Volume 14, Number 2, December 2019
| Role of Board Structure in Financial Institutions: Evidence from Western Europe |
Abstract
Role of gender diversity and firm performance has been examined widely, however the regarded research to corporate risk taking is still restricted and little is known to focus deeply in risk measurement. Align with the concern that female leadership may help reduce the risk and alleviate damages from financial crisis, we aimed to shed more light on the role of gender board structure and corporate risk-taking through a unique approach which based on Value at Risk. Our data was collected from a panel dataset of listed financial institutions in Western European countries, which have the rigid corporate governance mechanisms and consequently affected by global events. After controlling for the effect of endogeneity through application of Two-Stage Least Squares (2SLS), as expected, we found evidences for negative relationships between the proportion of women on boards and idiosyncratic as well as systemic risk. In addition, board size increases the market risk. Results of this research support recommendations of the EU government on the critical role of gender board structure in risk management, and it could be useful for managers in reducing excessive risk-taking behavior.
Keywords: Gender Equality, Corporate Governance, Risk Attributes.
JEL Classification: G30, G32, M16