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From the Boardroom to Systemic Risk: Estimating the influence of female directors on European banks’ contribution to systemic risk

Juväng, Maja LU and Horvath, Thilda (2024) NEKP01 20241
Department of Economics
Abstract
Understanding the mechanisms that shape banks’ risk management practices is crucial for maintaining a sound financial system. An extensive body of literature has documented that financial outcomes and risk-taking behavior are influenced by the gender of its directors and executives. This literature tends to exclude financial institutions and when not, focus on an isolated performance indicator or risk measure. Hence, despite the recent EU directives of gender quotas as a means of reducing excessive risk-taking of banks, scant attention has been given to the link between female representation and systemic risk. This paper is a seminal attempt to estimate the causal impact of female representation within banks’ board of directors on systemic... (More)
Understanding the mechanisms that shape banks’ risk management practices is crucial for maintaining a sound financial system. An extensive body of literature has documented that financial outcomes and risk-taking behavior are influenced by the gender of its directors and executives. This literature tends to exclude financial institutions and when not, focus on an isolated performance indicator or risk measure. Hence, despite the recent EU directives of gender quotas as a means of reducing excessive risk-taking of banks, scant attention has been given to the link between female representation and systemic risk. This paper is a seminal attempt to estimate the causal impact of female representation within banks’ board of directors on systemic risk, measured by the £ΔCoVaR. Based on the weekly closing stock prices, we derive the £ΔCoVaR as a measure of a bank’s systemic risk through a quantile regression approach. Subsequently, we employ a dynamic fixed effects regression model using data from 61 banks across 20 European countries between 2013-2022. The documented results indicate that female representation within banks’ boards do not have a causal effect on systemic risk. The insignificant relationship holds through several alternative estimation strategies, such as an IV probit model and a probit regression model with propensity score matching. (Less)
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author
Juväng, Maja LU and Horvath, Thilda
supervisor
organization
course
NEKP01 20241
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Systemic risk, Boardroom gender diversity, Conditional Value at Risk, Quantile Regression, Dynamic fixed effects model
language
English
id
9155187
date added to LUP
2024-10-01 13:18:33
date last changed
2024-10-01 13:18:33
@misc{9155187,
  abstract     = {{Understanding the mechanisms that shape banks’ risk management practices is crucial for maintaining a sound financial system. An extensive body of literature has documented that financial outcomes and risk-taking behavior are influenced by the gender of its directors and executives. This literature tends to exclude financial institutions and when not, focus on an isolated performance indicator or risk measure. Hence, despite the recent EU directives of gender quotas as a means of reducing excessive risk-taking of banks, scant attention has been given to the link between female representation and systemic risk. This paper is a seminal attempt to estimate the causal impact of female representation within banks’ board of directors on systemic risk, measured by the £ΔCoVaR. Based on the weekly closing stock prices, we derive the £ΔCoVaR as a measure of a bank’s systemic risk through a quantile regression approach. Subsequently, we employ a dynamic fixed effects regression model using data from 61 banks across 20 European countries between 2013-2022. The documented results indicate that female representation within banks’ boards do not have a causal effect on systemic risk. The insignificant relationship holds through several alternative estimation strategies, such as an IV probit model and a probit regression model with propensity score matching.}},
  author       = {{Juväng, Maja and Horvath, Thilda}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{From the Boardroom to Systemic Risk: Estimating the influence of female directors on European banks’ contribution to systemic risk}},
  year         = {{2024}},
}