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

Abstract

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.

Citation

Abou-El-Sood, H. (2019), "Corporate governance and risk taking: the role of board gender diversity", Pacific Accounting Review, Vol. 31 No. 1, pp. 19-42. https://doi.org/10.1108/PAR-03-2017-0021