Proceedings of World Business Research Conference
11 - 13 June 2015, Hotel Novotel Xin Qiao, Beijing, China, ISBN: 978-1-922069-78-8
Women Leaders in Banking and Bank Risk
Bing Yu*, Mary Jane Lenard, E. Anne York and Shengxiong Wu
Our paper examines gender diversity among corporate leadership positions in the
banking industry and the relation to bank risk as measured by the variability of stock
market return. We examine a sample of companies in the financial industry pulled from
the RiskMetrics database, which contains information on executive officers and
corporate boards of directors. Our study covers the years from 2003 to 2011, and our
findings indicate that more gender diversity on the audit committee and corporate
governance committee impacts firm risk by contributing to lower variability of stock
market return. The presence of women executives increased bank risk in the early years
of our study, but decreased bank risk during the time of the financial crisis. Our research
design and findings assist in providing additional evidence about the role of women in
corporate leadership positions in the banking industry and the association with corporate
performance.
Keywords: Risk
performance
Management,
Corporate
governance,
Gender
diversity,
Corporate
JEL Classification: G32
1 Introduction
Research on women leaders is a study in contrasts. On the one hand, shareholders want
managers who take risks in order to maximize the value of their equity (Sun and Liu 2014). On
the other hand, female CFOs are shown to be more risk-averse than male CFOs (Francis et al.
2013). Studies have also shown that firms with female CFOs adopt more conservative
accounting policies (Francis et al. 2014) and are less likely to manipulate earnings (Chava and
Purnanandam 2010). In addition, committees of all publicly-traded companies are required to
follow strict regulations as a result of the Sarbanes-Oxley (SOX) act of 2002. The (SOX)
legislation includes specific requirements for corporate governance, such as the independence
of board members and financial expertise on the audit committee (SOX, 2002). As a result,
high quality boards are tasked with constraining excessive risk-taking that benefits
management at the expense of shareholders (Sun and Liu 2014).
_______________________________________________________________________________
Bing Yu*, Assistant Professor of Finance, School of Business, Meredith College, 3800 Hillsborough St., Raleigh,
NC 27607, yubing@meredith.edu * Corresponding author
Mary Jane Lenard, Professor of Accounting, School of Business, Meredith College, 3800 Hillsborough St., Raleigh,
NC 27607, lenardmj@meredith.edu
E. Anne York, Associate Professor of Economics, School of Business, Meredith College, 3800 Hillsborough St.,
Raleigh, NC 27607, yorka@meredith.edu
Shengxiong Wu, Assistant Professor of Finance, School of Business, Texas Wesleyan University, Fort Worth, TX
76105, shwu@txwes.edu
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Proceedings of World Business Research Conference
11 - 13 June 2015, Hotel Novotel Xin Qiao, Beijing, China, ISBN: 978-1-922069-78-8
Researchers have examined the effect of women in the boardroom and their impact on firm
performance (Lenard et al. 2014; Schwartz-Ziv 2013; Srunidhi et al. 2011; Rhode and Packel 2010;
Adams and Ferreira 2009; Campbell and Minguez-vera 2008; deLuis-Carnicer et al. 2008; Carter et al.
2003; Anastasopoulos et al. 2002; Adler 2001). Research by Catalyst found that in 2012, women were
just 16.6 percent of the directors for Fortune 500 companies and that 10.3 percent of these firms had no
female board members (Catalyst 2012). Catalyst also reported that in 2012, just 19.2 percent of
nominating/corporate governance committee chairs were female. Looking specifically at banks, Landy
(2014) reported that in 2014 there were roughly 100 bank holding companies in the U.S. with assets of
more than $10 billion. In 2011, five of those companies had a female CEO – now only three do. Data
from the Bureau of Labor Statistics show that the percentage of women employed in the banking industry
has fallen from 68.4% in 2004 to 61% in 2013. Ross-Smith and Bridge (2008) noticed a similar “glacial
effect” regarding the progress of women in corporate governance in Australia, and Shilton et al. (2010)
reported that women are also underrepresented on corporate boards in New Zealand. Yet Bart and
McQueen (2013) found that female directors achieved significantly higher scores than their male
counterparts on a „Complex Moral Reasoning‟ (CMR) test. According to the authors, the CMR
dimension involved making consistently fair decisions when competing interests were at stake.
Studies of banks and financial institutions have specifically highlighted the impact of boards of
directors and corporate governance during and after the global financial crisis. Wang and Hsu (2013)
found that board size was negatively associated with risk events and that financial firms with a higher
proportion of independent directors were less likely to suffer from fraud. They also found that a more
diverse board could have an adverse impact on the board monitoring function. Peni and Vahamaa (2012)
examined several corporate governance factors and found that banks with strong corporate governance
had substantially higher stock returns in the aftermath of the market meltdown. Sun and Liu (2014)
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Proceedings of World Business Research Conference
11 - 13 June 2015, Hotel Novotel Xin Qiao, Beijing, China, ISBN: 978-1-922069-78-8
studied audit committee effectiveness and found that banks with long board tenure audit committees had
lower risk, while banks with busy directors on their audit committees had higher risk. Cooper and Uzun
(2012) studied busy directors and bank risk and found that bank risk was positively related to multiple
board appointments of bank directors, supporting the “busyness” hypothesis. Jiraporn et al. (2008)
studied not only multiple-directorships but also multiple board committee memberships. They found that
busier directors often serve on a higher number of board committees because they are more competent
(supporting the “reputation” hypothesis). The authors also found that directors of regulated firms serve
on a larger number of committees, and that women and ethnic minority directors held a larger number of
board committee memberships. Pathan and Faff (2013) examined board structure in banks and the effect
on performance. They included board size, independence, and gender diversity as the board
characteristics. They also measured bank performance over three time periods – the pre-Sarbanes-Oxley
Act (SOX) period, the post-SOX (2003 – 2006) period, and the global financial crisis period (20072011). They found that while gender diversity on the board of directors improved bank performance in
the pre-SOX period, the positive effect of gender diminishes in both the post-SOX and the financial crisis
periods.
Thus, given these contradictory findings on board performance and corporate governance and the
overall challenges of women leaders in the banking industry, it is important to investigate women‟s roles
as both executives and board members, in order to examine the impact on the industry as it moves
forward. Building on the work of Pathan and Faff (2013), our study analyzes the impact of gender in
executive and board positions over the time period 2003 to 2011. We selected this time period because
any specific committee memberships would reflect the rules defined under the Sarbanes-Oxley
legislation, and also in order to consider the effect of the global financial crisis. If the board committees,
especially after the SOX legislation, have an important role in monitoring firm performance in order to
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Proceedings of World Business Research Conference
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reduce risk, and if women have increased their presence on these committees, then how do they
contribute to the management of risk? In our paper, we look at the presence of women in leadership
positions and the effect on bank risk. Specifically, we look at the percentage of women in executive
positions, and the percentage of women directors on the audit committee and the corporate governance
committee for our sample of banks during this time period. Our paper proceeds as follows. Section 2
contains a literature review and hypothesis development. Section 3 discusses our research methodology,
and section 4 presents our results. Section 5 is our conclusion.
2 Literature review and hypothesis development
Previous research on corporate boards has investigated the role of board size and board
independence in mitigating risk. Klein (2002) found a negative relation between board independence and
abnormal accruals. Cheng (2008) found that firms with larger boards have lower variability of corporate
performance. On the other hand, previous studies also found an advantage to smaller boards. Jensen
(1993) suggested that boards larger than seven or eight people are “less likely to function effectively and
are easier for the CEO to control” (1993: 865). Group cohesiveness may also be a factor, as Evans and
Dion (1991) reported a positive association between group cohesion and performance. Goodstein et al.
(1994) found that largeness can significantly inhibit a board‟s ability to initiate strategic actions. Dalton
et al. (1999) provide a summary of these competing viewpoints, where they found that the literature
provided no consensus about the direction of the relationship between board size and firm
performance. In addition to board size and composition, authors have studied the size and composition
of board committees. Hamdan et al. (2013) investigated the relationship between audit committee
characteristics and performance, and found that the size and structure of the audit committee had an
effect on financial and stock performance for companies in Jordan. Thoopsamut and Jaikengkit (2009)
found a negative relation between the average tenure of audit committees and quarterly earnings
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Proceedings of World Business Research Conference
11 - 13 June 2015, Hotel Novotel Xin Qiao, Beijing, China, ISBN: 978-1-922069-78-8
management. However, Klein (1998), and Vafeas and Theodorou (1998) found no relationship between
audit committees and firms‟ financial performance. Bruynseels and Cardinaels (2014) found that when
CEOs appoint directors to audit committees from their social networks, there is a negative effect on
variables that proxy for oversight quality.
Researchers have studied the effect of gender diversity on the board of directors, or in executive
positions, and the contribution to corporate performance. Srinidhi et al. (2011) studied gender-diverse
boards in the U.S. using two measures of earnings quality. They found that firms with female directors
exhibited higher earnings quality. Campbell and Minguez-vera (2008) studied Spanish companies from
1995-2000 and found that gender diversity on the board had a positive effect on firm value. Similarly,
Barua et al. (2010) examined a sample of firms from 2004-2005 for the association between the quality
of accruals and CFO gender. They found that companies with female CFOs had lower absolute
discretionary accruals and lower absolute accrual estimation errors, resulting in better earnings quality for
those firms. Peni and Vahamaa (2010) found that female CFOs followed more conservative earnings
management strategies, testing S&P 500 firms in 2007. Ittonen and Peni (2012) examined gender
differences of the audit engagement partner and the difference in audit pricing. In a study of three Nordic
countries, they found that firms with female audit partners had significantly higher audit fees. The
authors theorize that potential reasons include gender differences in risk tolerance, as well as female
auditors‟ diligence, lower overconfidence, and higher level of preparation that could lead to a higher
audit investment.
Other authors used several different measures to show a link between gender diversity and
corporate performance. Adler (2001) found a strong correlation between women-friendliness and firm
profitability. In studying Fortune 500 companies from 1980 to 1998, he developed a scoring system to
determine “women-friendly” firms as those firms who scored highest in employing women in the top 10
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Proceedings of World Business Research Conference
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executive positions, the next 10 executive positions, and the board of directors. The profitability
measures in his study were return on assets (ROA), return on sales (ROS), and return on equity
(ROE). Carter et al. (2003) encountered a positive relationship between board diversity and firm value,
proxied by Tobin‟s Q. In 2004, Catalyst examined the connection between gender diversity and financial
performance, using a sample of Fortune 500 companies from 1996-2000. The study found that firms in
the top quartile in terms of diversity achieved better financial performance, as measure by ROE and raw
stock returns, than their lower-quartile counterparts (Catalyst, 2004).
Schubert (2006) studied gender differences in risk attitudes and found that women were more
pessimistic towards gains than men. In the context of risk management, however, women were found to
have a comparative advantage with respect to diversification and communication tasks. The author noted
that these results had implications on firm success because “a well-established cooperation of men and
women at the senior management level appears recommendable for firms which strive for an
optimization of their risk analysis and risk management” (p. 706).
Kesner (1988) studied a sample of 250 Fortune 500 companies in 1983 for directors‟
characteristics and committee membership. She found that while women made up only a small
percentage of board members (3.6%), a woman‟s odds of being on the audit committee were 1.78 to 1,
compared to .575 to 1 for a man. However, a woman‟s odds of being on the compensation committee
were .819 to 1, compared to 1.22 to 1 for a man. Yet these two committees are still two of the most
prominent committees of the board. Kesner concludes that as long as some “degree of diversity” is
present among members, it allows differing viewpoints to be heard, which may serve to strengthen the
board. However, Kesner‟s study was done before 2002. We update her results, along with the previously
described conflicting results specific to the banking industry, and examine gender diversity in two areas:
on the executive team, and on specific committees of the board. Our hypotheses are as follows:
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H1:
Increasing gender diversity on the executive team is significantly associated with the
variability of corporate performance.
H2:
Increasing gender diversity on specific committees of the board is significantly associated
with the variability of corporate performance.
In studies of multiple board memberships and board busyness, there are conflicting results. Fich
and Shivdasani (2006) suggested a “busyness” hypothesis and found that firms in which a majority of
outside directors hold three or more directorships are associated with weak corporate governance and
weaker profitability. Cooper and Uzun (2012) specifically studied the impact of busy directors on bank
risk, and found that bank risk was positively related to multiple board appointments. Sharma and Iselin
(2012) studied the association between multiple-directorships and tenure of audit committee members
and financial misstatements.
They found a significant positive association between financial
misstatements and both tenure and multiple-directorships in the post-SOX time period. They reasoned
that independent audit committee members serving on multiple boards may be stretched too thinly to
effectively perform their monitoring responsibilities. Chandar et al. (2012) studied what happens when
there is overlap on the audit and compensation committees. They found that the effect is a non-linear
relationship, and that when the overlapping percentage is 47 percent, the abnormal accruals are the
lowest, implying the highest financial reporting quality at that point. Xie et al. (2003) examined the
relationship between the audit committee and financial reporting quality. They found that board and
audit committee members with corporate or financial backgrounds were associated with firms that had
lower discretionary accruals. They found the same result when the board and audit committee met more
frequently. Fama and Jensen (1983) reported results that support the “reputation hypothesis”, where the
number of committee memberships signals director reputation. This hypothesis reasons that directors on
multiple committees offer better advice and better monitoring than directors on only one committee. We
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Proceedings of World Business Research Conference
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thus investigate whether female board members serving on more than one committee have an effect on
bank risk. Our hypothesis is as follows:
H3:
A female director serving on multiple committees is significantly associated with the
variability of corporate performance
3 Data and model development
3.1 Data
Our sample consists of companies in the financial industry (SIC codes between 6000 and 6500)
from the RiskMetrics database from 2003 to 2011. This database contains information on corporate
boards of directors. Financial variables were collected from the Compustat database and CRSP database
for the same years. We used multiple years of financial information in order to have a more accurate
measure of financial performance. We excluded companies whose financial statement information was
incomplete or unavailable on Compustat or CRSP. Our final sample consists of 616 firm-year
observations, which represents 94 banks.
3.2 Model development
Our dependent variable, SD_RETi,t, is the standard deviation of monthly stock return in each year.
We use monthly stock return to eliminate daily stock price fluctuation and therefore standard deviation is
a better risk measure (Cheng 2008). We include the following control variables to control for firmspecific factors such as operation efficiency, management effectiveness, and corporate governance
quality.
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Dependent
Variable,t
+ β4LN_TAi,t +
Dummy
=
α
+
β1LEVERAGEi,t
+
β2ROAi,t
+
β3Tobins_Qi,t
β5Board_Variablesi,t + β6Female_Governancei,t + β7FCRSi,t + β8FCRS*Fi,t +Year
(1)
Our control variables are total debt ratio (LEVERAGE), return on assets (ROA), firm size that is
measured by log of total assets (LN_TA), and Tobin’s_Q. We would expect that bigger, older, more
diversified firms are likely to observe less variable performance (Cheng 2008). We would also expect
that firms with lower profitability, as measured by ROA, would have higher variability of
performance. We also include Tobin‟s Q as an independent variable. Tobin‟s Q is a proxy for growth
computed as the sum of the market value of equity plus the book value of liabilities, divided by the book
value of total assets (Pathan and Faff 2013). It is expected to be negatively associated with market
variability. Our board variables are either board size (B_SIZE), or whether there is a CEO who is also the
chairman of the board (CEO_CHAIR). In the model examining the women on the various board
committees, we follow Cheng (2008), and examine whether the board size is an indicator of performance
variability. Our variable, B_SIZE, is the log of the number of board members. Wang (2012) found that
small boards give CEOs larger incentives and force them to bear more risk than larger boards. So a
smaller board would imply more volatility or variability. However, other authors have found the
opposite result (Jensen 1993; Goodstein et al. 1994). Therefore we have no prediction about the sign of
the B_SIZE variable. Then, when we examine the percentage of women executives at the bank, we
expect someone who is both CEO and Chairman of the Board (CEO_CHAIR) to exercise more power in
decision-making. According to Cheng (2008), when CEOs become more powerful, firm performance
may become more variable or less variable. Cheng uses this variable in order to distinguish agency
problems of a powerful CEO from board size. We also use a dummy variable, FCRS, to represent the
time period of the financial crisis, 2007 – 2011. FCRS is equal to one if year is between 2007 and 2011,
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otherwise zero. We expect that there will be more variability of financial performance during this time.
To examine female directors‟ role in bank risk during the financial crisis period, we add an interaction
term FCRS*F which is FCRS dummy multiplied by female dummy, F. F is equal to one if there is a
female director on a board, otherwise zero.
We have several variables that measure female governance. Our first test variable, PCT_F_EXE
represents the role of female executives. According to the RiskMetrics dataset we count the following
eight positions - CEO, CFO, Chairman, COO, Executive VP, President, Senior VP, and Treasurer, as
executive positions. PCT_F_EXE is number of females in the above positions at a bank divided by
eight.
We then measure the various board positions. We measure the percentage of women on two of
the committees that comprise a monitoring role and could significantly affect bank risk. These two
variables are represented as the percentage of female members of the audit committee (PCT_F_AUD)
and the percentage of female members of the corporate governance committee (PCT_F_CG).
We run all models using the two-stage system GMM approach, following Arellano and Bover
(1995). This two-stage system GMM model treats all explanatory variables as endogenous and
orthogonally uses lagged values as instruments. To correct the unobserved heterogeneity and omitted
variable bias, we generate a match equation of the first differences of all variables and use the lagged
value of independent variables to estimate models via GMM. Doing so treats all explanatory variables
except firm size (LN_TA) and the financial crisis dummy (FCRS) as endogenous (Wintoki et al.
2012). We conduct the F-test and Hansen‟s J-test to check the reliability of estimation and validity of the
instrument.
4 Results
4.1 Descriptive Statistics
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Figures 1 through 4 represent the average percentage of women in executive and director positions in
the banking industry over the time period of our sample. Figure 1 shows that the average percentage of
female directors increased from just below 11 percent in 2003 to approximately 13 percent in 2012. At
the same time, Figure 2 shows that the average percentage of women executives declined from
approximately 7 percent to fewer than 2 percent. Figure 3 indicates that the percentage of women on the
audit committee increased after 2004, moving from slightly more than 10 percent to more than 16
percent. Figure 4 shows that the percentage of women on the corporate governance committee has
fluctuated, with the most recent average at 11 percent in 2011.
[Insert Figures 1 through 4 here]
Table 1, Panel A shows the descriptive statistics for our sample of banks. The minimum size of a
board is 5 directors, while the maximum is 26 directors, with a median of 12 directors. When we
examine the number of members of the audit committees, there is a maximum of 9 members on such a
committee, with an average of just over 4 members. The average size of the corporate governance
committee is approximately 4 members, with a maximum of 12 members. On average, the percentage of
women directors is 12.1%, percentage of women on the audit committee is 13.7%, and percentage of
women on the corporate governance committee is 11.5%. In contrast, the average percentage of women
executives is 3.3%.
The descriptive statistics in Table 1, Panel B cover the financial variables in our model. The average
standard deviation of stock return (SD_RET) is 9.2%, the standard deviation of market-adjusted stock
return (SD_MKT_ADJ_RET) is 8%. The leverage (LEVERAGE) has a mean (median) of 8.7%
(7.7%). The mean (median) ROA for the time period of our sample is 0.6% (0.9%), and the mean
(median) of Tobin‟s Q is 1.052 (1.046). Size, measured as the log of total assets (LN_TA), has a mean
(median) of 9.78 (9.38).
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[Insert Table 1 here]
Table 2 shows the Pearson pair-wise sample correlations between variables. The correlation between
the percentage of women on the audit and corporate governance committees (PCT_F_AUD and
PCT_F_CG) and the financial variables of size and board size is positive and significant. This is to be
expected because larger banks would have larger boards. SD_RET is negatively correlated with ROA,
Tobin‟s Q, SIZE and B_SIZE, indicating that smaller banks with lower ROA and Tobin‟s Q reflect higher
risk.
[Insert Table 2 here]
4.2 Regression Results
Table 3 shows the results of the model representing women executives and bank risk. Consistent with
literature, ROA, Tobin‟s Q, and firm size (LN_TA) are negatively associated with bank risk while
LEVERAGE and CEO_CHAIR are positively related to variability of bank stock return. We find that the
percent of women executives (PCT_F_EXE) is positively associated with the variability of bank
performance. For every one percentage point increase in the percent of female executives, the variability
of return increases by 0.67 percent, all else held constant. The significant F-test shows that the model is
well fitted and the insignificant Hansen J-statistic suggests that the instruments are valid in the two-stage
system GMM model.
[Insert Table 3 here]
We report the results of our tests for the relation between women directors and bank risk in Table
4. While all controlling variables are consistent with the literature, we find that board size (B_SIZE) is
positively associated with volatility of bank stock return. This finding is in line with previous studies that
assert large boards have lower function efficiency (Jensen 1993, Evans and Dion 1991, and Goodstein et
al 1994). We also find that both percentage of women on the audit committee (PCT_F_AUD) and
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percentage of women on the corporate governance committee (PCT_F_CG) are negatively related to
volatility of bank stock return. For every ten percentage point change in the percent of female directors
on the audit (corporate governance) committee, the variability of stock return decreases by 0.16 (0.63)
percent, respectively, all else held constant. While the positively significant FCRS dummy indicates that
bank risks are higher during the financial crisis, the negatively significant interaction term FCRS*F
shows that female directors‟ role in risk reduction is more pronounced during financial crisis period. In
testing our sample, we found that the percentage of women on the audit committee increased steadily
from 2003 to 2011 as shown in Figure 3. Based on the fact that there are more women on the audit
committee, our results support the literature which shows that women have lower risk tolerance
(Steffensmeier et al. 2013; Byrnes et al. 1999), and that more diverse teams are more diligent in their
duties (Ittonen and Peni 2012; Schwartz-Ziv 2013). It also supports findings by Adams and Ferreira
(2009) that women are more likely to join monitoring committees, and as such, gender diverse boards
devote more effort to monitoring.
Next, we examine the impact of busy women directors on bank risk. Table 5 reports the test
results. We measure busy women directors using percentage of women directors on more than one
committee (PCT_F_MULTI_COM). The coefficient of PCT_F_MULTI_COM is negatively significant,
indicating that busier women directors are more likely to be related to lower bank risk. This finding is in
line with Chandar et al (2012) and Fama and Jensen (1983), supporting the “reputation hypothesis”.
[Insert Table 4 and Table 5 here]
4.3 Additional tests
We run two additional tests to examine the robustness of our models. In order to remove the
impact of market factors on firm performance variability, we calculate the market-adjusted return for
each firm by subtracting the monthly S&P 500 index return from firm return. Our dependent variable,
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SD_MKT_ADJ_RET, is the standard deviation of monthly market-adjusted stock return. As another
robustness test, we also run model (1) by using a measure for idiosyncratic risk as a dependent variable.
While the standard deviation of stock return measures total risk, it is the idiosyncratic risk that a
company‟s executives or board members are able to influence because total risk includes two
components, systematic risk and idiosyncratic risk. We use a single-index market model to estimate the
total risk, which is the standard deviation of monthly stock returns. The idiosyncratic risk is the standard
deviation of the residual in the following model:
(2)
where βi is systematic risk and Rm is the stock market return using an equally-weighted market index.
Table 6 reports the results of these additional tests. In both regressions, the coefficients of percentage
of females on the audit and corporate governance committees (PCT_F_AUD and PCT_F_CG) are
negatively significant at the 1% level, indicating that having more women on audit or corporate
governance committees is negatively associated with firm risk as measured by standard deviation of
market-adjusted return or the idiosyncratic risk variable.
[Insert Table 6 here]
5 Conclusion
This paper examines the role of women in the banking industry and the impact on bank
risk. Specifically, we look at the percentage of women in executive positions and the percentage of
women in various board positions, and the impact on variability of stock return. We examine a sample of
banks from the time period of 2003 – 2011. This time period includes the enactment of the SOX
legislation and the global financial crisis. The objective of our study was to examine the role of diversity,
both in the executive suite and in the boardroom. Our findings support the statistics that the number of
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women executives in banking positions is declining. For the early time period in our sample, the
percentage of women executives positively affects bank risk. However, during the financial crisis, the
presence of women executive reduces bank risk. On the other hand, for the full time period of our
sample, as the percentage of women on the audit committee and corporate committee increases, the bank
risk decreases.
Our research findings support studies that indicate that women follow a more conservative
approach to financial management (Barua et al. 2010; Peni and Vahamaa 2010) and that they have a more
diligent approach to the monitoring role (Ittonen and Peni 2012), through membership on the auditing
committee and corporate governance committee. Our findings also support the “reputation hypothesis”
regarding board busyness (Chandar et al 2012; Fama and Jensen 1983). As the percentage of women on
multiple committees in our sample increased, the bank risk decreased.
Our results show that women play an important role in the risk management of the banking
industry, and that increased gender diversity of the board and participation on board committees is
effective in reducing bank risk. More research could be conducted to examine what policy choices about
board structure are most effective in improving and monitoring corporate performance.
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.11
.115
.12
.125
.13
Figure 1 Percent of Women Directors
2002
2004
2006
2008
Data Year - Fiscal
2010
2012
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.05
.04
.03
.02
mean_pct_w_mg
.06
.07
Figure 2 Percent of Women Executives
2002
2004
2006
2008
Data Year - Fiscal
2010
2012
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.1
.12
.14
.16
Figure 3 Percent of Women Directors in Audit Committee
2002
2004
2006
2008
Data Year - Fiscal
2010
2012
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.12
.11
.1
.09
mean_pct_f_cg
.13
.14
Figure 4 Percent of Women Directors in Corporate Governance Committee
2002
2004
2006
2008
Data Year - Fiscal
2010
2012
Table 1 Descriptive Statistics
Panel A. Board Structure of Banks
No. of Director
Percent of Woman Directors
Audit Committee Size
Percent of Women on Audit
Com
CG Committee Size
Percent of Women on CG Com
Percent of Women Executives
Mean
12.609
0.121
4.341
SD
2.978
0.079
1.112
0.137
3.930
0.115
0.033
0.159
1.935
0.152
0.066
Min Median
5
12
0
0.111
1
4
Max
26
0.462
9
N
616
616
616
0
4
0
0
0.667
12
0.667
0.25
616
616
561
616
Min Median
0.019
0.073
0.018
0.061
0.000
0.077
-0.162
0.009
0.892
1.046
7.435
9.386
Max
0.449
0.439
0.558
0.037
1.314
14.633
N
614
614
616
616
616
616
0
0
0
0
Panel B. Financial Characteristics of Banks
SD_RET*
SD_MKT_ADJ_RET
LEVERAGE
ROA
Q
LN_TA
Mean
0.092
0.080
0.087
0.006
1.052
9.786
SD
0.063
0.059
0.070
0.014
0.076
1.556
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Proceedings of World Business Research Conference
11 - 13 June 2015, Hotel Novotel Xin Qiao, Beijing, China, ISBN: 978-1-922069-78-8
* Variables are defined in model development section
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Proceedings of World Business Research Conference
11 - 13 June 2015, Hotel Novotel Xin Qiao, Beijing, China, ISBN: 978-1-922069-78-8
Table 2 Sample Correlations
PCT_F_AUD
PCT_F_CG
PCT_F_EXE
SD_RET
LEVERAGE
ROA
Q
PCT_F_AUD
1
0.1491*
0.1213*
-0.058
-0.0339
-0.0189
-0.0086
PCT_F_CG PCT_F_MG
1
0.013
-0.011
-0.024
-0.001
0.021
1
-0.0968*
0.0049
0.0963*
0.1117*
SD_RET LEVERAGE
1
0.015
-0.5943*
-0.5720*
1
-0.016
-0.1200*
SIZE
0.1931*
0.2121*
0.1610*
-0.055
0.1924*
B_SIZE
0.1527*
0.2128*
0.0602
-0.1132*
0.007
*denotes 5% significance level. All variables are defined in model development section.
ROA
1
0.5021*
0.065
0.0855*
Q
1
0.1273*
0.0085
SIZE B_SIZE
1
0.3874*
1
Proceedings of World Business Research Conference
11 - 13 June 2015, Hotel Novotel Xin Qiao, Beijing, China, ISBN: 978-1-922069-78-8
Table 3 Women Executives and Bank Risk
Dependent Var
SD_RET
SD_RETt-1
0.055**
LEVERAGE
0.182***
ROA
-3.931***
Q
-0.323***
LN_TA
-0.007***
CHAIR_CEO
0.006***
PCT_F_EXE
0.067**
FCRS
0.010***
FCRS*W
-0.183***
CONSTANT
0.486***
Year Dummy
Yes
F-Stat
182.11***
Hansen J-Stat
34.54(0.22)
N
510
* significant at 10%; ** significant at 5%; *** significant at 1%
Dependent Variable,t = α + β1LEVERAGEi,t + β2ROAi,t + β3Tobins_Qi,t + β4LN_TAi,t +
β5CEO_CHAIRi,t +β6Pct_F_EXEi,t + β7FCRSi,t + β8FCRS*Wi,t
Dependent Variable = standard deviation of monthly stock return (SD_RET) or standard deviation of
monthly market-adjusted stock return (SD_MKT_ADJ_RET). LEVERAGE = Long-term debt / Total
assets ; ROA = return on assets, Tobins_Q = (mkt value of equity + book value of liabilities)/book
value of Total assets; LN_TA = log of Total assets; CEO_CHAIR = 1 if someone is the CEO and
Chairman of the Board, 0 otherwise. Pct_F_EXE= percentage of female executives on the executive
positions, including CEO, CFO, Chairman, COO, Executive VP, President, Senior VP, and Treasurer.
FCRS is a dummy variable indicating the time period of the financial crisis, 2007 – 2011. FCRS*W is
an interaction term between FCRS and a dummy W that equals to one if there is at least one female on
the executive positions, otherwise zero.
Proceedings of World Business Research Conference
11 - 13 June 2015, Hotel Novotel Xin Qiao, Beijing, China, ISBN: 978-1-922069-78-8
Table 4 Women Directors and Bank Risk
Dependent Var
SD_RET
SD_RET
SD_RET
SD_RET
SD_RETt-1
0.164***
0.128***
0.133***
0.144***
LEVERAGE
0.140***
0.146***
0.129***
0.098***
ROA
-2.820***
-3.533***
-3.163***
-3.166***
Q
-0.345***
-0.296***
-0.300***
-0.312***
LN_TA
-0.003***
-0.004***
-0.004***
-0.001
B_SIZE
0.037***
0.026***
0.035***
0.032***
PCT_F_DIRECTOR
0.004
0.049***
PCT_F_AUD
-0.010*
-0.015***
PCT_F_CG
-0.039***
-0.053***
FCRS
0.018***
0.019***
0.014***
0.006**
FCRS*F
-0.023***
-0.032***
-0.020***
-0.029***
CONSTANT
0.379***
0.373***
0.500***
0.560***
Year Dummy
Yes
Yes
Yes
Yes
F-Stat
2168*** 1631.03*** 4273.31*** 6271.75***
Hansen J-Stat
24.73(1.00) 37.12(0.56) 36.54(0.84) 19.88(0.99)
N
479
510
510
479
* significant at 10%; ** significant at 5%; *** significant at 1%
Dependent Variable,t = α + β1LEVERAGEi,t + β2ROAi,t + β3Tobins_Qi,t + β4LN_TAi,t + β5B_SIZEi,t +
β6Pct_F_DIRECTORi,t + β7Pct_F_Audi,t + β8Pct_F_CGi,t + β9FCRSi,t + β10FCRS*Fi,t
Dependent Variable = standard deviation of monthly stock return (SD_RET). LEVERAGE = Longterm debt / Total assets ; ROA = return on assets, Tobins_Q = (mkt value of equity + book value of
liabilities)/book value of Total assets; LN_TA = log of Total assets; B_SIZE = Log of number of
directors; Pct_F_DIRECTOR= percentage of female directors on the board; Pct_F_Aud = percentage
of female directors on the audit committee. Pct_F_CG = percentage of female directors on the
corporate governance committee. FCRS is a dummy variable indicating the time period of the
financial crisis, 2007 – 2011. FCRS*F is an interaction term between FCRS and a dummy F that
equals to on if there is at least one female director on the board, otherwise zero.
23
Proceedings of World Business Research Conference
11 - 13 June 2015, Hotel Novotel Xin Qiao, Beijing, China, ISBN: 978-1-922069-78-8
Table 5 Busy Women Directors and Bank Risk
Dependent Var
SD_RET
SD_RETt-1
0.163***
LEVERAGE
0.114***
ROA
-2.932***
Q
-0.298***
LN_TA
-0.002***
PCT_F_AUD
-0.017***
PCT_F_CG
-0.043***
PCT_F_MULTI_COM
-0.020*
B_SIZE
0.031***
FCR
0.022***
FCR*F
-0.022***
CONTANT
0.337***
Year Dummy
Yes
F-Stat
1081.83***
Hansen J-Stat
0.99(0.61)
N
479
* significant at 10%; ** significant at 5%; *** significant at 1%
Dependent Variable,t = α + β1LEVERAGEi,t + β2ROAi,t + β3Tobins_Qi,t + β4LN_TAi,t + β5B_SIZEi,t +
β6Pct_F_Audi,t + β7Pct_F_CGi,t + β8Pct_F_MULTI_COMi,t + β9FCRSi,t + β10FCRS*Fi,t
Dependent Variable = standard deviation of monthly stock return (SD_RET). LEVERAGE = Longterm debt / Total assets ; ROA = return on assets, Tobins_Q = (mkt value of equity + book value of
liabilities)/book value of Total assets; LN_TA = log of Total assets; B_SIZE = Log of number of
directors; Pct_F_Aud = percentage of female directors on the audit committee. Pct_F_CG =
percentage of female directors on the corporate governance committee. Pct_F_MULTI_COM =
percentage of female directors who serve on more than one committees on a board. FCRS is a dummy
variable indicating the time period of the financial crisis, 2007 – 2011. FCRS*F is an interaction term
between FCRS and a dummy F that equals to on if there is at least one female director on the board,
otherwise zero.
24
Proceedings of World Business Research Conference
11 - 13 June 2015, Hotel Novotel Xin Qiao, Beijing, China, ISBN: 978-1-922069-78-8
Table 6 Robustness Tests
Dependent Var
SD_MKT_ADJ_RET
IDI_RISK
SD_MKT_AJ_RETt0.090***
1
IDI_RISK
0.100***
LEVERAGE
0.162***
0.156***
ROA
-3.259***
-3.195***
Q
-0.217***
-0.243***
LN_TA
-0.002***
-0.002***
PCT_F_AUD
-0.006**
-0.006**
PCT_F_CG
-0.057***
-0.059***
B_SIZE
0.051***
0.049***
FCR
0.020***
0.020***
FCR*F
-0.029***
-0.029***
CONTANT
0.201***
0.229***
Year Dummy
Yes
Yes
F-Stat
3829.7***
1177.98***
Hansen J-Stat
0.11(0.947)
0.26(0.88)
N
479
479
* significant at 10%; ** significant at 5%; *** significant at 1%
Dependent Variable,t = α + β1LEVERAGEi,t + β2ROAi,t + β3Tobins_Qi,t + β4LN_TAi,t + β5B_SIZEi,t +
β6Pct_F_Audi,t + β7Pct_F_CGi,t + β8FCRSi,t + β9FCRS*Fi,t
SD_MKT_AJ_RET = standard deviation of monthly market-adjusted stock return,
IDI_RISK=idiosyncratic risk measure which is the standard deviation of the error terms of total risk.
LEVERAGE = Long-term debt / Total assets ; ROA = return on assets, Tobins_Q = (mkt value of
equity + book value of liabilities)/book value of Total assets; LN_TA = log of Total assets; B_SIZE =
Log of number of directors; Pct_F_Aud = percentage of female directors on the audit committee;
Pct_F_CG = percentage of female directors on the corporate governance committee; FCRS is a
dummy variable indicating the time period of the financial crisis, 2007 – 2011; FCRS*F is an
interaction term between FCRS and a dummy F that equals to on if there is at least one female
director on the board, otherwise zero.
25
Proceedings of World Business Research Conference
11 - 13 June 2015, Hotel Novotel Xin Qiao, Beijing, China, ISBN: 978-1-922069-78-8
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