Are women more risk-averse than men? Is this pattern especially prominent in industries like finance?

Gender & Finance Literature Review Series #6: Adams and Ragunathan (2015)

In this G&F LRS #6, we analyze the following research paper:

Adams RB, Ragunathan V. 2017. Lehman sisters. Working paper. University of South Wales.

This paper allows us to understand if women are systematically more risk-averse than men. Adams and Ragunathan (2015) concentrate on a specific industry i.e. the finance industry with a focus on banking. They study in detail to check if the presence of women as top executives, led the banks to perform better during the times of crises.

What is the methodology used by the authors?

The authors consider origin risk (risks measured on the date that banks first appear in CSRP) as an exogenous measure for banks to see if boardroom diversity responds to changes in risk (based on Cheng, Hong and Scheinkman, 2015). Secondly, they account for gender diversity in the risk regressions using a Blau index of gender balance in director connections. In order to analyze whether more gender diverse boards have different responses which help to improve their performance, they consider the research done by Adams and Ferreira (2009). Thirdly, they try to find out if there is a difference between women who choose a career in finance and others who do not, especially with reference to the risk-taking capabilities of these women. In order to analyze this further, they draw upon the research done by Sapienza, Zingales and Maestripieri (2009). The research considers the entire cohort of MBA students at the University of Chicago (including men). They run test on the responses of the sample to check if women have more risk-taking abilities than men. Finally, they try to analyze the participation of women as board members in financial firms in comparison with non-financial firms. They do this by drawing upon the research done by Adams and Kirchmaier (2015b).

What are the results obtained by them?

They find that there is no conclusive evidence suggesting that boardroom gender diversity is associated with more risk-taking capabilities, especially in the event of a crisis. Secondly,
male directors are more punctual and there is less absenteeism on their side when there are more women directors in the board. Thirdly, in the cohort of MBA students, women are more risk-averse than men. Women who opt for a career in finance have lower risk-aversion than other women who opt for careers in other industries. Whereas, this is not the case for the male students. And finally, they found that fewer women were on the boards of financial firms as compared to industrial firms.


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