Does board diversity mitigate risk? The effect of homophily and social ties on risk-taking in financial institutions
Abstract
Research Question/Issue
This study investigates whether greater board diversity and looser social network ties have an impact on board independence and risk-taking in US financial institutions from 2010 to 2022.The econometric strategy involved structural equation models, where risk as a dependent variable was measured by two latent variables and a total of five measures of risk. Several aspects of board diversity were utilized including gender, social, experience and educational backgrounds.
Research Findings/Insights