous equation framework is used to estimate the coefficients. Findings The study finds that absolute level of regulatory capital and bank risk are positively associated, although the influence of capital on risk is not statistically significant. The influence of competition on risk is negative for all the models, which supports the “competition stability” view. The impact of human capital on bank risk is also negative for all cases. Practical implications The findings of the study are useful for the decision makers in several ways based on the inverse influence of competition and HCE on bank risk. Further, the observed positive association between capital and risk indicates that the capital regulation is not sufficient to enhance the stability in the banking sector. Originality/value This is the first study in the Indian context that incorporates the competition in the banking industry as an explanatory variable in the extant bank capital and risk relationship.

Corporate governance and risk taking: the role of board gender diversity

2019 ◽  
Vol 31 (1) ◽  
pp. 19-42 ◽  
Author(s):  
Heba Abou-El-Sood
Keyword(s):  
Corporate Governance ◽  
Risk Taking ◽  
Emerging Market ◽  
Gender Diversity ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Regulatory Capital ◽  
Government Ownership ◽  
Content Type ◽  
Board Gender Diversity

Purpose This paper aims to investigate the association between board gender diversity and bank risk taking in an emerging market context. Design/methodology/approach The association between female board directorship and bank risk taking is examined, while controlling for board characteristics, managerial, concentrated, family and government ownership. Two-stage regression with instrumental variables is used for a sample of banks listed in Gulf Cooperation Council (GCC) countries during 2002-2014. Findings Results show that banks with more female board directors invest in less risky positions; the association is attenuated when the regulatory capital is larger, providing protection against risky investments, and female directors tend to invest less in risky asset positions in Islamic banks relative to conventional banks. Practical implications The relevance of the findings stems from the recent initiatives undertaken by the Basel Committee to address deficient corporate governance structures that lead to bank breakdowns and the diversified economy of the fast-growing GCC market, relying on banking services in the aftermath of the oil price drop. Originality/value This paper provides novel evidence on the influence of board gender diversity on bank risk taking in an emerging market context. This paper fills a gap in prior research by examining bank-specific regulatory capital adequacy and Islamic banking aspects.

Determinants of non-performing loans in Chinese banks

2018 ◽  
Vol 12 (3) ◽  
pp. 273-289 ◽  
Author(s):  
Muhammad Umar ◽  
Gang Sun
Keyword(s):  
Risk Taking ◽  
Inflation Rate ◽  
Banking Industry ◽  
Foreign Exchange Rate ◽  
Bank Risk ◽  
Content Type ◽  
Credit Quality ◽  
Independent Variables ◽  
Chinese Banks ◽  
Risk Taking Behavior

Purpose The study aims to explore macroeconomic and banking industry-specific determinants of non-performing loans (NPLs) for Chinese banks, spanning from 2005 to 2014. Design/methodology/approach It uses three different models to explore the determinants. The first model has only macroeconomic variables as regressors; the second model has only banking industry-specific variables as independent variables; and the third model has macroeconomic and banking industry-specific variables as explanatory variables. Furthermore, system generalized method of moments estimation technique has been used to measure the coefficients of independent variables. Findings Gross domestic product (GDP) growth rate, effective interest rate, inflation rate, foreign exchange rate, type of bank, bank risk-taking behavior, ownership concentration, leverage and credit quality are significant determinants of NPLs in Chinese banks. Furthermore, the determinants of NPLs for listed and unlisted banks differ. Determinants of NPLs of listed banks include GDP, bank risk-taking behavior and credit quality. However, variation in NPLs of unlisted banks is explained by GDP, inflation rate, foreign exchange rate, bank risk-taking behavior, leverage and credit quality. Originality/value This study also finds that using only macroeconomic or banking industry-specific variables as regressors is not a right approach because it may lead to erroneous conclusions.

Female directors and risk-taking behavior of Indian firms

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shreya Biswas
Keyword(s):  
Risk Taking ◽  
Fixed Effects ◽  
Critical Mass ◽  
Gender Diversity ◽  
Dynamic Panel Data ◽  
Fixed Effects Model ◽  
Firm Level ◽  
Content Type ◽  
Female Directors ◽  
Risk Taking Behavior

PurposeThis study examines whether female directorship on board is related to firm's risk-taking behavior in India.Design/methodology/approachThe study considers the top 500 listed companies in India during the period 2013 to 2018 for the analysis. The paper employs fixed effects as well as a dynamic panel data model to address the bias in the fixed effects model when the lagged risk outcome is included as an explanatory variable.FindingsThe study finds that the presence of female directors on board is unrelated to the firm's risk-outcomes and the risk-adjusted return earned by the shareholders. The results are in line with the tokenism theory of board diversity. Having a higher share of female independent directors is also unrelated to the risk-taking behavior of firms. The findings are in contrast to the critical mass theory and the agency theory of gender diversity. The study does not rule out the possibility of female directors' risk-preferences being similar to those of male directors.Practical implicationsThe findings suggest that regulations related to having independent female directors may not add value for the shareholders in the short run. The business case for such stringent regulations in India on the gender diversity of boards remains unclear.Originality/valueThis is the first study to analyze the relationship between gender diversity of boards and firm-level risk in India. Most of the studies have focused on gender diversity and firm performance in India. However, modern portfolio theory suggests that both risk and return are important as shareholders care about risk-adjusted returns.

Intellectual capital, bank stability and risk-taking: evidence from Asian emerging markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tamanna Dalwai ◽  
Dharmendra Singh ◽  
Ananda S.
Keyword(s):  
Emerging Markets ◽  
Intellectual Capital ◽  
Risk Taking ◽  
Bank Risk ◽  
Bank Stability ◽  
Gmm Estimation ◽  
Content Type ◽  
Risk Taking Behavior ◽  
Asian Emerging Markets ◽  
The Impact

Purpose The purpose of this paper is to investigate the impact of intellectual capital (IC) efficiency on the banks’ risk-taking and stability of Asian emerging markets. Design/methodology/approach This study uses a sample of 204 listed banks from 12 Asian emerging countries for the period 2010 to 2019. Data were analyzed using Ordinary Least Squares regression and checked for robustness using system generalized methods moment (GMM) estimation. The dependent variable of bank stability is measured using Z-score-based return on assets (ROA) and return on equity (ROE). The second dependent variable of bank risk is proxied by the standard deviation of ROA, ROE, non-performing loans and loan loss provision. Findings The results suggest the IC efficiency has no association with bank risk-taking and stability. The findings lend no support to the resource-based theory. The robustness of this result is confirmed by the system GMM estimation. However, support is found for the competition fragility view as high market power is associated with low risk-taking. The IC subcomponents, human capital efficiency (HCE) report a negative coefficient for bank risk-taking thereby having no support for the hypothesized relationships. Diversified banks with a higher deposit to total asset ratio resort to high risk-taking. Research limitations/implications IC efficiency does not have an impact on the bank’s risk-taking behavior and stability for Asian banks. Managers can use these findings to improve their IC and boost investor confidence. Regulatory authorities should increase its monitoring function of banks when the GDP decreases as risk-taking behavior are galvanized during this period. Originality/value This research is one of the first to provide empirical evidence of IC efficiency’s relationship with bank stability and bank risk-taking. The implications are useful for policymakers, managers and governing bodies to enhance the banks’ IC efficiency.

The Chinese banks’ directors and their risk-taking behavior

2016 ◽  
Vol 10 (2) ◽  
pp. 291-311 ◽  
Author(s):  
Sok-Gee Chan ◽  
Eric H.Y. Koh ◽  
Mohd Zaini Abd Karim
Keyword(s):  
Risk Taking ◽  
Commercial Banks ◽  
Boards Of Directors ◽  
Gender Diversity ◽  
Content Type ◽  
Regulatory Policies ◽  
Wide Range ◽  
Risk Taking Behavior ◽  
The Impact ◽  
Chinese Banking

Purpose The purpose of this paper is to examine the impact of the directors’ socioeconomic backgrounds on the risk-taking behavior of the listed commercial banks in China. Design/methodology/approach The generalized least square method and Arellano and Bover’s (1995) generalized method of moment were used to study the relationship between the directors’ socioeconomic backgrounds and bank risk-taking behavior. The sample studied consists of 16 listed commercial banks in China from 2003 to 2011. Findings It was found that smaller board sizes and higher percentage of independent directors contribute to lower risk-taking. The results also indicate that banks are better off with boards that have gender diversity, government affiliation and higher average age because they enhance problem-solving and market insights facilitate adherence to government or regulatory policies and help reduce the banks’ risks. Research limitations/implications Future studies may consider including non-public-listed banks, pre-2003 data and analyses of the agencies to which the government-affiliated directors are or were attached. Practical implications The paper suggests that corporate governance reform initiatives with closely monitored implementation and phased liberalization contributed toward the banking industry’s resilience. Implications for management include that boards of directors with better quality, sufficient independence, gender diversity, government affiliation and maturity will help reduce risks. Social implications This study may facilitate the decision-making for the bank management and policymakers on the selection of best directors in the Chinese banking sector. The Chinese banking system serves as a plausible role model for consideration, given that four of its banks have now leapfrogged to be among the top ten largest banking institutions after the global financial crisis. Originality/value The study covers a wide range of socioeconomic backgrounds of the board of directors which are crucial in influencing the behavior of the board in banking operations.

scholarly journals When do regulations matter for bank risk-taking? An analysis of the interaction between external regulation and board characteristics

2018 ◽  
Vol 18 (3) ◽  
pp. 440-461 ◽  
Author(s):  
Glauco De Vita ◽  
Yun Luo
Keyword(s):  
Risk Taking ◽  
Gender Diversity ◽  
Capital Requirements ◽  
Market Discipline ◽  
Bank Risk ◽  
Board Independence ◽  
Board Governance ◽  
Board Size ◽  
Content Type ◽  
External Regulation

PurposeAccording to previous international studies, the impact of external regulation on bank risk is ambiguous. The purpose of this paper is to ask the question, “When do regulations matter for bank risk-taking?” by reporting the first empirical investigation of how the relation between bank regulations (capital requirements, official supervisory power and market discipline) and bank risk-taking is moderated by board monitoring characteristics.Design/methodology/approachUsing SYS-GMM, the analysis of the interaction between bank-level boards of directors’ attributes (board size, board independence and board gender diversity) and external regulation is based on a sample of 493 banks operating in 54 countries over 2001-2015, accounting for three measures of bank risk-taking.FindingsRegulations matter for bank risk-taking conditional on board characteristics: board size, board independence and board diversity. With the exception of capital requirements, the market discipline exerted by external private monitoring and greater supervisory power are unable to mitigate the propensity to greater risk-taking by banks resulting from larger board size, higher board independence and greater gender diversity of the board.Originality/valueThe bank risk empirical literature is still silent as to the interaction between board governance and regulation for the purpose of examining banks’ risk-taking. This paper fills this gap, thus making a significant contribution by extending our knowledge of whether and how board governance moderates the relationship between external regulation and bank risk-taking.

scholarly journals Loan Loss Provision and Risk-Taking Behavior of Commercial Banks in Pakistan: A Dynamic GMM Approach

2019 ◽  
Vol 11 (19) ◽  
pp. 5209 ◽  
Author(s):  
Changjun Zheng ◽  
Shumaila Meer Perhiar ◽  
Naeem Gul Gilal ◽  
Faheem Gul Gilal
Keyword(s):  
Interest Rate ◽  
Credit Risk ◽  
Risk Taking ◽  
Commercial Banks ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Loan Loss ◽  
Loan Loss Provision ◽  
Capital Adequacy Ratio ◽  
Risk Taking Behavior

The paper analyzes the determinants of the loan loss provision (LLP) of 22 commercial banks in Pakistan from 2010 to 2017. The motive of the research is that LLP is a measure of credit risk as a proxy for bank risk-taking behavior profits and banks’ sustainability. Especially after the occurrence of a global financial crisis. The quantitative research method of data collection from Bureau Van Dijk’s BankFocus portal and the World Bank’s World Development Indicators. Other than considering specific bank variables such as capital adequacy ratio, return on average equity, and government securities, the effects of macroeconomic variable inflation and lending interest rates are explicitly studied. The model of pooled ordinary least squares (POLS), fixed effect (FE), panel corrected standard error (PCSE), and panel data estimation in the form of a general method of moments (GMM) two-step system is used to find the risk-taking behavior of banks in Pakistan. The results obtained by the use of inflation (INF) as an instrumental variable of LLP are highly dependable with a negative impact on loan loss provision. Lending interest rate (LIR) has a positive and significant relationship with LLP and contribute in the study of macroeconomic variables for bank risk-taking, excessive amount of interest rate was not beneficial for banks to earn profits especially during the economic crises. Return on average equity (ROAE) significantly moderates LLP with a negative interaction and helped the bank with profitable operations and save bank from solvency. Capital adequacy ratio (CAR) and government securities (GOV) are insignificant to LLP. The result is robust by measure of endogeneity, and highlights the important role of commercial banks’ sustainability to explain risk-taking behavior in Pakistan with the intention to increase profits after the occurrence of financial crises. The study further contributes to future research on managerial policy and decision making. In summary, the paper on loan loss provision has the capacity to forecast commercial banks’ credit risk for risk-taking in an emerging country.

Does boardroom gender diversity affect the risk profile of acquiring banks?

2018 ◽  
Vol 44 (10) ◽  
pp. 1174-1199 ◽  
Author(s):  
Adnène Sghaier ◽  
Taher Hamza
Keyword(s):  
Default Risk ◽  
Gender Diversity ◽  
Risk Profile ◽  
Top Management ◽  
Gender Quotas ◽  
Content Type ◽  
Related Risk ◽  
Management Positions ◽  
Reduce Risk ◽  
The Relationship

Purpose The purpose of this paper is to investigate the influence of gender diversity on the boardroom and in top management positions on the risk profile (RP) of acquiring banks. Design/methodology/approach To estimate the effect of mergers and acquisitions (M&A) in the RP of the acquirer, the authors will use the same methodology adopted by Vallascas and Hagendorff (2011), this method compares the variation of the RP of the acquirer to the level risk of control banks. To investigate how merger-related risk changes are affected by gender diversity, the authors use a linear regression. Findings The results show that, on average, bank mergers do not significantly affect the RP of the acquiring bank. However, the authors found that the proportion of women in the board standing reduces the RP of the acquiring bank. Overall, the authors observe evidence that the appearance of a female in top management is associated with lower bank risk. Moreover, the authors conclude that the relationship between the presence of at least three women on the board and the default risk of the acquiring bank is negative. Originality/value This finding suggests that in the M&A transactions, female directors are considerably more conservative than their male counterparts. Thus, the authors confirm the postulate that women are more risk averse and less overconfident than their male counterpart. The conclusions are of particular significance for the banking industry. The authors provide some support for the view that regulators should favor gender quotas in the board management of banks to reduce risk-taking behavior.

Macroprudential policies, crisis and risk-taking

2016 ◽  
Vol 7 (1) ◽  
pp. 6-27 ◽  
Author(s):  
Saibal Ghosh
Keyword(s):  
Panel Data ◽  
Risk Taking ◽  
Balance Sheet ◽  
Dynamic Panel Data ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Content Type ◽  
Macroprudential Policies ◽  
Cross Country ◽  
The Impact

Purpose – The role of macroprudential policies (MPPs) in influencing bank risk-taking has recently attracted significant attention in the literature. Several studies have emerged, both at the cross-country level as well as at the level of individual countries that have examined this issue. However, whether and to what extent do MPPs affect risk-taking by Gulf Cooperation Council (GCC) banks has not been investigated in prior empirical research. Toward this end, using data during 1996-2010, the author examines the impact of MPPs on risk-taking by GCC banks. The author considers the entire gamut of MPPs – those focused on credit, capital and liquidity – and how they impact bank risk. Design/methodology/approach – In view of the possible endogeneity between the dependent variables and the crucial independent variable (i.e. MPP), the paper uses advanced panel data techniques that address this endogeneity. Toward this end, the author uses dynamic panel data methodology to examine the interlinkage between bank risk taking and MPPs for GCC banks. Findings – The findings appear to suggest that although MPPs are useful, not all of them are equally effective in containing the potential build-up of financial stress. Viewed from this standpoint, it appears that capital adequacy ratios and reserve requirements are the ones with maximum efficacy in limiting potential build-up of risks. Classifying the MPPs as per their impact on major balance sheet variables, the results indicate that capital-related measures tend to exert the greatest impact on credit. Originality/value – A significant volume of literature has emerged in recent years that examine the efficacy of MPPs on bank risk-taking. Notwithstanding available cross-country research, limited analysis on this aspect in the context of GCC banks. Toward this end, an extended sample of GCC banks has been used to examine this issue. To the best of the author’s knowledge, this is one of the earliest studies for GCC banking systems to examine this issue.

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