Executive board composition and bank risk taking

Abstract

executive board composition and bank risk taking allen n. berger moore school of business, university of south carolina, wharton financial institutions center center – tilburg university 1705 college street, columbia, sc 29208, united states e-mail: aberger@moore.sc.edu thomas kick deutsche bundesbank, wilhelm-epstein-straße 14, 60431 frankfurt am main, germany e-mail: thomas.kick@bundesbank.de klaus schaeck* bangor business school, bangor university, hen goleg, college road, bangor ll57 2dg, united kingdom e-mail: klaus.schaeck@bangor.ac.uk abstract little is known about how socioeconomic characteristics of executive teams affect corporate governance in banking. exploiting a unique dataset from germany which operates a two-tier system of corporate governance that separates inside directors (i.e., executives that run the bank) into a management board, and outside directors into a supervisory board, we show how age, gender, and education composition of executive teams affect risk taking. first, we establish that age, gender, and education of the management board jointly affect the variability of bank performance. second, we use difference-in-difference estimations that focus on mandatory executive retirements and find that younger executive teams increase risk taking, as do board changes that result in a higher proportion of female executives. in contrast, if board changes increase the representation of executives holding ph.d. degrees, risk taking declines. keywords: banks, …

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