Board Diversity and Risk Behavior: A Cross-Regional Study of US- and Nordic Banks

Abstract

This thesis aims to examine if diversity on the board of directors in US- and Nordic banks has an influence on risk-taking and credit risk. This paper provides another dimension into the existing body of literature by investigating whether board diversity influences internal risk governance in banks, which is an unexplored field. Building on two samples of 70 US banks and 34 Nordic banks, the thesis’ findings are derived from fixed effect regressions applied to panel data covering the period 2015 to 2024. With diversity defined as heterogeneity among members’ characteristics on the board of directors, this paper measures board diversity by gender, tenure, and age. Recognizing that the concept of risk varies across fields, this study defines risk as an internal strategic behavior reflected in organizational decision-making. The findings reveal no consistent evidence that board diversity has an influence on either risk-taking or credit risk in US- and Nordic banks. While a few statistically significant relationships are observed, their practical relevance is limited. Despite the study’s overall finding that board diversity does not influence risk-taking and credit risk, the possibility that gender diversity affects risk-taking in US banks cannot be entirely rejected. Regardless of the clear differences in governance structures and diversity practices between the two regions, the study’s findings point to similar conclusions, indicating that board diversity does not appear to play a significant role in shaping risk behavior within either institutional context.